GENESEE & WYOMING INC - 10-Q Quarterly Report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

Quarterly report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

for the quarter ended September 30, 2004 Commission File No. 001-31456

GENESEE & WYOMING INC.

(Exact name of registrant as specified in its charter)


Delaware		06-0984624

(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

66 Field Point Road, Greenwich, Connecticut		06830

(Address of principal executive offices)		(Zip Code)

(203) 629-3722

(Telephone No.)

Shares of common stock outstanding as of the close of business on November 1, 2004:


Class	Number of Shares Outstanding
Class A Common Stock		24,245,025
Class B Common Stock		2,650,122

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.

[X] YES [ ] NO

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2)

[X] YES [ ] NO

GENESEE & WYOMING INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share amounts)

(Unaudited)


	Three Months						Nine Months
	Ended September 30,						Ended September 30,
	2004			2003			2004			2003
OPERATING REVENUES	$	77,243		$	61,499		$	223,707		$	183,298

OPERATING EXPENSES:
Transportation		25,950			20,252			73,976			62,005
Maintenance of ways and structures		7,516			6,449			22,002			19,550
Maintenance of equipment		12,060			9,028			34,789			27,181
General and administrative		13,624			12,731			40,317			34,930
Net loss (gain) on sale and impairment of assets		81			(35	)		(12	)		141
Depreciation and amortization		4,812			3,869			14,295			11,437

Total operating expenses		64,043			52,294			185,367			155,244

INCOME FROM OPERATIONS		13,200			9,205			38,340			28,054
Interest expense		(2,352	)		(2,175	)		(7,070	)		(6,685	)
Other income, net		(221	)		54			203			767

Income before income taxes and equity earnings		10,627			7,084			31,473			22,136
Provision for income taxes		4,284			2,384			12,267			8,260

Income before equity earnings		6,343			4,700			19,206			13,876
Equity in net income of international affiliates:
Australian Railroad Group		3,529			2,715			10,746			6,859
South America		273			203			496			112

Net income	$	10,145		$	7,618		$	30,448		$	20,847

Net income available to common stockholders — Basic	$	10,145		$	6,114		$	27,433		$	16,788

Net income available to common stockholders — Diluted	$	10,145		$	7,234		$	29,969		$	19,878

Basic earnings per Class A common share	$	0.42		$	0.31		$	1.24		$	0.84

Weighted average Class A shares — Basic		24,213			20,037			22,048			19,932

Diluted earnings per common share	$	0.37		$	0.27		$	1.09		$	0.74

Weighted average shares — Diluted		27,497			26,835			27,412			26,712

The accompanying notes are an integral part of these consolidated financial statements.

GENESEE & WYOMING INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)

(Unaudited)


	September 30,			December 31,
	2004			2003
ASSETS
CURRENTS ASSETS:
Cash and cash equivalents	$	9,403		$	11,118
Accounts receivable, net		62,460			54,656
Materials and supplies		5,381			5,204
Prepaid expenses and other		6,700			6,204
Deferred income tax assets, net		3,453			3,010

Total current assets		87,397			80,192

PROPERTY AND EQUIPMENT, net		327,940			315,345
INVESTMENT IN UNCONSOLIDATED AFFILIATES		120,975			117,664
GOODWILL		24,577			24,522
INTANGIBLE ASSETS, net		78,062			79,357
OTHER ASSETS, net		10,432			10,093

Total assets	$	649,383		$	627,173

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt	$	6,428		$	6,589
Accounts payable		64,440			57,472
Accrued expenses		17,916			13,902

Total current liabilities		88,784			77,963

LONG-TERM DEBT, less current portion		122,614			151,433
DEFERRED INCOME TAX LIABILITIES, net		47,360			41,840
DEFERRED ITEMS—grants from governmental agencies		45,487			42,667
DEFERRED GAIN—sale/leaseback		3,570			3,982
OTHER LONG-TERM LIABILITIES		14,796			14,843
MINORITY INTEREST		3,507			3,365
COMMITMENTS AND CONTINGENCIES
MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK (converted June 2004 into 3,668,478 shares at $6.81 per share of Class A Common Stock)		—			23,994
STOCKHOLDERS’ EQUITY:
Class A Common Stock, $0.01 par value, one vote per share; 90,000,000 shares authorized; 27,805,161 and 23,697,287 shares issued and 24,273,067 and 20,167,875 shares outstanding (net of 3,532,094 and 3,529,412 shares in treasury) on September 30, 2004 and December 31, 2003, respectively		278			237
Class B Common Stock, $0.01 par value, ten votes per share; 15,000,000 shares authorized; 2,650,122 shares issued and outstanding on September 30, 2004 and December 31, 2003		27			27
Additional paid-in capital		159,862			131,890
Retained earnings		160,881			130,913
Accumulated other comprehensive income		14,861			16,599
Less treasury stock, at cost		(12,644	)		(12,580	)

Total stockholders’ equity		323,265			267,086

Total liabilities and stockholders’ equity	$	649,383		$	627,173

The accompanying notes are an integral part of these consolidated financial statements.

GENESEE & WYOMING INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)


	Nine Months Ended
	September 30,
	2004			2003
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	30,448		$	20,847
Adjustments to reconcile net income to net cash provided by operating activities-
Depreciation and amortization		14,295			11,437
Deferred income taxes		4,737			4,750
Net (gain) loss on disposition of property		(12	)		141
Equity in net income of international affiliates		(11,242	)		(6,971	)
Minority interest expense		142			209
Tax benefit realized upon exercise of stock options		1,090			846
Changes in assets and liabilities -
Accounts receivable		(7,774	)		1,457
Materials and supplies		(184	)		77
Prepaid expenses and other		(541	)		(343	)
Accounts payable and accrued expenses		10,727			4,437
Other assets and liabilities, net		(217	)		1,271

Net cash provided by operating activities		41,469			38,158

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net of proceeds from government grants		(19,751	)		(12,846	)
Locomotive upgrade project		—			(1,425	)
Purchase of Homer City and Savannah Wharf rail properties		(2,124	)		—
Cash received from unconsolidated international affiliate		5,757			132
Proceeds from disposition of property		315			644

Net cash used in investing activities		(15,803	)		(13,495	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term borrowings		(151,134	)		(121,932	)
Proceeds from issuance of long-term debt		121,300			92,000
Net proceeds from employee stock purchases		2,795			1,680
Dividends paid on Redeemable Convertible Preferred Stock		(411	)		(750	)

Net cash used in financing activities		(27,450	)		(29,002	)

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS		69			253

DECREASE IN CASH AND CASH EQUIVALENTS		(1,715	)		(4,086	)
CASH AND CASH EQUIVALENTS, beginning of period		11,118			11,028

CASH AND CASH EQUIVALENTS, end of period	$	9,403		$	6,942

CASH PAID DURING PERIOD FOR:
Interest	$	7,206		$	6,533
Income taxes	$	4,635		$	922

The accompanying notes are an integral part of these consolidated financial statements.

GENESEE & WYOMING INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION:

The interim consolidated financial statements presented herein include the accounts of Genesee & Wyoming Inc. and its subsidiaries. References to “GWI” or the “Company” mean Genesee & Wyoming Inc. and, unless the context indicates otherwise, its consolidated subsidiaries. All significant intercompany transactions and accounts have been eliminated in consolidation. These interim consolidated financial statements have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the SEC) and accordingly do not contain all disclosures which would be required in a full set of financial statements in accordance with accounting principles generally accepted in the United States of America. In the opinion of management, the unaudited financial statements for the three-month and nine-month periods ended September 30, 2004 and 2003, are presented on a basis consistent with audited financial statements and contain all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation. As discussed in Note 3, the Company adopted Issue No. 03-6 – “Participating Securities and the Two-Class Method under FASB Statement No. 128, Earnings Per Share” which provides new guidance for the calculation of Basic and Diluted Earnings Per Share. The results of operations for interim periods are not necessarily indicative of results of operations for the full year. The interim consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2003 included in the Company’s 2003 Form 10-K. Certain prior period balances have been reclassified to conform to the 2004 presentation.

2. EXPANSION OF OPERATIONS:

On August 30, 2004, the Company’s newly formed subsidiary, the Tazewell & Peoria Railroad, Inc. (TZPR) signed a twenty year agreement to lease the assets of the Peoria and Pekin Union Railway (PPU) located in Peoria, Illinois. The owners of the PPU include Norfolk Southern Railway Company, Union Pacific Railroad Company and Illinois Central Railroad Company. The TZPR will be operated by the Company’s Illinois Region and is contiguous to that Region’s existing railroad operations. The TZPR began operations in November 2004.

On August 30, 2004, the Company completed the purchase from CSX Transportation, Inc. 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 the Company’s Rail Link Region and is contiguous to one of two existing Rail Link operations in the Savannah area. Rail Link began operations of the Savannah Wharf Branch in September 2004.

On January 27, 2004, the Company completed the purchase from CSX Transportation, Inc. 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. The Homer City Branch rail line will be operated by the Company’s New York-Pennsylvania Region and is contiguous to that existing railroad operation. 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 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, the Company implemented a severance program which is included in the table below. The aggregate cost of the severance program, $1.0 million at December 31, 2003, is considered a liability assumed in the acquisition, and as such, was allocated to the purchase price. In conjunction with the acquisition, the Company 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. The Company funded the acquisition through its revolving line of credit held under its primary credit agreement.

The table below sets forth a roll-forward of the activity affecting the restructuring reserves established in acquisitions, including the number of employees and actual cash payments for severance:

Schedule of Acquisition Restructuring Activity


	Three Months Ended
	September 30,
	2004
Number of Employees:
Number of planned terminations related to 2003 acquisitions – beginning of period		2
Additions to planned terminations during the period		2

Actual number of employees terminated during the period		2

Number of remaining planned terminations as of the end of the period		2

Restructuring Reserves:
Liabilities established in purchase accounting for acquisitions in 2003 – beginning of period – June 30, 2004	$	179,000
Additions to liability reserve during the period		80,000
Cash payments during the period		142,000

Balance at end of period	$	117,000

For U.S. tax purposes, the Company has made elections under Internal Revenue Code Section 338 to treat the GP Railroads as a purchase of assets.

Pro Forma Financial Results

The following table summarizes the Company’s pro forma operating results for the three-month and nine-month periods ended September 30, 2003, as if the GP Railroads had been acquired as of the beginning of 2003. Actual results for the three-month and nine-month periods ended September 30, 2004 are presented for comparison purposes (in thousands, except per share amounts):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	Actual		Pro forma		Actual		Pro forma
	2004		2003		2004		2003
Operating revenues	$	77,243	$	66,046	$	223,707	$	196,525
Net income	$	10,145	$	8,441	$	30,448	$	21,955
Basic earnings per share	$	0.42	$	0.34	$	1.24	$	0.89
Diluted earnings per share	$	0.37	$	0.30	$	1.09	$	0.78

The pro forma operating results include the acquisition of the GP Railroads adjusted for depreciation expense, net of tax resulting from the step-up of GP Railroads property based on appraised values, and incremental interest expense, net of tax related to borrowings used to fund the GP Railroads acquisition.

