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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

þ

Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Fiscal Year Ended December 31, 2002

or

o

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from     to

Commission File No. 001-31456

GENESEE & WYOMING INC.
(Exact name of registrant as specified in its charter)

(203) 629-3722

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

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

None

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.

þ  YES    o  NO

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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation 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. o

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, 2002, the last business day of Registrant’s most recently completed second fiscal quarter: $279,105,394.

Shares of common stock outstanding as of the close of business on March 18, 2003:

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

The remainder of this page is intentionally left blank.

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PART I

ITEM 1.  BUSINESS

     Genesee & Wyoming Inc. (the Registrant or the Company) is a holding company whose subsidiaries and unconsolidated affiliates own and operate short line and regional freight railroads in the United States, Australia, Canada, Mexico and Bolivia. The Company, through its U.S. industrial switching subsidiary, also provides freight car switching and rail-related services to industrial companies in the United States. The Company was incorporated as a Delaware corporation in 1977.

     The Company 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 the Genesee and Wyoming Railroad Company and became Chief Executive Officer, the Company has completed 23 acquisitions and now operates over approximately 8,000 miles of owned, jointly owned or leased track as well as over 3,000 additional miles under track access arrangements. Based on track miles, the Company believes that:

•		it is the second-largest operator of regional railroads in the United States and Canada;
•		its 50/50 joint venture with Wesfarmers Limited, the Australian Railroad Group (ARG), owns and operates the second largest privately owned rail system in Australia;
•		it owns and operates Mexico’s fourth-largest railroad; and
•		it is a strategic investor in, and operator of, the second largest railroad in Bolivia.

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

     The Company makes available free of charge, on or through its Internet web site, its 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 the Securities and Exchange Commission. The Company’s Internet address is http:\\www.gwrr.com.

GROWTH STRATEGY

     The Company intends to increase its earnings per share and return on invested capital by:

•		acquiring rail lines that are close to or contiguous with its existing regional rail systems in order to improve asset utilization and reduce operating costs;
•		broadening its geographic presence by acquiring significant rail lines in new regions where the Company believes there are additional business development and acquisition opportunities;

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•		expanding its revenue base within each region it serves through focused marketing efforts and a high level of customer service; and
•		improving its operating performance through the more efficient use of equipment and facilities and the reduction of overhead and operating expenses.

     The Company has a disciplined acquisition and investment-driven strategy that focuses on both domestic and international opportunities. From 1977 to 1997, the Company acquired and integrated twelve acquisitions in the United States. From 1997 to 2000, the Company 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, the Company has made four acquisitions in the U.S. and Canada, including South Buffalo Railway Company (October 2001), Emons Transportation Group (February 2002), Utah Railway Company (August 2002), and a rail line leased from Burlington Northern Santa Fe in Oregon (December 2002).

     The Company’s recent acquisitions and investments include:

•		branch lines of U.S. and Canadian Class I railroads;
•		rail lines of industrial companies, such as Bethlehem Steel and Mueller Industries;
•		other regional railroads or short-line railroads; and
•		the privatization of foreign government-owned rail systems.

     The Company believes that the market for acquisitions in the United States includes over 500 short line and regional railroads operating over approximately 50,000 miles of track, as well as additional lines expected to be sold by Class I railroads. Internationally, the Company believes there are additional acquisition or privatization candidates in Australia, Canada, South America and other markets. Furthermore, the Company believes that there is a relatively small number of well capitalized operators currently bidding for properties in the international and U.S. rail markets. As a result, the Company believes that it is well positioned to capitalize on additional acquisition opportunities.

     In evaluating potential acquisitions and investments, the criteria the Company considers, among others, include:

•		projected risk adjusted return on investment;
•		potential for additional revenue and service improvements;
•		identifiable cost savings and synergies, such as asset utilization improvements, consolidation of administrative functions, and operational improvements; and
•		diversity of overall commodity and geographic mix.

     In new regions, the Company targets 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. When acquiring rail properties in its existing regions, the Company targets contiguous rail properties where it believes there are significant opportunities to realize operating efficiencies. The Company’s strategy of building regional rail systems is illustrated by its original U.S. region, the New York-Pennsylvania Region, and ARG, its joint venture in Australia.

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•		New York-Pennsylvania Region. Starting with its original rail line, the Genesee and Wyoming Railroad Company, the Company has completed seven contiguous acquisitions since 1985, creating a regional railroad linking Western New York with Western Pennsylvania. After giving effect to the 2001 acquisition of South Buffalo, the region now has approximately $50.0 million in annual revenue and a diverse commodity base including petroleum, auto parts, chemicals, pulp and paper and steel.
•		Australian Railroad Group. Over the past four years, the Company has been sequentially building a regional rail system that covers more than half of the Australian continent. In Australia, the Company (1) entered the market through the privatization of the rail system of South Australia in 1997; (2) acquired the right to operate iron ore supply rail-lines and in-plant rail operations for a steel mill in Whyalla, South Australia in 1999; (3) combined its South Australian railroad business with previously state-owned rail assets of Western Australia, which were acquired with its 50/50 joint venture partner for $334.4 million in December 2000; and (4) acquired a 2.6% equity interest in a consortium to build, own and operate an 885-mile rail line from Alice Springs to Darwin in the Northern Territory of Australia in April 2001.

MARKETING

     The Company builds each regional railroad business on a base of large industrial customers, grows that business through focused marketing efforts, and creates additional revenues by attracting new customers and providing ancillary rail services. By providing improved service to shippers, the Company is often able to provide increased revenue to the Class I carriers that connect with its North American lines. The Company’s marketing efforts are often aimed at enhancing its railroads’ relationships with both Class I carriers and shippers. Thus the Company provides related rail services such as railcar repair, switching, storage, weighing and blocking and bulk transfer, which enable Class I carriers and customers to move freight more easily and cost-effectively. Wherever possible, the Company also seeks to divert freight traffic from trucking companies to its railroads. At newly privatized railroads, the Company has generated new business through improved marketing efforts and improved service levels.

