UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

GENESEE & WYOMING INC.

(Exact name of registrant as specified in its charter)

Delaware		06-0984624
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer 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
August 5, 2005:

Class		Number of Shares Outstanding
Class A Common Stock			24,592,136
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.

þ YES            o NO

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

þ YES            o NO

 

 

INDEX

		Page
Part I — Financial Information
Item 1. Financial Statements (Unaudited):
Consolidated Statements of Income — For the Three Month and Six Month Periods Ended June 30, 2005 and 2004			3
Consolidated Balance Sheets — As of June 30, 2005 and December 31, 2004			4
Consolidated Statements of Cash Flows — For the Six Month Periods Ended June 30, 2005 and 2004			5
Notes to Consolidated Financial Statements			6 - 21
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			22 - 46
Item 3. Quantitative and Qualitative Disclosures About Market Risk			46
Item 4. Controls and Procedures			46
Part II — Other Information			46
Item 1. Legal Proceedings			47
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			47 - 48
Item 3. Defaults Upon Senior Securities			47
Item 4. Submission of Matters to a Vote of Security Holders			48 - 49
Item 5. Other Information			49
Item 6. Exhibits			49
Index to Exhibits			49
Signatures			50
EX-31.1: CERTIFICATION
EX-31.2: CERTIFICATION
EX-32.1: CERTIFICATION

GENESEE & WYOMING INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(Unaudited)

		Three Months								Six Months
		Ended June 30,								Ended June 30,
		2005				2004				2005				2004
		-
OPERATING REVENUES		$	92,742			$	74,062			$	176,824			$	146,464
		-
OPERATING EXPENSES:
Transportation			31,827				23,360				60,713				48,026
Maintenance of ways and structures			8,558				7,599				16,450				14,486
Maintenance of equipment			13,675				11,048				26,780				22,729
General and administrative			16,925				13,720				31,940				26,693
Net loss (gain) on sale and impairment of assets			68				—				2				(94	)
Depreciation and amortization			5,669				4,754				10,659				9,484
		-
Total operating expenses			76,722				60,481				146,544				121,324
		-
INCOME FROM OPERATIONS			16,020				13,581				30,280				25,140
Interest expense			(2,837	)			(2,283	)			(4,955	)			(4,718	)
Other (expense) income, net			(475	)			231				(380	)			425
		-
Income before income taxes and equity earnings			12,708				11,529				24,945				20,847
Provision for income taxes			3,842				4,351				7,557				7,984
		-
Income before equity earnings			8,866				7,178				17,388				12,863
Equity in net income of international affiliates:
Australian Railroad Group			2,280				3,475				4,571				7,217
South America			219				183				306				223
		-
Net income		$	11,365			$	10,836			$	22,265			$	20,303
Preferred stock dividends and cost accretion			—				178				—				479
		-
Net income available to common stockholders		$	11,365			$	10,658			$	22,265			$	19,824
Basic earnings per common share		$	0.46			$	0.44			$	0.91			$	0.82
Weighted average shares — Basic			24,534				24,171				24,476				24,108
Diluted earnings per common share		$	0.41			$	0.39			$	0.80			$	0.72
Weighted average shares — Diluted			27,713				27,544				27,683				27,490

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)

		June 30,				December 31,
		2005				2004
ASSETS
CURRENTS ASSETS:
Cash and cash equivalents		$	19,254			$	14,451
Accounts receivable, net of $2.1 million allowance			83,125				64,537
Materials and supplies			6,240				5,263
Prepaid expenses and other			5,441				7,784
Deferred income tax assets, net			3,191				3,190
Total current assets			117,251				95,225
PROPERTY AND EQUIPMENT, net			525,477				337,024
INVESTMENT IN UNCONSOLIDATED AFFILIATES			134,215				132,528
GOODWILL			24,829				24,682
INTANGIBLE ASSETS, net			137,442				77,778
OTHER ASSETS, net			11,246				10,014
Total assets		$	950,460			$	677,251
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt		$	4,471			$	6,356
Accounts payable			86,983				63,794
Accrued expenses			27,299				21,598
Total current liabilities			118,753				91,748
LONG-TERM DEBT, less current portion			342,080				125,881
DEFERRED INCOME TAX LIABILITIES, net			54,189				50,517
DEFERRED ITEMS—grants from governmental agencies			48,305				46,229
DEFERRED GAIN—sale/leaseback			3,359				3,495
OTHER LONG-TERM LIABILITIES			15,273				14,122
MINORITY INTEREST			3,329				3,559
COMMITMENTS AND CONTINGENCIES			—				—
STOCKHOLDERS’ EQUITY:
Class A Common Stock, $0.01 par value, one vote per share; 90,000,000 shares authorized; 28,175,438 and 27,930,147 shares issued and 24,627,532 and 24,397,918 shares outstanding (net of 3,547,906 and 3,532,229 shares in treasury) on June 30, 2005 and December 31, 2004, respectively			282				279
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 June 30, 2005 and December 31, 2004			27				27
Additional paid-in capital			164,484				161,361
Retained earnings			190,318				168,054
Accumulated other comprehensive income			24,475				25,228
Less treasury stock, at cost			(13,016	)			(12,648	)
Less restricted stock, net			(1,398	)			(601	)
Total stockholders’ equity			365,172				341,700
Total liabilities and stockholders’ equity		$	950,460			$	677,251