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

3. EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per share (EPS) (in thousands, except per share amounts):


	Three Months Ended				Nine Months Ended
	Sept. 30,		Sept. 30,		Sept. 30,		Sept. 30,
	2004		2003		2004		2003
Numerators:
Net income	$	10,145	$	7,618	$	30,448	$	20,847
Preferred Stock dividends and accretion		—		384		479		969
Net income allocated to participating preferred stockholders		—		1,120		2,536		3,090

Net income available to Class A Common stockholders — Basic	$	10,145	$	6,114	$	27,433	$	16,788

Net income allocated to participating preferred stockholders		—		1,120		2,536		3,090

Net income available to Class A Common stockholders — Diluted	$	10,145	$	7,234	$	29,969	$	19,878

Denominators:
Weighted average Class A Common Shares outstanding – Basic		24,213		20,037		22,048		19,932
Weighted average Mandatory Redeemable Convertible Preferred Stock (converted to class A common stock in the second quarter of 2004)		—		3,668		2,038		3,668
Weighted average Class B Common Shares outstanding		2,650		2,708		2,682		2,708
Dilutive effect of employee stock options		634		422		644		404

Weighted average shares — Dilutive		27,497		26,835		27,412		26,712

Income per common share:
Basic	$	0.42	$	0.31	$	1.24	$	0.84

Diluted	$	0.37	$	0.27	$	1.09	$	0.74

Stock Split

On February 11, 2004, the Company announced a three-for-two common stock split in the form of a 50% stock dividend distributed on March 15, 2004 to stockholders of record as of February 27, 2004. All share, per share and par value amounts presented herein have been restated to reflect the retroactive effect of the stock split.

Public Offering of Class A Common Stock through Conversion of Class A Preferred Stock

On June 1, 2004, upon the conversion by The 1818 Fund III, L.P., a private equity partnership managed by Brown Brothers Harriman & Co., of 22,886 shares of the Company’s then outstanding Series A Preferred Stock, the Company issued 3,358,303 shares of its Class A Common Stock to The 1818 Fund III, L.P., and these shares were sold in a secondary public offering. Certain of the Company’s management stockholders granted the underwriters of the offering a 30-day option to purchase up to an additional 503,745 shares of Class A Common Stock to cover any over-allotments. The 1818 Fund III, L.P. accounted for 310,175 of such shares, all of which were sold, and certain management stockholders accounting for the remaining 193,570 shares, all of which were sold. The Company incurred $542,000 of costs in the second quarter of 2004 related to this offering. The Company received no proceeds from the secondary offering.

Emerging Issues Task Force (EITF):

Issue No. 03-6 – “Participating Securities and the Two-Class Method Under FASB Statement No. 128, Earnings Per Share”

During the second quarter of 2004 the Company adopted EITF 03-6, “Participating Securities and the Two-Class Method under FASB Statement No. 128,” that provides additional guidance related to the calculation of earnings per share under SFAS No. 128, “Earnings per Share,” which includes application of the “two-class” method in computing earnings per share, identification of participating securities, and requirements for the allocation of undistributed earnings (and in some cases losses) to participating securities.

EITF 03-6 was effective for the quarter ending June 30, 2004 and required retroactive restatement for all periods presented. The calculation for basic EPS now excludes the Company’s Class B Common Stock from the denominator and includes the share equivalents of the Series A Preferred Stock for periods prior to its conversion. The diluted EPS calculation is now calculated on net income less preferred stock dividends and accretion in the numerator. As a result of the retroactive restatement, the adoption of EITF 03-06 reduced basic and diluted EPS by $.01 and $.02, respectively for the three months ended September 30, 2003 and $.04 and $.04, respectively for the nine months ended September 30, 2003.

Stock-based Compensation Plans

In 1996, the Company established an incentive and nonqualified stock option plan for key employees and a nonqualified stock option plan for non-employee directors, and in 2004 the Company established a new Omnibus Incentive Plan which also permits the granting of options (the Stock Option Plans). See Note 17 of the Company’s Form 10-K for the year ended 2003 and Proxy for 2004 for additional information regarding the Stock Options Plans. The Company accounts for these plans under APB Opinion No. 25, under which no compensation cost has been recognized. Had compensation cost for all options issued under these plans been determined consistent with FASB Statement No. 123, the Company’s net income and earnings per share would have been reduced as follows (in thousands, except EPS):

2004


										Nine Months
	Quarters Ended									Ended
	March 31,			June 30,			Sept. 30,			Sept. 30
Net Income: As reported	$	9,466		$	10,836		$	10,145		$	30,448
Deduct: Total stock-based employee compensation expense determined under fair value based methods for all awards, net of related tax effects		(539	)		(314	)		(377	)		(1,230	)

Pro Forma		8,927			10,522			9,768			29,218
Basic EPS: As reported	$	0.40		$	0.44		$	0.42		$	1.24
Pro Forma		0.38			0.43			0.40			1.19
Diluted EPS: As reported	$	0.35		$	0.39		$	0.37		$	1.09
Pro Forma		0.33			0.38			0.36			1.05

2003


										Nine Months
	Quarters Ended									Ended
	March 31,			June 30,			Sept. 30,			Sept. 30
Net Income: As reported	$	5,534		$	7,695		$	7,618		$	20,847
Deduct: Total stock-based employee compensation expense determined under fair value based methods for all awards, net of related tax effects		(295	)		303	)		(512	)		(1,110	)

Pro Forma		5,239			7,392			7,106			19,737
Basic EPS: As reported	$	0.23		$	0.31		$	0.31		$	0.84
Pro Forma		0.22			0.30			0.28			0.79
Diluted EPS: As reported	$	0.21		$	0.28		$	0.27		$	0.74
Pro Forma		0.20			0.27			0.25			0.70

4. EQUITY INVESTMENTS

Australian Railroad Group

Australian Railroad Group Pty. Ltd. (ARG) is a company which is 50%-owned by the Company and is accounted for under the equity method of accounting. The related equity earnings in this investment are shown within the equity in net income of international affiliates section in the accompanying consolidated statements of income. The following are U.S. GAAP condensed balance sheets of ARG as of September 30, 2004 and December 31, 2003, and the related condensed consolidated statements of income and cash flows for the three-month and nine-month periods ended September 30, 2004 and 2003 (in thousands of U.S. dollars). For the dates and periods indicated below, one Australian dollar could be exchanged into the following amounts of U.S. dollars:


As of September 30, 2004	$	0.73
As of December 31, 2003	$	0.75
Average for the three months ended September 30, 2004	$	0.71
Average for the three months ended September 30, 2003	$	0.67
Average for the nine months ended September 30, 2004	$	0.73
Average for the nine months ended September 30, 2003	$	0.63

Australian Railroad Group Pty. Ltd.
Condensed Consolidated Balance Sheets
(in thousands of U.S. dollars)


	September 30,		December 31,
	2004		2003
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	30,760	$	26,618
Accounts receivable, net		41,607		47,764
Materials and supplies		10,512		10,033
Prepaid expenses and other		4,862		3,069

Total current assets		87,741		87,484
PROPERTY AND EQUIPMENT, net		481,610		478,808
DEFERRED INCOME TAX ASSETS, net		73,338		80,193
OTHER ASSETS, net		7,875		5,476

Total assets	$	650,564	$	651,961

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	44,522	$	42,310
Current income tax liabilities		212		—

Total current liabilities		44,734		42,310
LONG-TERM BANK DEBT		356,671		367,892
DEFERRED INCOME TAX LIABILITIES, net		18,278		14,271
OTHER LONG-TERM LIABILITIES		1,989		2,031
FAIR VALUE OF INTEREST RATE SWAPS		9,291		9,133
SUBORDINATED NOTES TO STOCKHOLDERS		—		11,562

Total non-current liabilities		386,229		404,889
REDEEMABLE PREFERRED STOCK OF STOCKHOLDERS		15,718		16,212
TOTAL STOCKHOLDERS’ EQUITY		203,883		188,550

Total liabilities and stockholders’ equity	$	650,564	$	651,961

Australian Railroad Group Pty. Ltd.
Condensed Consolidated Statements of Income
(in thousands of U.S. dollars)


	Three Months Ended						Nine Months Ended
	Sept. 30,			Sept. 30,			Sept. 30,			Sept. 30,
	2004			2003			2004			2003
Operating revenues	$	83,695		$	61,716		$	247,765		$	174,988

Operating expenses		66,959			50,546			196,929			138,153
Restructuring costs		—			—			—			267

Total operating expenses		66,959			50,546			196,929			138,420

Income from operations		16,736			11,170			50,836			36,568
Interest expense		(6,865	)		(8,060	)		(21,068	)		(22,757	)
Other income, net		221			876			962			2,414

Income before income taxes		10,092			3,986			30,730			16,225
Provision (benefit) for income taxes		3,030			(1,446	)		9,236			2,505

Net income	$	7,062		$	5,432		$	21,494		$	13,720

Australian Railroad Group Pty. Ltd.
Condensed Consolidated Statements of Cash Flows
(in thousands of U.S. dollars)


	Nine Months Ended
	Sept. 30,			Sept. 30,
	2004			2003
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	21,494		$	13,720
Adjustments to reconcile net income to net cash provided by operating activities-
Depreciation and amortization		19,845			16,940
Deferred income taxes		8,894			8,362
Net loss (gain) on sale and impairment of assets		376			(816	)
Changes in assets and liabilities		3,345			(3,926	)

Net cash provided by operating activities		53,954			34,280

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		(39,059	)		(21,014	)
Proceeds from disposition of property and equipment		1,296			4,027
Transfer to restricted funds on deposit		—			(4,523	)

Net cash used in investing activities		(37,763	)		(21,510	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Payments on subordinated notes to stockholders		(10,710	)		—

Net cash used in financing activities		(10,710	)

EFFECT OF EXCHANGE RATE DIFFERENCES ON CASH AND CASH EQUIVALENTS		(1,339	)		3,488

INCREASE IN CASH AND CASH EQUIVALENTS		4,142			16,258
CASH AND CASH EQUIVALENTS, beginning of period		26,618			5,882

CASH AND CASH EQUIVALENTS, end of period	$	30,760		$	22,140

South America

Ferroviaria Oriental S.A. (Oriental) is a company which is 22.89%-owned by the Company and is accounted for under the equity method of accounting. The related equity earnings in this investment are shown within the equity in net income of international affiliates section in the accompanying consolidated statements of income. Oriental has a U.S. functional currency and the following condensed results of operations for the three-month and nine-month periods ended September 30, 2004 and 2003 are based on accounting principles generally accepted in the United States (in thousands):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2004		2003		2004		2003
Operating revenues	$	8,554	$	7,325	$	23,045	$	18,745

Net income		2,040		1,510		4,777		2,846

Condensed balance sheet information for Oriental as of September 30, 2004 and December 31, 2003:


	September 30, 2004		December 31, 2003
Current assets	$	12,739	$	14,374
Non-current assets		57,023		55,237

Total assets	$	69,762	$	69,611

Current liabilities		5,947		5,617
Non-current liabilities		5,340		4,702
Long-term debt		882		1,568
Shareholders’ equity		57,593		57,724

Total liabilities and shareholders’ equity	$	69,762	$	69,611

The above data does not include non-recourse debt of $12.0 million held at an intermediate unconsolidated affiliate or any of the general and administrative, interest or income tax costs at various intermediate unconsolidated affiliates. The Company’s share of the various costs from the intermediate unconsolidated affiliates is $235,000 and $178,000 for the three months and $691,000 and $466,000 for the nine months ended September 30, 2004 and 2003, respectively, and is included in the Company’s equity income reported for South America for the three-month and nine-month periods ended September 30, 2004 and 2003, respectively.

As noted previously, the Company holds its equity interest in Oriental through a number of intermediate holding companies, and the Company accounts for its interest in Oriental under the equity method of accounting. The Company indirectly holds a 12.52% equity interest in Oriental through an interest in Genesee & Wyoming Chile (GWC), and the Company holds its remaining 10.37% equity interest in Oriental through other companies. GWC is an obligor of non-recourse debt of $12.0 million, which has an adjustable interest rate dependent on operating results of Oriental. This non-recourse debt is secured by a lien over GWC’s 12.52% indirect equity interest in Oriental.