OPERATIONS

     The Company focuses on lowering operating costs and improving asset efficiency to maximize its return on invested capital, and has historically been able to operate acquired rail lines more efficiently than the Class I railroads and governments from whom it acquired these properties. The Company typically achieves efficiencies through lowering administrative overhead, consolidating equipment and track maintenance contracts, reducing transportation costs, and selling unutilized assets.

     The Company also intends to continue to improve the operating efficiency of its railroads by track rehabilitation, especially where maintenance has been deferred by the prior owner. Because of the importance of certain of the Company’s shippers to the economic stability and/or development of the regions where they are located, and because of the importance of certain of the Company’s railroads to the economic infrastructure of those regions, approximately $59.0 million in state and federal grants for track

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rehabilitation and service improvements have been invested in the Company’s North American rail properties since 1987.

INDUSTRY OVERVIEW

     According to the Association of American Railroads Railroad Facts, 2002 Edition, there are 571 railroads in the United States operating roughly 143,000 miles of track. U.S. railroads are segmented into one of three categories based on the amount of their revenues. Class I railroads, those with over $266.7 million in revenues, represent over 90% of total rail revenues. Regional and short line railroads operate approximately 45,000 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 revenue, regional and short line railroads combined account for approximately 8% of total railroad revenue.

     The following table shows the breakdown of railroads by classification.

Source: Association of American Railroads Railroad Facts, 2002 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 and Canada 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 and improve operating efficiency.

     Although the acquisition market is competitive, the Company believes that there will continue to be opportunities to acquire rail properties in the United States and Canada from Class I railroads, industrial companies, and independent short line and regional railroads. The Company also believes there may be additional acquisition opportunities in Australia, Canada, South America and other markets.

MANAGEMENT

     The Company’s Chief Executive Officer, Chief Operating Officer, Chief Financial Officer and Executive Vice President — Corporate Development have responsibility for overall strategic and financial planning. The Chief Executive Officer oversees the Company’s global operations including its equity investments in Australia and South America, while the Chief Operating Officer manages operations in North America. The Company believes that through its decentralized management structure it has developed a culture that encourages

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employees to take initiative and responsibility which is rewarded through performance-based bonus programs.

     The Company currently operates in two business segments: North American Railroad Operations, which includes operating short line and regional railroads, and Industrial Switching, which includes providing freight car switching and related services to industrial companies with railroad facilities within their complexes in the United States. Through December 16, 2000, the Company also operated in the Australian Railroad Operations segment. For financial information with respect to each of the Company’s business segments and for each geographic area for 2002, 2001 and 2000, see Note 18 to the Company’s Consolidated Financial Statements set forth in Part IV, Item 15 of this Annual Report on Form 10-K.

RAILROAD OPERATIONS — NORTH AMERICA

     North American Customers

     The Company’s North American railroads served over 800 customers in 2002 compared with approximately 680 customers in 2001. The ten largest North American customers accounted for approximately 29%, 30% and 30% of the Company’s North American railroad revenues in 2002, 2001 and 2000, respectively. In 2002, 2001 and 2000, the Company’s largest North American customer was a coal-fired electricity generating plant owned by Dominion Resources, which accounted for approximately 5%, 7% and 6%, respectively, of the Company’s North American railroad revenues. The Company typically handles freight pursuant to transportation contracts among the Company, its connecting carriers and the shipper. These contracts are in accordance with industry norms and vary in duration from one to seven years. These contracts establish price but do not typically obligate the shipper to move any particular volume.

     North American Railroad Commodities

     The Company’s North American railroads transport a wide variety of commodities. Some of the Company’s railroads have a diversified commodity mix while others transport one or two principal commodities. In 2002, coal, coke and ores, and paper products were the two largest commodity groups transported by the Company’s North American railroads, constituting 18.2% and 16.3%, respectively, of total North American freight revenues (see Item 7. of this Annual Report under the heading “Results of Operations — Year Ended December 31, 2002 Compared to Year Ended December 31, 2001”), and 29.6% and 14.0%, 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, 2002 and 2001:

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North American Freight Revenues and Carloads Comparison by Commodity Group
Years Ended December 31, 2002 and 2001
(dollars in thousands, except average per carload)

     Coal, coke and ores consist primarily of shipments of coal to utilities and industrial customers.

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

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

     Petroleum products consists primarily of fuel oil and crude oil.

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

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

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

     Chemicals consists primarily of various chemicals used in manufacturing.

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

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

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   North American Railroad Employees

     As of December 31, 2002, the Company’s North American railroads had 1,549 full-time employees. Of this total, 861 are members of national labor organizations. The Company’s North American railroads have 29 contracts with these national labor organizations which have expiration dates ranging to 2005. The Company has also entered into employee bargaining agreements with an additional 75 employees who represent themselves, which have expiration dates ranging to 2005. The Company believes that its relationship with its employees is good.

RAILROAD OPERATIONS — AUSTRALIA (Equity Accounting)

     On December 16, 2000, the Company, through its joint venture, ARG, completed the acquisition of Westrail Freight from the government of Western Australia. ARG is a joint venture owned 50% by the Company and 50% by Wesfarmers Limited, a public corporation based in Perth, Western Australia.