This debt became due and payable on November 2, 2003. Due to the political and economic unrest and uncertainties in Bolivia, it has become difficult for GWC to refinance this debt and the Company has chosen not to repay the non-recourse obligation. GWC entered into discussions with its creditors on plans to restructure the debt, and as a result of those discussions, GWC obtained a written waiver of principal repayment from the creditors which expired on January 31, 2004. However,

negotiations with the creditors continue, and currently, none of GWC’s creditors have commenced court proceedings to (i) collect on the debt or (ii) exercise their rights pursuant to the lien.

If the Company were to lose its 12.52% equity stake in Oriental due to creditors exercising their lien on GWC’s indirect equity interest in Oriental, the Company would write-off its investment in Oriental held through GWC, which on September 30, 2004 amounted to $385,000. A default, acceleration or effort to foreclose on the lien under the non-recourse debt will have no impact on the Company’s remaining 10.37% equity interest in Oriental because that equity interest is held indirectly through holding companies outside of GWC’s ownership in Oriental.

Oriental has no obligations associated with the $12.0 million debt. In addition, a default, acceleration or effort to foreclose on the lien under the non-recourse debt would not result in a breach of a representation, warranty, covenant, cross-default or acceleration under the Company’s Senior Credit Facility.

5. COMMITMENTS AND CONTINGENCIES:

Legal Proceedings – 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 the Company of their ownership interests in certain of the Company’s 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 the Company’s Class A Common Stock at an exercise price of $2.56 per share if certain of the Company’s 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. The Company has determined that the Canadian operations at issue failed to achieve these financial performance targets in any of the required years, and it intends to vigorously defend this lawsuit.

In addition, the Company is a defendant in certain lawsuits resulting from its operations. The Company believes that it 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, the Company believes that the ultimate liability, if any, will not be material to its operating results, financial condition or liquidity.

6. COMPREHENSIVE INCOME:

Comprehensive income is the total of net income and all other non-owner changes in equity. The following table sets forth the Company’s comprehensive income, net of tax, for the three-month and nine-month periods ended September 30, 2004 and 2003 (in thousands):


	Three Months Ended
	September 30,
	2004			2003
Net income	$	10,145		$	7,618
Other comprehensive income (loss):
Foreign currency translation adjustments		6,879			(2,476	)
Net unrealized gains (losses) on qualifying cash flow hedges, net of (benefit) tax of ($86) and $297, respectively		(129	)		577
Net unrealized gains (losses) on qualifying cash flow hedges of Australian Railroad Group, net of (benefit) tax of ($267) and $1,065, respectively		(624	)		2,468

Comprehensive income	$	16,271		$	8,187


	Nine Months Ended
	September 30,
	2004			2003
Net income	$	30,448		$	20,847
Other comprehensive income (loss):
Foreign currency translation adjustments		(2,298	)	$	15,846
Net unrealized gains (losses) on qualifying cash flow hedges, net of tax (benefit) of $392 and ($106), respectively		588			(181	)
Net unrealized gains (losses) on qualifying cash flow hedges of Australian Railroad Group, net of (benefit) tax of ($11) and $256, respectively		(26	)		597
Minimum pension liability adjustment, net of benefit of $0 and ($186), respectively		—			(435	)

Comprehensive income	$	28,712		$	36,674

The following table sets forth the components of accumulated other comprehensive income, net of tax, included in the consolidated balance sheets as of September 30, 2004, and December 31, 2003 (in thousands):


	Sept. 30, 2004			December 31, 2003
Net accumulated foreign currency translation adjustments	$	19,541		$	21,839
Net unrealized (losses) on qualifying cash flow hedges		(832	)		(1,420	)
Net unrealized (losses) on qualifying cash flow hedges of Australian Railroad Group		(3,222	)		(3,196	)
Net unrealized minimum pension liability adjustment, net of tax		(624	)		(624	)

Accumulated other comprehensive income as reported	$	14,863		$	16,599

7. GEOGRAPHIC AREA INFORMATION:

The table below sets forth the Company’s geographic area data for its consolidated operations for the three-month and nine-month periods ended September 30, 2004 and 2003:

Geographic Area Data


	Three Months Ended				Nine Months Ended
	2004		2003		2004		2003
Operating Revenues:
United States	$	57,514	$	44,388	$	166,335	$	131,792
Canada		11,269		8,782		33,633		27,142
Mexico		8,460		8,329		23,739		24,364

Total operating revenues	$	77,243	$	61,499	$	223,707	$	183,298


	As of
	Sept. 30, 2004
Long-lived assets located in:
United States	$	464,176
Canada		58,739
Mexico		39,071

Total long-lived assets	$	561,986

8. DERIVATIVE FINANCIAL INSTRUMENTS:

The Company actively monitors its exposure to interest rate and foreign currency exchange rate risks and uses derivative financial instruments to manage the potential impact of certain of these risks. The Company uses derivative financial instruments only for purposes of managing risk associated with underlying exposures. Management believes that its use of derivative instruments to manage risk is in the Company’s best interest. However, the Company’s use of derivative financial instruments may result in short-term gains or losses and increased earnings volatility.

Accounting for Derivative Financial Instruments

Interest Rate Risk

The Company uses interest rate swap agreements to manage its exposure to changes in interest rates for its floating rate debt. Interest rate swap agreements are accounted for as cash flow hedges. Gains or losses on the swaps, representing interest rate differentials to be received or paid on the swaps, are recognized in the consolidated statements of income as a reduction or increase in interest expense, respectively. In accordance with the derivative accounting requirements, the change in the fair value of the derivative instrument is recorded in the consolidated balance sheets as a component of current assets or liabilities, and the effective portion of the change in the value of the derivative instrument is recorded in other comprehensive income. The ineffective portion of the change in the fair value of the derivative instrument, along with the gain or loss on the hedged item, is recorded in earnings and reported in the consolidated statements of income in interest expense.

During 2003, 2002 and 2001, the Company entered into various interest rate swaps fixing its base interest rate by exchanging its variable LIBOR interest rates on long-term debt for a fixed interest rate. The swaps expire at various dates through September 2007 and the fixed base rates range from 3.35% to 5.46%. At September 30, 2004 and December 31, 2003, the notional amount under these agreements was $56.8

million and $60.6 million, respectively and the fair value of these interest rate swaps was a negative $1.2 million and $2.2 million, respectively.

Foreign Currency Exchange Rate Risk

The Company uses purchased options to manage foreign currency exchange rate risk related to certain projected cash flows related to foreign operations. Foreign currency exchange rate options are accounted for as cash flow hedges. In accordance with the derivative accounting requirements, the change in the fair value of the derivative instrument is recorded in the consolidated balance sheets as a component of current assets or liabilities, and the effective portion of the change in the value of the derivative instrument is recorded in other comprehensive income. The ineffective portion of the change in the fair value of the derivative instrument, along with the gain or loss on the hedged item, is recorded in earnings and reported in the consolidated statements of income in interest expense.

During 2004 and 2003, the Company entered into various exchange rate options that establish exchange rates for converting Mexican Pesos to U.S. Dollars, one of which was outstanding as of September 30, 2004. This option, which expires in March 2005, gives the Company the right to sell Mexican Pesos for U.S. Dollars at an exchange rate of 13.34 Mexican Pesos to the U.S. Dollar. The Company paid an up-front premium for this option of $28,000 in the quarter ended June 30, 2004. At September 30, 2004 and December 31, 2003, the notional amount under exchange rate options was $2.1 million and $5.3 million, respectively. At September 30, 2004 and December 31, 2003, the fair value of currency exchange rate options was $160 and $17,000, respectively.

9. INTANGIBLE AND OTHER ASSETS, NET AND GOODWILL:

Acquired intangible assets are as follows (in thousands):


	September 30, 2004						December 31, 2003
	Gross						Gross
	Carrying		Accumulated		Net		Carrying		Accumulated		Net
	Amount		Amortization		Assets		Amount		Amortization		Assets
INTANGIBLE ASSETS:
Amortizable intangible assets:
Chiapas-Mayab Operating License (Mexico)	$	6,916	$	1,151	$	5,765	$	7,058	$	999	$	6,059
Amended and Restated Service Assurance Agreement (Illinois & Midland Railroad)		10,566		539		10,027		10,566		216		10,350
Transportation Services Agreement (GP Railroads)		27,055		676		26,379		27,055		—		27,055
Non-amortizable intangible assets:
Track Access Agreements (Utah Railway)		35,891		—		35,891		35,891		—		35,891

Total Intangible Assets		80,428		2,366		78,062		80,570		1,213		79,357

OTHER ASSETS:
Deferred financing costs		6,782		2,797		3,985		6,607		1,841		4,766
Other assets		7,067		620		6,447		5,370		43		5,327

Total Other Assets		13,849		3,417		10,432		11,977		1,884		10,093

Total Intangible and Other Assets	$	94,277	$	5,782	$	88,494	$	92,547	$	3,097	$	89,450

The Chiapas-Mayab Operating License is being amortized over 30 years which is the life of the concession agreement with the Mexican Communications and Transportation Department. The Chiapas-Mayab Operating License is subject to exchange rate changes resulting from conversion of Mexican Pesos to U.S. Dollars at different periods.

On July 23, 2003 as a result of a settlement agreement with Commonwealth Edison Company, the Company amended and restated the Service Assurance Agreement and began to amortize the Amended and Restated Service Assurance Agreement (ARSAA). The estimate of the useful life of the ARSAA asset is based on the Company’s estimate that the useful life of the coal-fired electricity generation plant to which the Company provides service will be in service through 2027. Prior to the settlement date, upon adoption of SFAS No. 142, the Service Assurance Agreement was determined to have an indefinite useful life and therefore was not subject to amortization.

The Transportation Services Agreement, entered into in conjunction with the GP transaction (the TSA), is a 20-year agreement to provide exclusive rail transportation service to GP facilities. The Company believes that the customer’s facilities have a 30-year economic life and that the Company will continue to be the exclusive rail transportation service provider until the end of the plant’s useful life. Therefore, the TSA is being amortized on a straight-line basis over a 30-year life beginning January 1, 2004.

The Track Access Agreements are perpetual trackage agreements assumed in the Company’s acquisition of Utah Railway Company. Under SFAS No. 142 these assets have been determined to have an indefinite useful life and therefore are not subject to amortization.

Deferred financing costs are amortized over terms of the related debt using the effective-interest method for the term debt and using the straight-line method for the revolving loan portion of debt.

Other assets consist primarily of executive split dollar life insurance, assets held for sale and a minority equity investment in an agricultural facility. Executive split dollar life insurance is the present value of life insurance benefits which the Company funds but that are owned by executive officers. The Company retains a collateral interest in the policies’ cash values and death benefits. Assets held for sale or future use primarily represent surplus track and locomotives.

Upon adoption of SFAS No. 142, amortization of goodwill was discontinued as of January 1, 2002. The changes in the carrying amount of goodwill are as follows:


	Nine Months Ended		Twelve Months Ended
	September 30, 2004		December 31, 2003
Goodwill:
Balance at beginning of period	$	24,522	$	24,174
Goodwill acquired during period		—		—
Amortization		—		—
Currency translation adjustment		55		348
Impairment losses		—		—

Balance at end of period	$	24,577	$	24,522

10. PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS:

Components of net periodic benefit cost

Three months ended September 30


							Other
							Retirement
	Pension						Benefits
	2004			2003			2004		2003
Service cost	$	57		$	45		$	28	$	25
Interest cost		52			48			68		69
Expected return on plan assets		(33	)		(23	)		—		—
Amortization of transition liability		36			36			—		—
Amortization of prior service cost		—			—			—		—
Amortization of (gain) loss		4			3			21		5

Net periodic benefit cost	$	116		$	109		$	117	$	99

Nine months ended September 30


							Other
							Retirement
	Pension						Benefits
	2004			2003			2004		2003
Service cost	$	171		$	135		$	83	$	75
Interest cost		158			143			205		209
Expected return on plan assets		(97	)		(67	)		—		—
Amortization of transition liability		107			107			—		—
Amortization of prior service cost		—			—			—		—
Amortization of (gain) loss		17			10			63		14

Net periodic benefit cost	$	356		$	328		$	351	$	298

Employer Contributions

The Company previously disclosed in its financial statements for the year ended December 31, 2003, that it expected to contribute $216,701 to its pension plan in 2004. As of September 30, 2004, $168,789 of contributions has been made. The Company presently anticipates contributing an additional $100,103 to fund its pension plan in 2004 for a total of $268,892.

11. SUBSEQUENT EVENT – NEW U.S. TAX LEGISLATION EFFECTIVE 2005

On October 22, 2004, the President of the United States signed into law the American Jobs Creation Act of 2004. There are provisions in the Act intended to benefit the railroad industry. One provision provides a 50% tax credit for qualified track maintenance expenditures incurred in 2005, 2006, and 2007. Another provision reduces the 4.3 cent per gallon excise tax paid on locomotive diesel fuel in phases starting in 2005, until it is eliminated in 2007. The Company is currently in the process of evaluating the impact the new law will have on its consolidated financial statements.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the Company’s consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q, and with the consolidated financial statements, related notes and other financial information included in the Company’s 2003 Form 10-K.

Forward-Looking Statements

This report and other documents referred to in this report may contain forward-looking statements based on current expectations, estimates and projections about the Company’s industry, management’s beliefs, and assumptions made by management. Words such as “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions, including the following risks applicable to all of the Company’s operations: risks related to the acquisition and integration of railroads; difficulties associated with customers, competition, connecting carriers, employees and partners; derailments; adverse weather conditions; unpredictability of fuel costs; changes in environmental and other laws and regulations to which the Company is subject; general economic and business conditions; and additional risks associated with the Company’s foreign operations. Therefore, actual results may differ materially from those expressed or forecast in any such forward-looking statements. Such risks and uncertainties include, in addition to those set forth in this Item 2, those noted in the Company’s 2003 Form 10-K under “Risk Factors.” The Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

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 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 railcar switching, car hire and rental, repair, storage, weighing, blocking and bulk transfer for Class I carriers and customers.

For a complete description of the Company’s accounting policies, see Note 2 to the audited consolidated financial statements for the year ended December 31, 2003 included in the Company’s 2003 Form 10-K.

On August 30, 2004, the Company completed the purchase from CSX Transportation, Inc. of the Savannah Wharf Branch rail line located in Savannah, Georgia for approximately $1.5 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 $1.5 million purchase price was allocated to the track and related assets. The Savannah Wharf Branch is operated by the Company’s Rail Link Region and

is contiguous to one of two existing Rail Link operations in the Savannah area. Rail Link began operations of the Savannah Wharf Branch in September 2004.

On December 31, 2003, the Company completed the purchase from Georgia-Pacific Corporation (GP) of all of the issued and outstanding shares of common stock of the Chattahoochee Industrial Railroad (CIRR), the Arkansas Louisiana & Mississippi Railroad Company (ALM), and the Fordyce and Princeton RR Co. (F&P, collectively, 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, the Company implemented a severance program. The aggregate cost of the severance program, $1.0 million, is considered a liability assumed in the acquisition, and as such, was allocated to the purchase price. In conjunction with the acquisition, the Company 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 was determined to be an intangible asset and approximately $27.1 million of the GP Railroads’ purchase price was 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. No value was assigned to the other TSA. The Company funded the acquisition through its revolving line of credit held under its primary credit agreement.

Results of Operations

Three Months Ended September 30, 2004 Compared to Three Months Ended September 30, 2003

Operating Revenues

Operating revenues (which exclude revenues from the Company’s equity investments) were $77.2 million in the quarter ended September 30, 2004 compared to $61.5 million in the quarter ended September 30, 2003, an increase of $15.7 million or 25.6%. The following table sets forth operating revenues by acquisitions and existing operations for the quarters ended September 30, 2004 and 2003:

Operating Revenues by Acquisitions and Existing Operations
Quarters Ended September 30, 2004 and 2003
(dollars in thousands)


	2004						2003
	Total		Less		Existing		Total
	Revenues		Acquisitions		Operations		Revenues
Freight revenues	$	57,109	$	4,771	$	52,338	$	45,039
Non-freight revenues		20,134		1,509		18,625		16,460

Total operating revenues	$	77,243	$	6,280	$	70,963	$	61,499

The $9.4 million increase on existing operations was primarily attributable to $7.3 million in freight revenues which mainly consisted of a $2.2 million increase in coal, coke and ores revenues in the Company’s Illinois, Utah and New York-

Pennsylvania Regions, a $1.8 million increase in metals revenues primarily in the Company’s New York-Pennsylvania and Canada Regions, a $857,000 net increase in revenues from farm and food products, a $817,000 increase in lumber and forest products, and a $1.8 million increase in non-freight switching revenues primarily in the Company’s Rail Link Region due to new customer contracts. The following table compares freight revenues, carloads and average freight revenues per carload for the quarters ended September 30, 2004 and 2003:

Freight Revenues and Carloads Comparison by Commodity Group
Quarters Ended September 30, 2004 and 2003
(dollars in thousands, except average per carload)


																					Average
																					Freight
																					Revenues
	Freight Revenues										Carloads										Per Carload
			% of					% of					% of					% of
Commodity Group	2004		Total			2003		Total			2004		Total			2003		Total			2004		2003
Coal, Coke & Ores	$	11,641		20.4	%	$	9,271		20.6	%		50,750		31.4	%		43,307		32.8	%	$	229	$	214
Pulp & Paper		10,420		18.2	%		8,019		17.8	%		23,981		14.8	%		19,361		14.7	%		435		414
Lumber & Forest Products		6,628		11.6	%		4,333		9.6	%		19,861		12.3	%		13,652		10.4	%		334		317
Metals		5,973		10.5	%		3,999		8.9	%		18,572		11.5	%		13,241		10.0	%		322		302
Minerals & Stone		5,866		10.3	%		5,791		12.9	%		16,457		10.2	%		15,296		11.6	%		356		379
Petroleum Products		5,803		10.2	%		6,079		13.5	%		7,806		4.8	%		7,636		5.8	%		743		796
Chemicals & Plastics		4,021		7.0	%		2,775		6.2	%		7,499		4.6	%		5,998		4.5	%		536		463
Farm & Food Products		3,648		6.4	%		2,708		6.0	%		8,692		5.4	%		6,826		5.2	%		420		397
Autos & Auto Parts		1,350		2.4	%		1,116		2.5	%		3,048		1.9	%		2,773		2.1	%		443		402
Intermodal		587		1.0	%		411		0.9	%		1,724		1.1	%		1,347		1.0	%		340		305
Other		1,172		2.0	%		537		1.1	%		3,402		2.0	%		2,397		1.9	%		345		224

Total	$	57,109		100.0	%	$	45,039		100.0	%		161,792		100.0	%		131,834		100.0	%		353		342

Total carloads were 161,792 in the quarter ended September 30, 2004 compared to 131,834 in the quarter ended September 30, 2003, an increase of 29,958, or 22.7%. The increase consisted of 12,695 carloads from the new GP Railroads and 17,263 from existing operations due largely to an increase of 7,036 from carloads of coal, coke and ores in the Company’s Illinois, Utah and New York-Pennsylvania Regions, a net increase of 4,938 from carloads of metals primarily in the Company’s New York-Pennsylvania and Canada Regions, a net increase of 1,650 from carloads of lumber and forest products, a net increase of 1,108 from carloads of minerals and stone and a net increase of 2,531 from carloads of all other commodities combined. Average revenue per carload increased to $353 in the quarter ended September 30, 2004, compared to $342 per carload in the quarter ended September 30, 2003, an increase of 3.2%.

Non-freight revenues were $20.1 million in the quarter ended September 30, 2004 compared to $16.4 million in the quarter ended September 30, 2003, an increase of $3.7 million or 22.3%. The $3.7 million increase was attributable to $1.5 million of non-freight revenues from the new GP Railroads of which $987,000 was car hire revenue, and a net increase of $2.2 million from existing operations. The net increase of $2.2 million from existing operations consisted of a $1.8 million increase in switching revenues primarily in the Rail Link Region and a net increase of $321,000 from all other non-freight revenues combined. The following table compares non-freight revenues for the quarters ended September 30, 2004 and 2003:

Non-Freight Revenues Comparison
Quarters Ended September 30, 2004 and 2003
(dollars in thousands)


	2004					2003
			% of					% of
			Non-Freight					Non-Freight
	$		Revenue			$		Revenue
Railcar switching	$	10,234		50.8	%	$	8,387		51.0	%
Car hire and rental		3,131		15.6	%		1,755		10.7	%
Car repair services		1,295		6.4	%		1,026		6.2	%
Other operating income		5,474		27.2	%		5,292		32.1	%

Total non-freight revenues	$	20,134		100.0	%	$	16,460		100.0	%

Operating Expenses

Operating expenses were $64.0 million in the quarter ended September 30, 2004, compared to $52.3 million in the quarter ended September 30, 2003, an increase of $11.7 million or 22.5%. The increase was attributable to $4.0 million in operating expenses from the new GP Railroads and an increase of $7.7 million in operating expenses from existing operations. The following table sets forth a comparison of the Company’s operating expenses in the quarters ended September 30, 2004 and 2003:

Operating Expense Comparison
Quarters Ended September 30, 2004 and 2003
(dollars in thousands)


	2004					2003
			% of						% of
			Operating						Operating
	$		Revenues			$			Revenues
Labor and benefits	$	26,551		34.4	%	$	21,068			34.3	%
Equipment rents		7,100		9.2	%		4,362			7.1	%
Purchased services		4,493		5.8	%		4,779			7.8	%
Depreciation and amortization		4,812		6.2	%		3,869			6.3	%
Diesel fuel		6,222		8.1	%		4,105			6.7	%
Casualties and insurance		4,598		6.0	%		3,377			5.5	%
Materials		3,826		5.0	%		4,157			6.8	%
Net loss (gain) on sale and impairment of assets		81		0.1	%		(35	)		(0.1	%)
Other expenses		6,360		8.1	%		6,612			10.6	%

Total operating expenses	$	64,043		82.9	%	$	52,294			85.0	%

Labor and benefits expense was $26.6 million in the quarter ended September 30, 2004 compared to $21.1 million in the quarter ended September 30, 2003, an increase of $5.5 million or 26.0%. The increase was attributable to $1.3 million in labor and benefits expense from the new GP Railroads and an increase of $4.2 million from existing operations. The increase from existing operations was due to a $4.0 million increase in labor and benefits expense related to increased freight shipments, regular wage and benefit increases and a 5.2% appreciation of the Canadian dollar.

Equipment rents were $7.1 million in the quarter ended September 30, 2004 compared to $4.4 million in the quarter ended September 30, 2003, an increase of $2.7 million or 62.8%. The increase was attributable to $1.3 million in freight car operating lease and car hire expense from the new GP Railroads and an increase of $1.4 million from existing operations primarily due to car hire expense from increased freight shipments.

Depreciation and amortization expense was $4.8 million in the quarter ended September 30, 2004 compared to $3.9 million in the quarter ended September 30, 2003, an increase of $943,000 or 24.4%. The increase was attributable to $568,000 from the new GP Railroads and an increase of $375,000 from existing operations.

Diesel fuel expense was $6.2 million in the quarter ended September 30, 2004 compared to $4.1 million in the quarter ended September 30, 2003, an increase of $2.1 million or 51.6%. The increase was attributable to $144,000 from the new GP Railroads and an increase of $2.0 million on existing operations primarily due to a 37.0% increase in the average price per gallon and increased consumption due to carload increases.