     In conjunction with the acquisition of Westrail, the Company contributed to ARG: (1) its formerly wholly-owned subsidiary, Australia Southern Railroad (ASR); (2) its 2.6% interest in the Asia Pacific Transport Consortium, a consortium selected to construct and operate the Alice Springs to Darwin railway line in the Northern Territory of Australia; and (3) $21.4 million in cash. The Company accounts for its 50% ownership in ARG under the equity method of accounting and therefore deconsolidated ASR from its consolidated financial statements as of December 17, 2000.

     Australian Railroad Customers

     ARG currently serves over 50 customers. A significant portion of ARG’s railroad operating revenue is attributable to customers operating in the grain, ores and minerals, and alumina industries. ARG’s largest ten customers accounted for approximately 69% and 67% of its revenues for the years ended December 31, 2002 and 2001, respectively. ARG’s largest customer, the Australian Wheat Board, accounted for 20% and 22% of its operating revenue for the years ended December 31, 2002, and 2001. ARG typically ships freight under transportation contracts between ARG and the shipper. The terms of these contracts vary from customer to customer and vary in duration from one to ten years, subject to certain review and extension provisions.

     Australian Railroad Commodities

     The following table provides ARG’s freight revenues, carloads and average freight revenues per carload for the years ended December 31, 2002 and 2001.

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Australian Railroad Group Freight Revenues and Carloads by Commodity Group
Years ended December 31, 2002 and 2001
(U.S. dollars in thousands, except average per carload)

     Australian Railroad Employees

     As of December 31, 2002, ARG had 1,016 full-time employees. Of this total, approximately 26% are employed under collective bargaining agreements. In South Australia, ARG has one collective bargaining agreement that expires in September 2004. In Western Australia, some employees have chosen to bargain locally rather than through national organizations, and other employees will consider similar arrangements during 2003. ARG believes that its relationship with its employees is good.

U.S. INDUSTRIAL SWITCHING OPERATIONS

     U.S. industrial switching operations generate non-freight revenues primarily by providing freight car switching and related rail services such as railcar repair to industrial companies with railroad facilities within their complexes. The Company’s U.S. industrial switching operation serves 28 customers in 11 states. These customers are primarily in the chemicals, paper, mining, and power generation industries. The provision of the service generally involves locating a work force and locomotives at the customer’s facility. As of December 31, 2002, the Company’s U.S. industrial switching operations had 264 employees. The Company believes that its relationship with its employees is good.

SAFETY

     The Company’s 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.

     The Company maintains a corporate-wide safety policy effort facilitated by the Vice President & Chief Safety Officer. The Company works continuously to comply fully with all federal, state, and local government regulations. Operating personnel are trained and certified in train

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operations, the transportation of hazardous materials, safety and operating rules, and governmental rules and regulations.

INSURANCE

     The Company has obtained 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 $150,000 to $500,000 per occurrence. In addition, the Company maintains excess liability policies which provide supplemental coverage for losses in excess of primary policy limits. With respect to the transportation of hazardous commodities, the Company’s liability policy covers sudden releases of hazardous materials, including expenses related to evacuation. Personal injuries associated with grade crossing accidents are also covered under the Company’s liability policies. The Company also maintains property damage coverage, subject to a standard pollution sub-limit and self-insured retentions ranging from $25,000 to $250,000.

     Employees of the Company’s 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 based on the comparative negligence of the employee and the employer. FELA-related claims are covered under the Company’s liability insurance policies. Employees of the Company’s industrial switching business are covered under workers’ compensation policies.

     The Company believes its insurance coverage is adequate in light of its experience and the experience of the rail industry. However, there can be no assurance as to the adequacy, availability, or cost of insurance in the future.

COMPETITION

     In acquiring rail properties, the Company generally competes with other short line and regional railroad operators. Competition for rail properties is based primarily upon price, operating history and financing capability. The Company believes its established reputation as a successful acquiror and operator of short line rail properties, combined with its managerial and financial resources, effectively positions it to take advantage of acquisition opportunities.

     Each of the Company’s railroads is typically the only rail carrier directly serving its customers, however, the Company’s railroads compete directly with other modes of transportation, principally motor carriers. Competition is based primarily upon the rate charged and the transit time required, as well as the quality and reliability of the service provided, for an origin-to-destination transportation service. To the extent other carriers are involved in transporting a shipment, the Company cannot 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, the Company also faces 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 the Company’s railroads depending on the relative competitiveness of that plant versus paper plants in other locations.

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REGULATION

United States

     The Company’s U.S. railroads are subject to regulation by:

•		The Surface Transportation Board;
•		the Federal Railroad Administration;
•		state departments of transportation; and
•		some state and local regulatory agencies.

     The Surface Transportation Board is the successor to certain regulatory functions previously administered by the Interstate Commerce Commission. Established by the ICC Termination Act of 1995, The Surface Transportation Board 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, it may condition its approval upon the payment of severance benefits to affected employees. The Federal Railroad Administration has jurisdiction over safety.

Canada

     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 Canada.

     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.

Australia

     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 Western Australia, South Australia, the Northern Territory, Victoria and New South Wales. In addition, with respect to access to rail infrastructure, ARG’s Australian assets are subject to individual access regimes established under Part IIIA of the Trade Practices Act 1974.

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     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.

Mexico

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

•		policies and programs related to the railroad system;
•		the granting of concessions;
•		regulating the concessions and resolving any issues regarding amendments or terminations to the concessions;
•		regulation of tariff application; and
•		sanctions when operators have not complied with the terms of a concession.

     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 by foreign entities, while the Law of Economic Competition is an antitrust statute.