Casualties and insurance expense was $4.6 million in the quarter ended September 30, 2004 compared to $3.4 million in the quarter ended September 30, 2003, an increase of $1.2 million or 36.2%. The increase was attributable to $73,000 from the new GP Railroads and an increase of $1.1 million on existing operations. The increase on existing operations resulted primarily from derailments in the Company’s Oregon Region and property damage in the Company’s New York-Pennsylvania Region resulting from heavy rains and flooding.

All other expenses combined were $14.8 million in the quarter ended September 30, 2004 compared to $15.5 million in the quarter ended September 30, 2003, a net decrease of $753,000 or 4.8%. A decline of $1.4 million on existing operations primarily due to reduced third party contractor services and materials for track maintenance work, was partially offset by $629,000 of new expense from the GP Railroads.

Operating Ratio

The Company’s operating ratio (total operating expenses as a percentage of operating revenues) improved to 82.9% in the quarter ended September 30, 2004 from 85.0% in the quarter ended September 30, 2003 due to the performance of both the Company’s existing and recently acquired railroads.

Interest Expense

Interest expense was $2.4 million in the quarter ended September 30, 2004 compared to $2.2 million in the quarter ended September 30, 2003, an increase of $177,000.

Other Income, Net

Other income (expense), net in the quarter ended September 30, 2004, was a loss of $221,000 compared to income of $54,000 in the quarter ended September 30, 2003, a decrease of $275,000. Other income, net consists primarily of exchange rate transaction gains (losses) from foreign dollar-denominated cash accounts and interest income.

Income Taxes

The Company’s effective income tax rate in the quarter ended September 30, 2004 was 40.3% compared to 33.7% in the quarter ended September 30, 2003. The increase was primarily attributable to an increase in the effective tax rate of the Company’s Mexico Region. This increase in Mexico was partially offset by a reduction in the

Canada Region, due to a statutory rate decrease in Canada. In Mexico, for tax purposes, the Company’s subsidiaries recognize exchange gain or loss on their US dollar based assets and liabilities. As a result, the intra-quarter appreciation of the Mexican peso compared to the US dollar in the quarter ended September 30, 2004 compared to the quarter ended September 30, 2003 resulted in a higher effective tax rate.

Equity in Net Income of Unconsolidated International Affiliates

Equity earnings of unconsolidated international affiliates, net were $3.8 million in the quarter ended September 30, 2004, compared to $2.9 million in the quarter ended September 30, 2003, an increase of $884,000. Equity earnings in the quarter ended September 30, 2004, consisted of $3.5 million from Australian Railroad Group and $273,000 from South America affiliates. Equity earnings in the quarter ended September 30, 2003, consisted of $2.7 million from Australian Railroad Group and $203,000 from South America affiliates. See additional information regarding ARG’s financial results and the impact of exchange rate changes in Supplemental Information – Australian Railroad Group.

Net Income and Earnings Per Share

The Company’s net income in the quarter ended September 30, 2004 was $10.1 million compared to net income of $7.6 million in the quarter ended September 30, 2003, an increase of $2.5 million or 33.2%. The increase in net income was the result of an increase in income before equity earnings of $1.6 million and an increase in equity in net income of unconsolidated international affiliates of $884,000.

Basic Earnings Per Share in the quarters ended September 30, 2004 and 2003 were $0.42 and $0.31 respectively, on weighted average shares of 24.2 million and 20.0 million respectively. Diluted Earnings Per Share in the quarters ended September 30, 2004 and 2003 were $0.37 and $0.27 respectively, on weighted average shares of 27.5 million and 26.8 million respectively.

Supplemental Information – Australian Railroad Group

ARG is a company owned 50% by the Company and 50% by Wesfarmers Limited, a public corporation based in Perth, Western Australia. The Company accounts for its 50% ownership in ARG under the equity method of accounting. As a result of the strengthening of the Australian dollar relative to the U.S. dollar in 2004, the average currency translation rate for the quarter ended September 30, 2004 was 7.1% more favorable than the rate for the quarter ended September 30, 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 quarters ended September 30, 2004 and 2003, the Company recorded $3.5 million and $2.7 million, respectively, of equity earnings in the equity in net income of international affiliates – Australian Railroad Group caption in the accompanying consolidated statements of income.

Freight Revenues

Australian Railroad Group
Freight Revenues and Carloads by Commodity Group
Quarters Ended September 30, 2004 and 2003
(U.S. dollars in thousands, except average per carload)


																					Average
																					Freight
																					Revenues
	Freight Revenues										Carloads										Per Carload
Commodity Group	2004		% of Total			2003		% of Total			2004		% of Total			2003		% of Total			2004		2003
Grain	$	26,392		37.9	%	$	13,298		26.3	%		69,185		28.1	%		35,552		16.6	%	$	381	$	374
Other Ores and Minerals		14,665		21.1	%		12,571		24.8	%		28,218		11.5	%		28,282		13.2	%		520		444
Iron Ore		10,588		15.2	%		9,960		19.7	%		47,886		19.4	%		47,646		22.2	%		221		209
Alumina		4,837		6.9	%		3,736		7.4	%		38,785		15.8	%		38,577		18.0	%		125		97
Bauxite		3,113		4.5	%		2,398		4.7	%		32,101		13.0	%		32,426		15.1	%		97		74
Hook and Pull (Haulage)		364		0.5	%		1,404		2.8	%		960		0.4	%		3,253		1.5	%		379		432
Gypsum		748		1.1	%		817		1.6	%		12,180		4.9	%		13,176		6.1	%		61		62
Other		8,946		12.8	%		6,414		12.7	%		16,927		6.9	%		15,694		7.3	%		529		409

Total	$	69,653		100.0	%	$	50,598		100.0	%		246,242		100.0	%		214,606		100.0	%		283		236

ARG’s freight revenues were $69.7 million in the quarter ended September 30, 2004, compared to $50.6 million in the quarter ended September 30, 2003, an increase of $19.1 million or 37.7%. The increase in freight revenues was led by a $13.1 million increase in grain, due to the record harvest in Western Australia and a new customer in New South Wales; a $2.1 million increase in other ores and minerals, led by increased nickel related shipments; a $1.1 million increase in alumina shipments; and a $2.5 million increase in other revenues due to new business in New South Wales. All other commodities combined increased $0.2 million. In local currency, freight revenues increased 29.6% in the quarter ended September 30, 2004 compared to the quarter ended September 30, 2003.

Total ARG carloads were 246,242 in the quarter ended September 30, 2004, compared to 214,606 in the quarter ended September 30, 2003, an increase of 31,636, or 14.7%. The increase was primarily the result of a 33,633 carload increase in grain offset by a net decrease in hook and pull of 2,293. Average freight revenues per carload increased from $236 to $283, primarily due to the appreciation of the Australian dollar relative to the U.S. dollar and higher revenues per car in other ores and minerals and other, partially offset by lower revenues per carload in hook and pull.

Non-Freight Revenues

The following table compares ARG’s non-freight revenues for the quarters ended September 30, 2004 and 2003.

Australian Railroad Group
Non-Freight Revenues Comparison
Quarters Ended September 30, 2004 and 2003
(U.S. dollars in thousands)


			% of					% of
	2004		Total			2003		Total
Third party track access fees	$	4,943		35.2	%	$	4,490		40.4	%
Alice Springs to Darwin Line		1,668		11.9	%		3,622		32.6	%
Other operating income		7,431		52.9	%		3,006		27.0	%

Total non-freight revenues	$	14,042		100.0	%	$	11,118		100.0	%

ARG’s non-freight revenues were $14.0 million in the quarter ended September 30, 2004, compared to $11.1 million in the quarter ended September 30, 2003, an increase of $2.9 million or 26.3%. ARG’s non-freight revenues increase was primarily attributable to higher third party access fees and other operating income, primarily fuel sales to other railroads, offset by a decrease in revenues from the Alice Springs to Darwin (ASD) line due to completion of construction. In local currency, non-freight revenue increased 19.0% in the quarter ended September 30, 2004 compared to the quarter ended September 30, 2003.

Operating Expenses

ARG’s operating expenses were $66.9 million in the quarter ended September 30, 2004, compared to $50.5 million in the quarter ended September 30, 2003, an increase of $16.4 million or 32.5%. The following table sets forth a comparison of ARG’s operating expenses in the quarters ended September 30, 2004 and 2003.

Australian Railroad Group

Operating Expense Comparison
Quarters Ended September 30, 2004 and 2003
(U.S. dollars in thousands)


	2004						2003
				% of						% of
				Operating						Operating
	$			Revenues			$			Revenues
Labor and benefits	$	14,530			17.4	%	$	12,416			20.1	%
Equipment rents		667			0.8	%		482			0.8	%
Purchased services		20,840			24.9	%		16,433			26.6	%
Depreciation and amortization		6,748			8.1	%		6,065			9.8	%
Diesel fuel used in operations		6,869			8.2	%		3,747			6.1	%
Diesel fuel for sales to third parties		5,385			6.4	%		1,644			2.7	%
Casualties and insurance		1,620			1.9	%		1,563			2.5	%
Materials		3,759			4.5	%		2,970			4.8	%
Net gain on sale and impairment of assets		(95	)		-0.1	%		(183	)		-0.3	%
Other expenses		6,636			7.9	%		5,409			8.8	%

Total operating expenses	$	66,959			80.0	%	$	50,546			81.9	%

Labor and benefits expense, as a percentage of revenues, decreased to 17.4% in the quarter ended September 30, 2004, compared to 20.1% the quarter ended September 30, 2003. In local currency, labor and benefits increased 9.6%. The increase was due

to higher freight volumes, particularly the strong grain shipments and the new business in New South Wales.

Purchased services expense decreased to 24.9% of revenues in the quarter ended September 30, 2004, compared to 26.6% of revenues in the quarter ended September 30, 2003. In local currency, purchased services increased 18.7%. The increase was primarily due to the use of contract locomotive engineers, increased grain transfer costs related to the increase in freight volume and the commencement of operations of a rail loading facility in New South Wales.

Depreciation and amortization expense, as a percentage of revenues, decreased to 8.1% in the quarter ended September 30, 2004, compared to 9.8% in the quarter ended September 30, 2003. In local currency, depreciation and amortization increased 4.6%. The increase was due to higher depreciation related to an increase in depreciable assets due to capital expenditures.

Diesel fuel used in operations increased to 8.2% of revenues in the quarter ended September 30, 2004, compared to 6.1% of revenues in the quarter ended September 30, 2003. In local currency, the cost of fuel used in operations increased 72.9%. The increase was due to higher freight volumes on existing lines, the new business in New South Wales, the contract operations on the ASD line and a 35.1% increase in fuel prices.

The cost of diesel fuel sold to third parties increased to 6.4% of revenues in the quarter ended September 30, 2004, compared to 2.7% of revenues in the quarter ended September 30, 2003. In local currency, the cost of diesel fuel sold to third parties increased 208.2%. The increase was due to a higher volume of fuel sales to other railroads and a 35.1% increase in fuel prices.

Casualties and insurance costs decreased to 1.9% of revenues in the quarter ended September 30, 2004, compared to 2.5% of revenues in the quarter ended September 30, 2003. In local currency, casualties and insurance increased 1.4%.

Materials expense, as a percentage of revenues, decreased to 4.5% in the quarter ended September 30, 2004, compared to 4.8% in the quarter ended September 30, 2003. In local currency, materials expense increased 19.2%. The increase was due to higher rolling stock maintenance costs.

Other expenses, as a percentage of revenues, decreased to 7.9% in the quarter ended September 30, 2004, compared to 8.8% in the quarter ended September 30, 2003. In local currency, other expenses increased 15.1%. The increase was primarily due to track access fees and various other increases in administrative costs related to the new business in New South Wales.

Nine Months Ended September 30, 2004 Compared to Nine Months Ended September 30, 2003

Operating Revenues

Operating revenues (which exclude revenues from the Company’s equity investments) were $223.7 million in the nine months ended September 30, 2004, compared to $183.3 million in the nine months ended September 30, 2003, an increase of $40.4 million or 22.0%.

Operating Revenues by Acquisitions and Existing Operations
Nine Months Ended September 30, 2004 and 2003
(dollars in thousands)


	2004						2003
	Total		Less		Existing		Total
	Revenues		Acquisitions		Operations		Revenues
Freight revenues	$	167,826	$	14,031	$	153,795	$	136,718
Non-freight revenues		55,881		4,396		51,485		46,580

Total operating revenues	$	223,707	$	18,427	$	205,280	$	183,298

The $22.0 million increase in operating revenues from existing operations was primarily attributable to $17.1 million in freight revenues which mainly consisted of a $4.9 million increase in coal, coke and ores revenues in the Company’s Illinois, Utah and New York-Pennsylvania Regions, a $3.8 million increase in metals revenues primarily in the Company’s New York-Pennsylvania and Canada Regions, a $2.9 million increase in revenues from farm and food products in the Company’s Canada and Mexico Regions, a $1.9 million increase in lumber and forest products in the Company’s New York-Pennsylvania and Oregon Regions, a $1.6 million increase in chemicals revenues in the Company’s New York-Pennsylvania and Rail Link Regions, and a $4.4 million increase in non-freight switching revenues primarily in the Company’s Rail Link Region due to new customer contracts. The following table compares freight revenues, carloads and average freight revenues per carload for the nine months ended September 30, 2004 and 2003:

Freight Revenues and Carloads Comparison by Commodity Group
Nine Months Ended September 30, 2004 and 2003
(dollars in thousands, except average per carload)


																					Average
																					Freight
																					Revenues
	Freight Revenues										Carloads										Per Carload
Commodity Group	2004		% of Total			2003		% of Total			2004		% of Total			2003		% of Total			2004		2003
Coal, Coke & Ores	$	34,440		20.5	%	$	28,919		21.2	%		144,051		30.6	%		125,418		31.7	%	$	239	$	231
Pulp & Paper		29,710		17.7	%		23,288		17.0	%		70,171		14.9	%		56,340		14.2	%		423		413
Lumber & Forest Products		18,793		11.2	%		12,776		9.3	%		57,323		12.2	%		40,508		10.2	%		328		315
Petroleum Products		18,251		10.9	%		18,750		13.7	%		24,301		5.2	%		24,033		6.1	%		751		780
Metals		17,078		10.2	%		12,951		9.5	%		53,940		11.5	%		44,986		11.4	%		317		288
Minerals & Stone		16,695		9.9	%		16,521		12.1	%		44,850		9.5	%		42,604		10.8	%		372		388
Chemicals & Plastics		11,996		7.1	%		8,209		6.0	%		22,775		4.8	%		17,631		4.5	%		527		466
Farm & Food Products		11,387		6.8	%		8,199		6.0	%		27,058		5.8	%		21,688		5.5	%		421		378
Autos & Auto Parts		4,946		2.9	%		4,351		3.2	%		11,458		2.4	%		10,764		2.7	%		432		404
Intermodal		1,769		1.1	%		1,199		0.9	%		4,824		1.0	%		4,335		1.1	%		367		277
Other		2,761		1.7	%		1,555		1.1	%		9,711		2.1	%		7,465		1.8	%		284		208

Total	$	167,826		100.0	%	$	136,718		100.0	%		470,462		100.0	%		395,772		100.0	%		357		345

Total carloads were 470,462 in the nine months ended September 30, 2004, compared to 395,772 in the nine months ended September 30, 2003, an increase of 74,690, or

18.9%. The increase consisted of 37,078 carloads from the new GP Railroads and 37,612 carloads from existing operations. The increase of 37,612 carloads from existing operations was due largely to a 16,563 increase from carloads of coal, coke and ores in the Illinois, Utah and New York-Pennsylvania Regions, a 8,065 increase from carloads of metals, primarily in the New York-Pennsylvania Region, a 4,936 increase from carloads of farm and food products, primarily in the Company’s Canada and Mexico Regions, and a 4,066 increase from carloads of lumber and forest products, primarily in the Oregon and New York-Pennsylvania Regions. The average revenue per carload increased to $357 in the nine months ended September 30, 2004, compared to $345 per carload in the nine months ended September 30, 2003, an increase of 3.5%.

Non-freight revenues were $55.9 million in the nine months ended September 30, 2004, compared to $46.6 million in the nine months ended September 30, 2003, an increase of $9.3 million or 20.0%. The $9.3 million increase was attributable to $4.4 million of non-freight revenues from the new GP Railroads of which $2.7 million was car hire revenue, and a $4.9 million increase on existing operations of which $3.5 million was switching revenues, primarily in the Company’s Rail Link Region due to new customer contracts. The following table compares non-freight revenues for the nine months ended September 30, 2004 and 2003:

Non-Freight Operating Revenues Comparison
Nine Months Ended September 30, 2004 and 2003
(dollars in thousands)


	2004					2003
			% of					% of
			Non-Freight					Non-Freight
	$		Revenue			$		Revenue
Railcar switching	$	28,866		51.7	%	$	24,458		52.5	%
Car hire and rental		8,618		15.4	%		5,257		11.3	%
Car repair services		4,119		7.4	%		3,222		6.9	%
Other operating income		14,278		25.5	%		13,643		29.3	%

Total non-freight revenues	$	55,881		100.0	%	$	46,580		100.0	%

Operating Expenses

Operating expenses were $185.4 million in the nine months ended September 30, 2004, compared to $155.2 million in the nine months ended September 30, 2003, an increase of $30.2 million or 19.4%. The increase was attributable to $11.7 million in operating expenses from the new GP Railroads and an increase of $18.5 million in operating expenses from existing operations. The following table sets forth a comparison of the Company’s operating expenses in the nine months ended September 30, 2004 and 2003:

Operating Expense Comparison
Nine Months Ended September 30, 2004 and 2003
(dollars in thousands)


	2004						2003
				% of					% of
				Operating					Operating
	$			Revenues			$		Revenues
Labor and benefits	$	77,897			34.8	%	$	64,868		35.4	%
Equipment rents		20,316			9.1	%		13,162		7.2	%
Purchased services		13,272			5.9	%		13,735		7.5	%
Depreciation and amortization		14,295			6.4	%		11,437		6.2	%
Diesel fuel		17,514			7.8	%		13,726		7.5	%
Casualties and insurance		11,958			5.3	%		9,675		5.3	%
Materials		11,144			5.0	%		11,822		6.4	%
Net (gain) loss on sale and impairment of assets		(12	)		0.0	%		141		0.1	%
Other expenses		18,983			8.6	%		16,678		9.1	%

Total operating expenses	$	185,367			82.9	%	$	155,244		84.7	%

Labor and benefits expense was $77.9 million in the nine months ended September 30, 2004, compared to $64.9 million in the nine months ended September 30, 2003, an increase of $13.0 million or 20.1%. The increase was attributable to $4.0 million in labor and benefits expense from the new GP Railroads and an increase of $9.0 million from existing operations. The increase from existing operations was due to an $8.0 million increase in labor and benefits expense related to increased freight shipments, regular wage increases and the 6.9% appreciation of the Canadian dollar and $1.0 million related to revised executive benefit plans.

Equipment rents were $20.3 million in the nine months ended September 30, 2004, compared to $13.2 million in the nine months ended September 30, 2003, an increase of $7.2 million or 54.4%. The increase was attributable to $3.4 million in freight car operating lease and car hire expense from the new GP Railroads and an increase of $3.8 million from existing operations primarily due to car hire expense on increased freight shipments.

Depreciation and amortization expense was $14.3 million in the nine months ended September 30, 2004, compared to $11.4 million in the nine months ended September 30, 2003, an increase of $2.9 million or 25.0%. The increase was attributable to $1.7 million from the new GP Railroads and an increase of $1.2 million from existing operations including $214,000 related to the Amended and Restated Service Assurance Agreement which the Company began amortizing in July 2003.

Diesel fuel expense was $17.5 million in the nine months ended September 30, 2004, compared to $13.7 million in the nine months ended September 30, 2003, an increase of $3.8 million or 27.6%. The increase was attributable to $384,000 from the new GP Railroads and an increase of $3.4 million from existing operations due to a 17.8% increase in the consolidated average price per gallon and increased fuel consumption due to carload increases.

Casualties and insurance expense was $12.0 million in the nine months ended September 30, 2004, compared to $9.7 million in the nine months ended September 30, 2003, an increase of $2.3 million or 23.6%. The increase was primarily attributable to $215,000 from the new GP Railroads, $1.6 million in derailment expense primarily in the Company’s Oregon Region, as well as significant property damage in the Company’s New York-Pennsylvania Region resulting from heavy rains and flooding.

All other expenses combined were $43.4 million in the nine months ended September 30, 2004, compared to $42.4 million in the nine months ended September 30, 2003, a net increase of $1.0 million or 2.4%. A decline of $1.0 million on existing operations primarily due to reduced third party contractor services and materials for track maintenance work, was partially offset by $2.0 million of new expense from the GP Railroads.

Operating Ratio

The Company’s operating ratio (total operating expenses as a percentage of operating revenues) improved to 82.9% in the nine months ended September 30, 2004, from 84.7% in the nine months ended September 30, 2003 due to the performance of both the Company’s existing and recently acquired railroads.

Interest Expense

Interest expense was $7.1 million in the nine months ended September 30, 2004, compared to $6.7 million in the nine months ended September 30, 2003, an increase of $385,000.

Other Income, Net

Other income, net in the nine months ended September 30, 2004, was $203,000 compared to $767,000 in the nine months ended September 30, 2003, a decrease of $564,000. Other income, net consists primarily of exchange rate transaction gains (losses) on foreign dollar-denominated cash accounts and interest income.

Income Taxes

The Company’s effective income tax rate in the nine months ended September 30, 2004, was 39.0% compared to 37.3% in the nine months ended September 30, 2003. The increase was primarily attributable to an increase in the effective tax rate of the Company’s Mexico Region. This increase in Mexico was partially offset by a reduction in the Canada Region, due to a statutory rate decrease in Canada. In Mexico, for tax purposes, the Company’s subsidiaries recognize exchange gain or loss on their US dollar based assets and liabilities. As a result, the movement of the Mexican peso compared to the US dollar in the nine months ended September 30, 2004 compared to the nine months ended September 30, 2003 resulted in a higher effective tax rate.

Equity in Net Income of Unconsolidated International Affiliates

Equity earnings of unconsolidated international affiliates, net, were $11.2 million in the nine months ended September 30, 2004, compared to $7.0 million in the nine months ended September 30, 2003, an increase of $4.3 million. Equity earnings in the nine months ended September 30, 2004, consisted of $10.7 million from Australian Railroad Group and $496,000 from South America affiliates. Equity earnings in the nine months ended September 30, 2003, consisted of $6.9 million from Australian Railroad Group and $112,000 from South America affiliates. See additional information regarding ARG’s financial results and the impact of exchange rate changes in Supplemental Information – Australian Railroad Group.

Net Income and Earnings Per Share

The Company’s net income was $30.4 million in the nine months ended September 30, 2004, compared to net income of $20.8 million in the nine months ended September 30, 2003, an increase of $9.6 million. The increase in net income was the result of an increase in income before equity earnings of $5.3 million and an increase in equity in net income of unconsolidated international affiliates of $4.3 million.