ENVIRONMENTAL MATTERS

     The Company’s 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 on a federal level and by the Environmental Protection Agency at the state level. There are no material environmental claims currently pending or, to the Company’s knowledge, threatened against the Company or any of its railroads. In addition, the Company believes that the operations of its railroads are in material compliance with current laws and regulations. The Company estimates that any expenses incurred in maintaining compliance with current laws and regulations will not have a material effect on the Company’s earnings or capital expenditures. However, there can be no assurance that the current regulatory requirements will not change, or that currently unforeseen environmental incidents will not occur, or that past non-compliance with environmental laws will not be discovered on the Company’s properties.

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     In Mexico, the Company’s 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 state-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 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 OF FOREIGN OPERATIONS

     The Company’s 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 the Company’s forward-looking statements. These risks include the fact that the Company’s 50/50 joint venture in Australia, ARG, and some of the Company’s significant subsidiaries transact business in foreign countries, namely in Australia, Canada, Mexico and Bolivia. In addition, the Company may consider acquisitions in other foreign countries in the future. The risks of doing business in foreign countries may include:

•		changes or greater volatility in the economies of those countries,
•		effects of currency exchange controls,
•		changes to the regulatory environment of those countries,
•		changes to the tax laws and regulations of those countries,
•		restrictions on the withdrawal of foreign investment and earnings,
•		the nationalization of the businesses that the Company operates,
•		the actual or perceived failure by the Company to fulfill commitments under concession agreements,
•		the potential instability of foreign governments, including from domestic insurgency, and
•		the challenge of managing a culturally and geographically diverse operation.

     The Company’s operations in foreign countries are also subject to economic uncertainties, including among others, risk of renegotiation or modification of existing agreements or arrangements with governmental authorities, exportation and transportation tariffs, foreign exchange restrictions and changes in taxation structure.

     ARG derives a significant portion of its rail freight revenues from shipments of grain. For the years ended December 31, 2002 and 2001, grain shipments in South Australia and Western Australia generated approximately 26.0% and 27.4%, respectively, of ARG’s operating revenues. A decrease in grain shipments as a result of adverse weather or other negative agricultural

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conditions could have a material effect on the Company’s income from ARG and financial condition. For example, drought conditions during the 2002 growing season are expected to result in a significant reduction in ARG’s grain shipments in 2003.

     Australia’s open access regime could lead to additional competition for ARG’s business, which could result in decreased revenues and profit margins. The legislative and regulatory framework in Australia allows third party rail operators to gain access to ARG’s railway infrastructure upon payment of a regulated fee. A similar framework governs ARG’s access to track owned by others. ARG currently operates on the Commonwealth-owned interstate network from Sydney, New South Wales and Melbourne, Victoria to Kalgoorlie, Western Australia and on State-owned track in New South Wales. Access charges continue to evolve because privatization of railways in Australia is recent. If fees paid by ARG to others are increased, ARG’s operating margins could be negatively affected. Conversely, if a regulator reduces access fees charged to others by ARG, then ARG’s income could be negatively affected. Furthermore, ARG has agreements with some customers which would obligate ARG to make refunds should access fees charged by ARG be reduced. When ARG operates over track networks owned by others, including Commonwealth-owned and State-owned networks, the owners of the network rather than the operators are responsible for scheduling the use of the tracks as well as for determining the amount and timing of the expenditures necessary to maintain the network in satisfactory condition. Therefore, in areas where ARG operates over tracks owned by others, it is subject to train scheduling set by the owners as well as the risk that the network may not be maintained adequately. Either risk could affect ARG’s results of operations and financial condition.

     The results of operations of the Company’s foreign operations are reported in the local currency — the Australian dollar, the Canadian dollar and the Mexican peso — and then translated into U.S. dollars at the applicable exchange rates for inclusion in the Company’s financial statements. The functional currency of the Company’s Bolivian operations is the U.S. dollar. The exchange rates between these currencies and the U.S. dollar have fluctuated significantly in recent years and may continue to do so in the future. In addition, because the Company’s financial statements are stated in U.S. dollars, the translation effect of such fluctuations may affect the Company’s results of operations and financial position and may affect the comparability of the Company’s results between financial periods.

FORWARD-LOOKING STATEMENTS

     The information contained in this Report, including Management’s Discussion and Analysis (Part II, Item 7) contains forward-looking statements with 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,” “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

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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 above under the caption “Risk Factors of Foreign Operations”, risks related to adverse weather conditions, changes in environmental and other laws and regulations to which the Company is subject, difficulties associated with the integration of acquired railroads, derailments, unpredictability of fuel costs and general economic and business conditions, as well as those noted in documents that the Company files from time to time with the Securities and Exchange Commission, such as Forms 10-K and 10-Q which contain additional important factors that could cause actual results to differ from current expectations and from the forward-looking statements contained herein.

ITEM 2.  PROPERTIES

     The Company, through its subsidiaries and unconsolidated affiliates, currently has interests in thirty railroads of which twenty-two 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 the Company’s 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 the Company’s railroads. Several of the Company’s railroads are operated under terms of leases or operating licenses in which the Company does not assume ownership of the track and the underlying land.

     The Company’s railroads operate over approximately 8,000 miles of track that is owned, jointly-owned or leased by the Company or its affiliates. The Company’s or its affiliates’ railroads also operate, through various trackage rights agreements, over approximately 3,000 miles of track that is owned or leased by others.