Basic Earnings Per Share in the nine months ended September 30, 2004 and 2003 were $1.24 and $0.84 respectively, on weighted average shares of 22.0 million and 19.9 million respectively. Diluted Earnings Per Share in the nine months ended September 30, 2004 and 2003 were $1.09 and $0.74 respectively, on weighted average shares of 27.4 million and 26.7 million respectively.

Supplemental Information – Australian Railroad Group

ARG is a company owned 50% by the Company and 50% by Wesfarmers Limited, a public corporation based in Perth, Western Australia. The Company accounts for its 50% ownership in ARG under the equity method of accounting. As a result of the strengthening of the Australian dollar relative to the U.S. dollar in 2004, the average currency translation rate for the nine months ended September 30, 2004 was 15.4% more favorable than the rate for the nine months ended September 30, 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 nine months ended September 30, 2004 and 2003, the Company recorded $10.7 million and $6.9 million, respectively, of equity earnings in the equity in net income of international affiliates – Australian Railroad Group caption in the accompanying consolidated statements of income.

Freight Revenues

Australian Railroad Group
Freight Revenues and Carloads by Commodity Group
Nine Months Ended September 30, 2004 and 2003
(U.S. dollars in thousands, except average per carload)


																					Average
																					Freight
																					Revenues
	Freight																				Per
	Revenues										Carloads										Carload
Commodity Group	2004		% of Total			2003		% of Total			2004		% of Total			2003		% of Total			2004		2003
Grain	$	78,323		37.6	%	$	40,709		28.4	%		205,409		27.7	%		104,369		17.0	%	$	381	$	390
Other Ores and Minerals		43,798		21.0	%		33,969		23.7	%		82,033		11.1	%		78,577		12.8	%		534		432
Iron Ore		32,922		15.8	%		25,640		17.9	%		149,415		20.1	%		132,250		21.5	%		220		194
Alumina		14,589		7.0	%		11,680		8.2	%		117,921		15.9	%		114,659		18.7	%		124		102
Bauxite		9,245		4.4	%		8,068		5.6	%		92,352		12.5	%		96,430		15.7	%		100		84
Hook and Pull (Haulage)		1,279		0.6	%		3,086		2.2	%		6,257		0.8	%		6,146		1.0	%		204		502
Gypsum		2,659		1.3	%		2,127		1.5	%		37,587		5.1	%		34,482		5.6	%		71		62
Other		25,551		12.3	%		17,896		12.5	%		50,749		6.8	%		47,029		7.7	%		503		381

Total	$	208,366		100.0	%	$	143,175		100.0	%		741,723		100.0	%		613,942		100.0	%		281		233

ARG’s freight revenues were $208.4 million in the nine months ended September 30, 2004, compared to $143.2 million in the nine months ended September 30, 2003, an increase of $65.2 million or 45.5%. The increase in freight revenues was led by a $37.6 million increase in grain, due to the record harvest in Western Australia and a new customer in New South Wales; a $9.8 million increase in other ores and minerals, led by increased nickel related shipments; and a $7.3 million increase in iron ore, due to production expansion at ARG’s largest iron ore customer and a new customer in Western Australia; a $2.9 million increase in alumina shipments; and a $7.7 million increase in other due to new business in New South Wales. All other commodities combined decreased $0.1 million. In local currency, freight revenues increased 26.5% in the nine months ended September 30, 2004 compared to the nine months ended September 30, 2003.

Total ARG carloads were 741,723 in the nine months ended September 30, 2004, compared to 613,942 in the nine months ended September 30, 2003, an increase of 127,781, or 20.8%. The increase was primarily the result of a 101,040 carload increase in grain, a 17,165 carload increase in iron ore, a 3,456 carload increase in other ores and minerals, and a 3,720 carload increase in other. Carloads of all other commodities combined increased 2,400. Average freight revenue per carload increased from $233 to $281, primarily due to the strength of the Australian dollar relative to the U.S. dollar and higher revenues per car in other ores and minerals and other, partially offset by lower revenues per carload in hook and pull.

Non-Freight Revenues

The following table compares ARG’s non-freight revenues for the nine months ended September 30, 2004 and 2003.

Australian Railroad Group
Non-Freight Revenues Comparison
Nine Months Ended September 30, 2004 and 2003
(U.S. dollars in thousands)


			% of					% of
	2004		Total			2003		Total
Third party track access fees	$	15,852		40.3	%	$	12,003		37.7	%
Alice Springs to Darwin Line		4,855		12.3	%		11,533		36.3	%
Other operating income		18,692		47.4	%		8,277		26.0	%

Total non-freight revenues	$	39,399		100.0	%	$	31,813		100.0	%

ARG’s non-freight revenues were $39.4 million in the nine months ended September 30, 2004, compared to $31.8 million in the nine months September 30, 2003, an increase of $7.6 million or 23.8%. ARG’s non-freight revenue increase was primarily attributable to the appreciation of the Australian dollar, higher third party track access fees and other operating income, primarily fuel sales to other railroads, offset by a decrease from the Alice Springs to Darwin (ASD) line due to completion of construction. In local currency, non-freight revenues increased 8.1% in the nine months ended September 30, 2004, compared to the nine months ended September 30, 2003.

Operating Expenses

ARG’s operating expenses were $196.9 million in the nine months ended September 30, 2004, compared to $138.4 million in the nine months ended September 30, 2003, an increase of $58.5 million or 42.3%. The following table sets forth a comparison of ARG’s operating expenses in the nine months ended September 30, 2004 and 2003:

Australian Railroad Group
Operating Expense Comparison
Nine Months Ended September 30, 2004 and 2003
(U.S. dollars in thousands)


	2004					2003
			% of						% of
			Operating						Operating
	$		Revenues			$			Revenues
Labor and benefits	$	43,731		17.7	%	$	33,033			18.9	%
Equipment rents		2,198		0.9	%		1,204			0.7	%
Purchased services		60,165		24.3	%		43,283			24.7	%
Depreciation and amortization		19,845		8.0	%		16,940			9.7	%
Diesel fuel used in operations		18,895		7.6	%		10,758			6.2	%
Diesel fuel for sales to third parties		13,549		5.5	%		4,607			2.6	%
Casualties and insurance		6,418		2.6	%		6,444			3.7	%
Materials		10,611		4.3	%		8,404			4.8	%
Net loss (gain) on sale and impairment of assets		376		0.1	%		(816	)		(0.5	%)
Other expenses		21,141		8.5	%		14,563			8.3	%

Total operating expenses	$	196,929		79.5	%	$	138,420			79.1	%

Labor and benefits expense, as a percentage of revenues, decreased to 17.7% in the nine months ended September 30, 2004, compared to 18.9% in the nine months ended September 30, 2003. In local currency, labor and benefits increased 15.1%. The increase was due to higher freight volumes, particularly the strong grain movements and the new business in New South Wales.

Purchased services expense decreased to 24.3% of revenue in the nine months ended September 30, 2004, compared to 24.7% of revenues in the nine months ended September 30, 2003. In local currency, purchased services increased 21.1%. The increase was primarily due to the use of contract locomotive engineers, private road carriers, and a rail loading facility in New South Wales.

Depreciation and amortization expense, as a percentage of revenues, decreased to 8.0% in the nine months ended September 30, 2004, compared to 9.7% in the nine months ended September 30, 2003. In local currency, depreciation and amortization increased 1.8%. The increase was due to higher depreciation related to an increase in depreciable assets due to capital expenditures.

Diesel fuel used in operations increased to 7.6% of revenues in the nine months ended September 30, 2004, compared to 6.2% of revenues in the nine months ended September 30, 2003. In local currency, the cost of fuel used in operations increased 53.2%. The increase was due to higher freight volumes on existing lines, the new business in New South Wales, the contract operations in the Northern Territory (ASD), and a 15.8% increase in fuel prices.

The cost of diesel fuel sold to third parties increased to 5.5% of revenues in the nine months ended September 30, 2004, compared to 2.6% of revenues in the nine months ended September 30, 2003. In local currency, the cost of diesel fuel sold to third parties increased 156.8%. The increase was due to a higher volume of fuel sales to other railroads and a 15.8% increase in fuel prices.

Casualties and insurance costs decreased to 2.6% of revenues in the nine months ended September 30, 2004, compared to 3.7% of revenues in the nine months ended

September 30, 2003. In local currency, casualties and insurance decreased 14.7%. The decrease was due to improved safety performance and a decrease in insurance costs.

Materials expense, as a percentage of revenues, decreased to 4.3% in the nine months ended September 30, 2004, compared to 4.8% in the nine months ended September 30, 2003. In local currency, materials expense increased 10.1%. The increase was due to higher rolling stock maintenance costs associated with the higher freight volumes.

Net loss (gain) on sale and impairment of assets as a percentage of revenues, changed from a gain of 0.5% in the nine months ended September 30, 2003 to a loss of 0.1% in the nine months ended September 30, 2004. The net loss in the nine months ended September 30, 2004 was due to asset write offs in South Australia related to a detailed asset review. In the nine months ended September 30, 2003 asset dispositions resulted in a net gain.

Other expenses, as a percentage of revenues, increased to 8.5% in the nine months ended September 30, 2004, compared to 8.3% in the nine months ended September 30, 2003. In local currency, other expenses increased 26.4%. The increase was primarily due to track access fees and various other increases in administrative costs related to the new business in New South Wales.

Liquidity and Capital Resources

During the nine months ended September 30, 2004 the Company generated cash flow from operating activities of $41.4 million, invested $19.8 million in capital assets (net of $4.4 million in state grant funds received for track rehabilitation and construction), purchased $2.1 million of new rail properties, received $5.8 million in cash from unconsolidated international affiliates and received $2.8 million in proceeds from employee stock purchases. The Company paid $411,000 of dividends on the Company’s Redeemable Convertible Preferred Stock and reduced its debt by $29.8 million during this same period primarily by using cash provided by operations.

During the nine months ended September 30, 2003 the Company generated cash from operations of $38.2 million, invested $14.3 million in capital assets (net of $1.5 million in state grant funds received for track rehabilitation and construction), received $132,000 in cash from unconsolidated affiliates and received $1.7 million in proceeds from employee stock purchases. The Company paid $750,000 of dividends on the Company’s Redeemable Convertible Preferred Stock and reduced its debt by $29.9 million during this same period primarily by using cash provided by operations to reduce debt.

The Company originally budgeted approximately $29.2 million in capital expenditures in 2004, of which $19.8 million was for track rehabilitation and $9.4 million was for equipment. During 2004, budget addendums related to track rehabilitation increased the capital budget by approximately $1.0 million, net of $2.3 million expected to be funded by grants from state and federal agencies. Included in the revised budget of $30.2 million is approximately $2.7 million to exercise an early buyout of 36 leased locomotives and approximately $2.3 million to partially rehabilitate 16 miles of track to access a new coal-fired power plant customer in Homer City, Pennsylvania. The Company also expects to receive $6.3 million of state and federal grants to fund a portion of the track rehabilitation on the Homer City line. Completion of track rehabilitation projects is typically dependent on weather conditions in the fourth quarter of each year. Any carryover amounts would be included in the following year’s capital budget.

At September 30, 2004 the Company had long-term debt, including current portion, totaling $129.0 million, which comprised 28.5% of its total capitalization. At December 31, 2003 the Company had long-term debt, including current portion, totaling $158.0 million, which comprised 35.2% of its total capitalization including the Mandatorily Redeemable Convertible Preferred Stock.

The Company has historically relied primarily on cash generated from operations to fund working capital and capital expenditures relating to ongoing operations, while

relying on borrowed funds and stock issuances to finance acquisitions and investments in unconsolidated affiliates. The Company believes that its cash flow from operations, together with amounts available under the credit facilities, will enable the Company to meet its liquidity and capital expenditure requirements relating to ongoing operations for at least the duration of the credit facilities.