     The following table sets forth certain information as of March 24, 2003 with respect to the Company’s railroads:

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(3)		In addition, BR operates by trackage rights over 14 miles of BPRR.
(4)		Includes 92 miles under perpetual leases and 9 miles under a lease expiring in 2090. In addition, BPRR operates by trackage rights over 27 miles of CSX under an agreement expiring in 2018, and 83 miles of NS under an agreement expiring in 2027. The Company is seeking to rationalize approximately 58 miles of owned track that parallels track under the NS trackage rights agreement.
(5)		The GNWR is now operated by RSR.
(6)		In addition, PS operates over 13 miles pursuant to an operating contract.
(7)		In addition, RSR has a haulage contract over 52 miles of CP.
(8)		In addition, IMR operates by trackage rights over 15 miles of IC, 9 miles of PPU and 5 miles of UP.
(9)		Includes 53 miles under lease expiring in 2015 with a 10-year renewal unless terminated by either party, 53 miles formerly under lease which was purchased in November, 1997, and is operated under a rail service easement, 92 miles which was purchased in July, 1997, and beginning in December 2002, 76 miles under lease expiring in 2017. In addition, PNWR operates by trackage rights over 2 miles of UP and 4 miles of POTB.
(10)		All under lease expiring in 2013, with renewal options subject to both parties’ consent. In addition, WPRR operates over 41 miles of UP under a concurrent trackage rights agreement.
(11)		Includes 14 miles under a lease expiring in 2011. In addition, LDRR operates by trackage rights over 91 miles of UP under an agreement terminable by either party after 1997 and has a haulage contract with M.A. Patout & Sons over 4 miles of track.
(12)		All leased on a month-to-month basis under a Lease and Option to Purchase Agreement which commenced in 1989.
(13)		Includes 12.5 miles under lease expiring in 2009.
(14)		All under lease expiring in 2005.
(15)		All under lease expiring in 2007.
(16)		All under lease expiring in 2006.
(17)		All under lease expiring in 2006.
(18)		Subsidiary of Emons Transportation Group, Inc., acquired February 22, 2002.
(19)		URC was acquired August 28, 2002. In addition, URC operates by trackage rights over 326 miles of UP and 96 miles of BNSF.
(20)		Subsidiary of Utah Railway Company, acquired August 28, 2002. In addition, SLCS operates by trackage rights over 21 miles of UP.
(21)		All under lease expiring in 2017, with renewal options subject to both parties’ consent.
(22)		Consists of 275 miles which are owned and 18 which are under lease expiring in 2017, with renewal options subject to both parties’ consent. In addition, QGRR operates by trackage rights over 27 miles of CP.
(23)		All under a 30-year concession agreement operating on track structure which is owned by the state-owned rail company Ferronales. In addition, FCCM operates by trackage rights over 210 miles on Ferrosur (another privatized rail concession) and a government-owned line.
(24)		The track structure is owned by ARG. The land on which the track structure is built is leased from the State of South Australia for a term of 50 years with a conditional right of renewal for an additional 15 years. In addition, ASR operates over the 2,100 mile government-owned corridor between Melbourne and Perth under a track access agreement.
(25)		ARG entered 49 year leases with the Government of Western Australia to operate the standard and narrow gauge freight railway infrastructure owned by the State. The lease obligations have been prepaid by ARG. ARG, in connection with the Westrail Freight acquisition, purchased certain rail yards, terminals, and other rail related maintenance facilities from the State.
(26)		The Asia Pacific Transport Consortium (APTC) has undertaken a project to build, own and operate an 885-mile rail line from Alice Springs to Darwin in the Northern Territory of Australia. ARG is a 2.6% equity participant in APTC and will be the rail operator once construction of the rail line is complete, which is expected to be later in 2003.
(27)		All under a 40-year concession agreement operating on track structure which is owned by the state-owned rail company Red Ferroviario Oriental.

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EQUIPMENT

     As of December 31, 2002, rolling stock of the Company’s North American operations consisted of 353 locomotives and 4,542 freight cars, some of which were owned and some of which were leased from third parties.

ITEM 3.  LEGAL PROCEEDINGS

     The Company is a defendant in certain lawsuits resulting from railroad and industrial switching operations. Management believes that the Company has 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 the Company’s results of operations or financial position.

     On August 6, 1998, a lawsuit was commenced against the Company and its subsidiary, Illinois & Midland Railroad, Inc. (IMRR), by Commonwealth Edison Company (ComEd) in the Circuit Court of Cook County, Illinois. The suit alleges that IMRR breached certain provisions of a stock purchase agreement entered into by a prior unrelated owner of the IMRR rail line. The provisions allegedly pertain to limitations on rates received by IMRR and the unrelated predecessor for freight hauled for ComEd’s previously owned Powerton Plant. The suit seeks up to $19.0 million in compensatory damages for alleged past rate overcharges. The Company believes the suit is without merit and is vigorously defending against the suit. However, an adverse outcome of this lawsuit could have a material adverse effect on the Company’s financial condition.

     The parent company of ComEd has sold certain of ComEd’s power facilities, one of which is the Powerton plant served by IMRR under the provisions of a 1987 Service Assurance Agreement (the SAA), entered into by a prior unrelated owner of the IMRR rail line. The SAA, which is not terminable except for failure to perform, provides that IMRR has exclusive access to provide rail service to the Powerton plant. On July 18, 2002, the Company filed an amended counterclaim against ComEd in the Cook County action. The counterclaim seeks a declaration of certain rights regarding the SAA and damages in excess of $45.0 million for ComEd’s failure to assign the SAA to the purchaser of the Powerton plant. The Company believes that its counterclaim against ComEd is well-founded and is pursuing it vigorously.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     None

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PART II

ITEM 5.  MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

     On June 24, 1996, the Company’s Class A Common Stock began publicly trading and was quoted on the Nasdaq National Market until September 26, 2002, under the trading symbol GNWR. On September 27, 2002, the Company’s Class A Common Stock began publicly trading on the New York Stock Exchange under the trading symbol GWR. The tables below show the range of high and low actual trade prices for the Company’s Class A Common Stock during each quarterly period of 2002, 2001 and 2000.

     The Company’s Class B Common Stock is not publicly traded.

     The Company did not pay cash dividends in 2002, 2001 or 2000. The Company does not intend to pay cash dividends for the foreseeable future and intends to retain earnings, if any, for future operation and expansion of the Company’s business. Any determination to pay dividends in the future will be at the discretion of the Company’s Board of Directors and will be dependent upon the Company’s results of operations, financial condition, contractual restrictions and other factors deemed relevant by the Board of Directors.

     On March 3, 2003 there were 154 holders of record of the Company’s Class A Common Stock and 9 holders of record of the Company’s Class B Common Stock.

     During 2002, the Company issued the following securities which were not registered under the Securities Act of 1933, as amended (the Act). Each of

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such issuances was made by private offering in reliance on the exemption from the registration provisions of the Act provided by Section 4(2) of the Act. The facts relied upon to establish such exemption included the recipients’ representations as to their investment intent with respect to such Securities and restrictions on the transfer of such Securities imposed by the Company.

     (1)    On January 11, 2002, the Company issued to one of its directors, for no additional consideration, options under the Genesee & Wyoming Inc. 1996 Stock Option Plan for Outside Directors to purchase an aggregate of 2,250 shares of Class A Common Stock at an exercise price of $19.9667 per share. The shares issuable upon exercise of such options are the subject of a Registration Statement on Form S-8 under the Act.

     (2)    On May 23, 2002, the Company issued to an aggregate of 194 of its employees, for no additional consideration, options under the Genesee & Wyoming Inc. 1996 Stock Option Plan to purchase an aggregate of 323,366 shares of Class A Common Stock at an exercise price of $21.35 per share, and 4,684 shares of Class A Common Stock at an exercise price of $23.49 per share. The shares issuable upon exercise of such options are the subject of a Registration Statement on Form S-8 under the Act.

     (3)    On July 28, 2002, the Company issued to one of its directors, for no additional consideration, options under the Genesee & Wyoming Inc. Stock Option Plan for Outside Directors to purchase an aggregate of 2,250 shares of Class A Common Stock at an exercise price of $16.70 per share. The shares issuable upon exercise of such options are the subject of a Registration Statement on Form S-8 under the Act.

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

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ITEM 6.  SELECTED FINANCIAL DATA.

     The following selected consolidated income statement data and selected consolidated balance sheet data of the Company as of and for the years ended December 31, 2002, 2001, 2000, 1999, and 1998, have been derived from the Company’s 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. of this Report.

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ITEM 7.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

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

General

     The Company is a holding company whose subsidiaries and unconsolidated affiliates own and/or operate short line and regional freight railroads and provide related rail services in North America, South America and Australia. The Company, through its U.S. industrial switching subsidiary, also provides freight car switching and related services to United States industrial companies with railroad facilities within their complexes. The Company generates revenues primarily from the movement of freight over track owned or operated by its railroads. The Company also generates non-freight revenues primarily by providing freight car switching and ancillary rail services.

     The Company’s operating expenses include wages and benefits, equipment rents (including car hire), 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 the Company’s results of operations from one reporting period to another, the following factors should be taken into consideration. The Company has historically experienced fluctuations in revenues and expenses such as one-time freight moves, customer plant expansions and shut-downs, railcar sales, accidents and derailments. In periods when these events occur, results of operations are not easily comparable to other periods. Also, the Company has completed a number of recent acquisitions. The Company completed acquisitions in the United States of Utah Railway Company in August 2002, Emons Transportation Group, Inc. in February 2002, and South Buffalo Railway Company in October 2001. The Company, through a 50% owned joint venture, completed an acquisition in Western Australia in December 2000, and through an investment in an unconsolidated affiliate, acquired an interest in a railroad in Bolivia in November 2000. Because of variations in the structure, timing and size of these acquisitions and differences in economics among the Company’s railroads resulting from differences in the rates and other material terms established through negotiation, the Company’s results of operations in any reporting period may not be directly comparable to its results of operations in other reporting periods.

     The general downturn in economies in North America for 2002 and 2001 has adversely affected the Company’s cyclical shipments of commodities such as 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 downturns and are more closely affected by the weather. The economic downturn has also impacted the Company’s customers and while a limited number of them have declared bankruptcy, their traffic volumes have remained largely unaffected and the impact on the collection of their receivables has not been significant to date.

     On February 14, 2002 and May 1, 2001, the Company announced three-for-two common stock splits in the form of 50% stock dividends distributed on March 14,

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2002 to shareholders of record as of February 28, 2002, and on June 15, 2001 to shareholders of record as of May 31, 2001, respectively. All share, per share and par value amounts presented herein have been restated to reflect the retroactive effect of both of the stock splits.

Expansion of Operations

United States

     On December 30, 2002, the Company expanded its Oregon region by commencing railroad operations over a 76-mile rail line between Salem and Eugene, Oregon previously operated by Burlington Northern Santa Fe Railway Company (BNSF). The rail line is contiguous to the Company’s existing Oregon railroad operations and is expected to increase that region’s annual carloads by approximately 20,000 and enhance operations through more efficient routing of existing traffic. The rail line is being operated under a 15-year lease agreement with BNSF.

     On August 28, 2002, the Company 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, the Company implemented a severance program under which certain URC employees were terminated in the third quarter of 2002. The aggregate $336,000 cost of these restructuring activities is considered a liability assumed in the acquisition, and as such, was allocated to the purchase price. The majority of these costs were paid in the three months ended September 30, 2002. The Company funded the acquisition through its revolving line of credit held under its primary credit agreement. URC (either directly or through its wholly-owned subsidiary, Salt Lake City Southern Railroad Company, Inc.) operates over 46 miles of owned track and 374 miles of track under trackage rights agreements. The tracks over which URC operates run from Ogden, Utah to Grand Junction, Colorado. In addition, URC serves industrial customers in and around Salt Lake City, Utah through trackage rights from the Utah Transit Authority.