U.S. Credit Facilities

As of September 30, 2004, the Company’s $223.0 million revolving loan, which matures in 2007, consisted of outstanding debt of $77.7 million, letter of credit guarantees of $8.1 million and $137.2 million of unused borrowing capacity. The $137.2 million ($113.4 million at December 31, 2003) of unused borrowing capacity is available for general corporate purposes including acquisitions. See Note 9 of the Company’s Form 10-K for the year ended 2003 for additional information regarding the Company’s credit facilities.

Mexican Financings

On December 7, 2000, one of the Company’s subsidiaries in Mexico, Servicios, entered into three promissory notes payable (Notes) totaling $27.5 million with variable interest rates based on LIBOR plus 3.5 percentage points. Two of the Notes, aggregating $16.8 million, have an eight year term with combined semi-annual principal payments of $1.4 million which began March 15, 2003, and continue through the maturity date of September 15, 2008. The third Note, in the amount of $10.5 million, has a nine year term with semi-annual principal payments of $750,000 which began March 15, 2003, and continue through the maturity date of September 15, 2009.

The Notes are secured by essentially all the assets of Servicios and its subsidiary, Compania de Ferrocarriles Chiapas-Mayab, S.A. de C.V., (FCCM), and a pledge of the Company’s shares of Servicios and FCCM. The Company is obligated to provide up to $8.0 million of funding to its Mexican subsidiaries, if necessary, to meet their investment or financial obligations prior to completing the investment phase of the project funded by the Notes (Physical Completion), consisting of several obligations related to capital investments, operating performance and management systems and controls. In addition, the Company is obligated to provide $7.5 million in funding to Servicios to meet its debt service obligations prior to completing the financial phase of the project (Financial Completion), consisting of several financial performance thresholds. At present, FCCM has yet to achieve Physical Completion or Financial Completion. To date, GWI has advanced $1.7 million of this obligation, and based on current circumstances, it is probable that the Company will have to fund additional payments in order to meet the future principal repayment obligations of the Notes.

In conjunction with the refinancing of FCCM and Servicios, the International Finance Corporation (IFC) (the primary lender to Servicios) invested $1.9 million of equity in Servicios for a 12.7% indirect interest in FCCM. 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 if the value of the put option exceeds the minority interest. Exercise of this put option by the IFC would result in a future cash outflow for the Company.

Mexican Fuel Tax Credits – Under prior tax regulations, FCCM could apply diesel fuel tax credits it earned to a variety of its federal tax obligations, including income taxes, payroll taxes and value added taxes. In 2003, FCCM utilized approximately $3.3 million in such fuel tax credits. However, effective January 2004, due to Mexican tax regulations that allow railroads to apply these tax credits only to income tax related obligations, FCCM became unable to utilize such fuel tax credits.

If this regulation remains in place, FCCM would face additional annual cash payment obligations for the next few years until it generates sufficient taxable income to utilize such credits. This additional burden will make it more difficult for FCCM and Servicios to satisfy their debt obligations and increases the likelihood that the Company will have to fund all or a portion of its funding obligation. Company personnel are working with Secretary of Communications and Transportation and Mexican tax authorities to attempt to revise the tax regulation but the Company can offer no assurance that it will be successful.

Supplemental Information – North America

Free Cash Flow Description and Discussion – The Company views Free Cash Flow as an important financial measure of how well it is managing its assets. Subject to the limitations discussed below, Free Cash Flow is a useful indicator of cash flow that may be available for use by the Company. Free Cash Flow is defined as Net Cash Provided by Operating Activities less Net Cash Used in Investing Activities, excluding the Cost of Acquisitions. Key limitations of the Free Cash Flow measure include the assumptions that the Company will be able to refinance its existing debt when it matures, and meet other cash flow obligations from financing activities, such as required amortization of debt. Free Cash Flow is not intended to represent, and should not be considered more meaningful than, or as an alternative to, measures of cash flow determined in accordance with Generally Accepted Accounting Principles.

The following table sets forth reconciliation for Net Cash Provided by Operating Activities to Free Cash Flow:


	Nine Months Ended
	September 30,
	2004			2003
Net cash provided by operating activities	$	41,469		$	38,158
Net cash used in investing activities		(15,803	)		(13,495	)
Cash used for acquisitions		2,124			—

Free cash flow	$	27,790		$	24,663

Impact of Foreign Currencies on Operating Revenues – In the nine months ending September 30, 2004, foreign currency translation had a positive impact on consolidated North America revenues primarily due to the strengthening of the Canadian dollar. The following table sets forth the impact of foreign currency translation on reported operating revenues:

Operating Revenues
(dollars in thousands)


	Nine Months Ended September,
	2004							2003
						Revenue
			Currency			Excluding
			Translation			Currency
	As Reported		Impact			Impact		As Reported
U.S. Operating Revenues	$	166,335		n/a		$	166,335	$	131,793
Canada Operating Revenues		33,633	$	(2,308	)		31,325		27,142
Mexico Operating Revenues		23,739		1,423			25,162		24,263

Total Operating Revenues	$	223,707	$	(885	)	$	222,822	$	183,298

Supplemental Information — Australian Railroad Group

ARG’s Free Cash Flow is defined as net cash provided by operating activities, less net cash used in investing activities, excluding the cash transfer to (from) restricted funds. The prior discussion concerning the usefulness and limitations associated with the Company’s Free Cash Flow also apply to the discussion of ARG’s Free Cash Flow. In addition, the Company has no access or right to any of ARG’s Free Cash Flow other than as a shareholder, and any dividend or distribution of cash by ARG must be approved by ARG’s board of directors, the Company and the Company’s 50/50 partner, Wesfarmers. The following table sets forth a reconciliation of ARG’s net cash provided by operating activities to its Free Cash Flow:


	Nine Months Ended
	September 30,
	2004			2003
Net cash provided by operating activities	$	53,954		$	34,280
Net cash used in investing activities		(37,763	)		(21,510	)
Cash transfer to restricted funds(a)		—			4,523

Free cash flow	$	16,191		$	17,293

(a)

Cash transfer to restricted funds represents cash deposited in an escrow account for mandated capital expenditures.

Impact of Foreign Currency on ARG’s Operating Revenues and Net Income – In the nine months ending September 30, 2004, foreign currency translation had a positive impact on ARG’s operating revenues and net income due to the strengthening of the Australian dollar. The following table sets forth the impact of foreign currency translation on reported operating revenues and net income:

ARG Operating Revenues and Net Income
(U.S. dollars in thousands)


	Nine Months Ended September 30,
	2004							2003
			Currency			Excluding
			Translation			Currency
	As Reported		Impact			Impact		As Reported
Operating Revenues	$	247,765		($32,310	)	$	215,455	$	174,988

Net Income	$	21,494		($2,864	)	$	18,630	$	13,720

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

ITEM 4. CONTROLS AND PROCEDURES

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s report under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of September 30, 2004. Based upon that evaluation and subject to the foregoing, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the design and operation of the Company’s disclosure controls and procedures provided reasonable assurance that the disclosure controls and procedures are effective to accomplish their objectives.

There have been no changes in the Company’s internal control over financial reporting that occurred during the Company’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

In addition, the Company is a defendant in certain lawsuits resulting from its operations. There have been no material developments in any litigation matters previously disclosed. The Company believes that it 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, the Company believes that the ultimate liability, if any, will not be material to its operating results, financial condition or liquidity.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

There were no unregistered sales of equity securities for the period covered by this Form 10-Q.

ITEM 2(e). ISSUER PURCHASES OF EQUITY SECURITIES

(d) Maximum

(c) Total

Number (or

Number of

Approximate

Shares (or

Dollar Value)

Units)

of Shares (or

Purchased as

Units) that

(a) Total

Part of

May Yet Be

Number of

(b) Average

Publicly

Purchased

Shares (or

Price Paid

Announced

Under the

Units)

per Share (or

Plans or

2004

Purchased

Unit)

Programs

July 1 to July 31

—

August 1 to August 31

642

23.35

September 1 to September 30

—

Total

642

23.35

On November 2, 2004 (and therefore after the period covered by this Form 10-Q), the Company announced that its Board has authorized the repurchase of up to 1,000,000 shares of its common stock. The Company intends to use the repurchased stock to offset dilution caused by the issuance of shares in connection with its 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.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES — NONE

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS — NONE

ITEM 5. OTHER INFORMATION

On August 19, 2004, the board of directors of GWI (Board) amended its Bylaws to make them more consistent with current Bylaws for Delaware public companies. Among other changes, the amended Bylaws set forth clear procedures for stockholders to follow in order to nominate a candidate to the Board. In addition, the amended Bylaws no longer have a provision that specifically permits stockholders to call a meeting; determine the number of directors; or set the time and place of the first Board meeting. The amended Bylaws are filed as an exhibit to this Form 10-Q and are available on the Governance hyperlink included in GWI’s website, which is: https:www.gwrr.com.

ITEM 6. EXHIBITS

(A). EXHIBITS — SEE INDEX TO EXHIBITS


	Page
Part I — Financial Information
Item 1. Financial Statements (Unaudited):
Consolidated Statements of Income — For the Three Month and Nine Month Periods Ended September 30, 2004 and 2003		3
Consolidated Balance Sheets – As of September 30, 2004 and December 31, 2003		4
Consolidated Statements of Cash Flows — For the Nine Month Periods Ended September 30, 2004 and 2003		5
Notes to Consolidated Financial Statements		6 - 19
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		20 - 39
Item 3. Quantitative and Qualitative Disclosures About Market Risk		40
Item 4. Controls and Procedures		40
Part II — Other Information		41
Item 1. Legal Proceedings		41
Item 2. Changes in Securities and Use of Proceeds		41
Item 3. Defaults Upon Senior Securities		42
Item 4. Submission of Matters to a Vote of Security Holders		42
Item 5. Other Information		42
Item 6. Exhibits		42
Index to Exhibits		43
Signatures		44
EX-2.1 AMENDED BY LAWS
EX-10.1 GENESEE & WYOMING INC. AWARD NOTICE FOR EMPLOYEES FOR OPTIONS
EX-10.2 GENESEE & WYOMING INC. AWARD NOTICE FOR EMPLOYEES FOR RESTRICTED STOCK
EX-10.3 GENESEE & WYOMING INC. AWARD NOTICE FOR EMPLOYEES FOR RESTRICTED STOCK UNITS
EX-10.4 GENESEE & WYOMING INC. AWARD NOTICE FOR DIRECTORS FOR RESTRICTED STOCK
EX-10.5 GENESEE & WYOMING INC. AWARD NOTICE FOR DIRECTORS FOR RESTRICTED STOCK UNITS
EX-31.1 RULE 13A-14(A)/15D-14(A) CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
EX-31.2 RULE 13A-14(A)/15D-14(A) CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
EX-32.1 SECTION 1350 CERTIFICATIONS

(2.1)		Amended Bylaws

(10.1)		Genesee & Wyoming Inc. Award Notice for Employees for Options

(10.2)		Genesee & Wyoming Inc. Award Notice for Employees for Restricted Stock

(10.3)		Genesee & Wyoming Inc. Award Notice for Employees for Restricted Stock Units

(10.4)		Genesee & Wyoming Inc. Award Notice for Directors for Restricted Stock

(10.5)		Genesee & Wyoming Inc. Award Notice for Directors for Restricted Stock Units

(31.1)		Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer

(31.2)		Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer

(32.1)		Section 1350 Certifications


	GENESEE & WYOMING INC.

Date: November 5, 2004		By: /s/ John C. Hellmann

	Name:	John C. Hellmann
	Title:	Chief Financial Officer

Date: November 5, 2004		By: /s/ James M. Andres

	Name:	James M. Andres
	Title:	Chief Accounting Officer and Global Controller


ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS — NONE