     On February 22, 2002, the Company acquired Emons Transportation Group, Inc. (Emons) for approximately $29.4 million in cash, including transaction costs and net of cash received in the acquisition. The Company 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 current liabilities assumed ($4.5 million) and long-term liabilities assumed ($3.8 million). As contemplated with the acquisition, the Company implemented early retirement and severance programs under which certain Emons employees were terminated in the first quarter of 2002. The aggregate $804,000 cost of these restructuring activities is considered a liability assumed in the acquisition and as such, was allocated to the purchase price. The majority of these costs were paid in the three months ended March 31, 2002. The Company funded the acquisition through its revolving line of credit held under its primary credit agreement. Emons is a short line railroad holding company with operations over 340 miles of owned track in Maine, Vermont, New Hampshire, Quebec and Pennsylvania.

     On October 1, 2001, the Company acquired all of the issued and outstanding shares of common stock of South Buffalo Railway Company (South Buffalo) from Bethlehem Steel Corp. (Bethlehem) for $33.1 million in cash, including transaction costs and the assumption of certain liabilities of $5.6 million. At the closing, the Company acquired beneficial ownership of the shares and, having received the necessary approvals from The Surface

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Transportation Board on November 21, 2001, assumed actual ownership on December 6, 2001. The purchase price was allocated to current assets ($2.3 million), property and equipment ($17.6 million) and goodwill ($18.8 million), less current liabilities assumed ($2.4 million) and long-term liabilities assumed ($3.2 million). South Buffalo operates over 52 miles of owned track in Buffalo, New York. The purchase price was reduced by a $669,000 adjustment pursuant to the final determination of the net assets of South Buffalo on the sale date. This amount, together with another $728,000 related to pre-acquisition liabilities paid by the Company on Bethlehem’s behalf, was paid to the Company in December 2002. Although Bethlehem filed for voluntary protection under U.S. bankruptcy laws on October 5, 2001, these payments were funded from a $3.0 million escrow account held by an independent trustee to settle amounts due to the Company pursuant to the South Buffalo acquisition.

     As contemplated with the acquisition, the Company closed the former South Buffalo headquarters office in March 2002 and implemented an early retirement program under which certain South Buffalo employees were terminated in December 2001. The aggregate $876,000 cost of these restructuring activities is considered a liability assumed in the acquisition, and therefore is included in purchase consideration. The majority of these costs were paid in 2001.

     The acquisition of South Buffalo triggered the right of The 1818 Fund III, L.P. (the Fund), a private equity fund managed by Brown Brothers Harriman & Co., to purchase an additional $5.0 million of the Company’s Series A Mandatorily Redeemable Convertible Preferred Stock (the Convertible Preferred), and the Fund exercised that right on December 11, 2001 (see Note 12 to Consolidated Financial Statements).

Australia

     On December 16, 2000, the Company, through its joint venture, Australian Railroad Group Pty. Ltd. (ARG), completed the acquisition of Westrail Freight from the government of Western Australia for approximately $334.4 million (This amount and all other dollar amounts in this report being U.S. dollars) including working capital. ARG is a joint venture owned 50% by the Company and 50% by Wesfarmers Limited, a public corporation based in Perth, Western Australia. Westrail Freight was composed of the freight operations of the formerly state-owned railroad of Western Australia.

     To complete the acquisition, the Company contributed its formerly wholly-owned subsidiary, Australia Southern Railroad (ASR), to ARG along with the Company’s 2.6% interest in the Asia Pacific Transport Consortium (APTC) — a consortium selected to construct and operate the Alice Springs to Darwin railway line in the Northern Territory of Australia. Additionally, the Company contributed $21.4 million of cash to ARG (partially funded by a $20.0 million private placement of the Convertible Preferred with the Fund) while Wesfarmers contributed $64.2 million in cash, including $8.2 million which represents a long-term Australian dollar denominated non-interest bearing note to match a similar note due to the Company from ASR at the date of the transaction. ARG funded the remaining purchase price with proceeds from its Australian bank credit facility.

     As a direct result of the ARG transaction, ASR stock options became immediately exercisable by key management of ASR and, as allowed under the provisions of the stock option plan, the option holders, in lieu of ASR stock, were paid an equivalent value in cash, resulting in a $4.0 million compensation charge to ASR earnings.

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     The Company recognized a $10.1 million gain upon the issuance of ASR stock to Wesfarmers upon the formation of ARG as a result of such issuance being at a per share price in excess of the Company’s book value per share investment in ASR. Additionally, due to the deconsolidation of ASR, the Company recognized a $6.5 million deferred tax expense resulting from the financial reporting versus tax basis difference in the Company’s equity investment in ARG.

     On April 20, 2001, APTC completed the arrangement of debt and equity capital to finance a project to build, own and operate the Alice Springs to Darwin railway line in the Northern Territory of Australia. As previously arranged, upon APTC reaching financial closure, Wesfarmers contributed an additional $7.4 million into ARG and accordingly, the Company recorded an additional first quarter gain of $3.7 million related to the December 2000 issuance of ARG stock to Wesfarmers. A related deferred income tax expense of $1.1 million was also recorded. In the second quarter of 2001, ARG paid the $7.4 million to its two shareholders, in equal amounts of $3.7 million each, as partial payment of each shareholder’s Australian dollar denominated non-interest bearing note which resulted in a $508,000 currency transaction loss.

     The combined gains totaling $13.8 million relating to the formation of ARG represented the difference between the recorded balance of the Company’s previously wholly-owned investment in Australia, less investment amounts that the Company estimated would be reimbursed by ARG, and the value of those Australian operations when ARG was formed. In the fourth quarter of 2001, the Company, ARG and Wesfarmers reached agreement as to the level of acquisition-related costs to be reimbursed to both venture partners. Accordingly, in the fourth quarter of 2001, the Company recorded a $728,000 decrease to its previously recorded gains to reflect the lower than estimated reimbursed amount for acquisition-related costs.

     The Company accounts for its 50% ownership in ARG under the equity method of accounting and therefore deconsolidated ASR from its consolidated financial statements as of December 16, 2000. Prior to its deconsolidation, ASR accounted for $37.6 million and $0.0 of operating revenue and income from operations (including the $4.0 option buyout charge), respectively, for 2000.

Mexico

     On December 7, 2000, in conjunction with the refinancing of the Company’s then wholly-owned subsidiary, Compania de Ferrocarriles Chiapas-Mayab, S.A. de C.V. (FCCM), and its parent company, GW Servicios, S.A. de C.V. (Servicios) (see Note 9 to Consolidated Financial Statements), the International Finance Corporation (IFC) invested $1.9 million of equity for a 12.7% indirect interest in FCCM, through Servicios. The Company contributed an additional $13.1 million and maintains an 87.3% indirect ownership in FCCM. The Company funded $10.7 million of its new investment with borrowings under its amended credit facility, with the remaining investment funded by the conversion of intercompany advances into permanent capital. Along with its equity investment, IFC received a put option exercisable in 2005 to sell its equity stake back to the Company. The put price will be based on a multiple of earnings before interest, taxes, depreciation and amortization. The Company increases its minority interest expense in the event that the value of the put option exceeds the otherwise minority interest liability. Because the IFC equity stake can be put to the Company, the impact of selling the equity stake at a per share price below the Company’s book value per share investment was recorded directly to paid-in capital in 2000.

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South America

     On November 5, 2000, the Company acquired an indirect 21.87% equity interest in Empresa Ferroviaria Oriental, S.A. (Oriental) increasing its stake in Oriental to 22.55% from its original indirect 0.68% interest acquired in September 1999. On July 24, 2001, the Company increased its indirect equity interest in Oriental to 22.89% with an additional investment of $246,000. Oriental is a railroad serving eastern Bolivia and connecting to railroads in Argentina and Brazil. The Company’s ownership interest is largely through a 90% owned holding company in Bolivia which also received $740,000 from the minority partner for investment into Oriental. The Company’s portion of the Oriental investment is composed of $6.9 million in cash, the assumption (via an unconsolidated subsidiary) of non-recourse debt of $10.8 million (90% of $12.0 million) at an adjustable interest rate dependent on operating results of Oriental, and a non-interest bearing contingent payment of $450,000 due in 2003 if certain financial results are achieved. The Company does not expect this financial target to be achieved. The cash used by the Company to fund such investment was obtained from its existing revolving credit facility. Additionally, the Company received the right to collect dividends from Oriental related to its full year 2000 earnings. Dividends received were $263,000 and $617,000 in 2002 and 2001, respectively. The non-recourse debt ($12.0 million as of December 31, 2002) bears interest, based on the availability of dividends received from Oriental, between a floor of 4% and a ceiling of 7.67%. The debt bore interest at an effective rate of 4.0% and 6.12% in 2002 and 2001, respectively, and is due in annual payments. Such payments are primarily funded by dividends received from Oriental, with any shortfalls to be funded by the Company and its partner. The debt is due and payable on December 2, 2003. The Company accounts for its indirect interest in Oriental under the equity method of accounting.

Results of Operations

Year Ended December 31, 2002 Compared to Year Ended December 31, 2001

     Consolidated Operating Revenues

     Consolidated operating revenues (which exclude revenues from the Company’s equity investees) were $209.5 million in the year ended December 31, 2002, compared to $173.6 million in the year ended December 31, 2001, a net increase of $35.9 million or 20.7%. The increase was attributable to a $12.2 million increase in North American railroad revenues from a full year of operations of South Buffalo, a $20.7 million increase in North American railroad revenues from the February 22, 2002 acquisition of Emons, a $6.7 million increase in North American railroad revenues from the August 28, 2002 acquisition of URC, and a $3.0 million increase in industrial switching revenues, offset by a $6.7 million decrease on existing North American railroad operations.

     The following two sections provide information on railroad revenues for North America and industrial switching revenues in the United States.

     North American Railroad Operating Revenues

     Operating revenues had a net increase of $32.9 million, or 20.4%, to $194.4 million in the year ended December 31, 2002 of which $157.3 million were freight revenues and $37.1 million were non-freight revenues. Operating revenues in the year ended December 31, 2001 were $161.4 million of which $129.9 million were freight revenues and $31.5 million were non-freight revenues. The increase in operating revenue was attributable to a $27.4 million net increase in freight revenues and a $5.5 million net increase in non-freight revenues. The $27.4 

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million net increase in freight revenues consisted of $10.2 million in freight revenue from a full year of operations of South Buffalo, $15.2 million in freight revenues from Emons, and $4.1 million in freight revenues from URC, offset by a $2.1 million decrease on existing North American railroad operations. The $5.5 million net increase in non-freight revenues consisted of $2.0 million in non-freight revenue from a full year of operations of South Buffalo, $5.4 million in non-freight revenues from Emons, and $2.7 million in non-freight revenues from URC, offset by a $4.6 million decrease on existing North American railroad operations. The following table compares North American freight revenues, carloads and average freight revenues per carload for the years ended December 31, 2002 and 2001:

North American Freight Revenues and Carloads Comparison by Commodity Group
Years Ended December 31, 2002 and 2001
(dollars in thousands, except average per carload)