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)

		Six Months Ended
		June 30,
		2005				2004
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		$	22,265			$	20,303
Adjustments to reconcile net income to net cash provided by operating activities-
Depreciation and amortization			10,659				9,484
Valuation of split dollar life insurance			74				—
Amortization of restricted stock			178				—
Deferred income taxes			3,503				2,929
Net loss (gain) on disposition of property			2				(94	)
Equity in net income of international affiliates			(4,877	)			(7,440	)
Minority interest (income) expense			(103	)			102
Tax benefit realized upon exercise of stock options			309				956
Changes in assets and liabilities -
Accounts receivable			(5,499	)			(605	)
Materials and supplies			231				(744	)
Prepaid expenses and other			2,993				(1,138	)
Accounts payable and accrued expenses			7,867				7,263
Other assets and liabilities, net			1,755				(305	)
Net cash provided by operating activities			39,357				30,711
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net of proceeds from government grants			(11,475	)			(11,561	)
Purchase of rail properties from Rail Management Corporation, net of $4.9 million cash received			(238,204	)			—
Cash received from unconsolidated international affiliates			606				—
Proceeds from disposition of property			281				294
Net cash used in investing activities			(248,792	)			(11,267	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term borrowings			(89,129	)			(99,407	)
Proceeds from issuance of long-term debt			302,800				76,300
Debt issuance costs			(1,629	)			—
Net proceeds from employee stock purchases			1,473				1,937
Dividends paid on Redeemable Convertible Preferred Stock			—				(411	)
Net cash provided by (used in) financing activities			213,515				(21,581	)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS			723				(531	)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			4,803				(2,668	)
CASH AND CASH EQUIVALENTS, beginning of period			14,451				11,118
CASH AND CASH EQUIVALENTS, end of period		$	19,254			$	8,450
CASH PAID DURING PERIOD FOR:
Interest		$	4,579			$	4,767
Income taxes		$	3,178			$	1,413

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 “we,” “our,” or “us” mean Genesee & Wyoming Inc. and its subsidiaries and affiliates, and when we use the term ARG we are referring to the Australian Railroad Group Pty Ltd and its subsidiaries. ARG is our 50%-owned affiliate based in Perth, Western Australia. Additionally, we have a 22.89% indirect ownership interest in our affiliate, Ferroviaria Oriental, S.A. (Oriental), which is located in eastern Bolivia. All references to currency amounts included in this quarterly report on Form 10-Q, including the financial statements, are in U.S. dollars unless specifically noted otherwise. All significant intercompany transactions and accounts have been eliminated in consolidation. These interim consolidated financial statements have been prepared by us, 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 (U.S. GAAP). In the opinion of management, the unaudited financial statements for the three-month and six-month periods ended June 30, 2005 and 2004, 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. 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, 2004 included in our 2004 Form 10-K. Certain prior period balances have been reclassified to conform to the 2005 presentation.

2. EXPANSION OF OPERATIONS:

     On June 1, 2005, we acquired from Rail Management Corporation (RMC), substantially all of its rail operations (collectively, Rail Partners) for $238.2 million in cash (net of $4.9 million received), the assumption of $1.4 million of non-interest bearing debt and $1.3 million in acquisition costs. The purchase price was allocated to current assets ($19.5 million including $4.9 million in cash received), property and equipment ($185.2 million), intangible assets ($60.4 million), and goodwill ($0.2 million) less currents liabilities ($20.8 million) and debt assumed ($1.4 million). The intangible assets consist of customer contracts and relationships with a weighted average amortization period of 27 years. Goodwill of $0.2 million is expected to be deductible for tax purposes. For U.S. tax purposes, we will treat the Rail Partners acquisition as a purchase of assets. We funded the purchase price through a combination of our newly expanded $225.0 million senior revolving credit facility and by completing a private placement of $125.0 million 10-Year Senior Floating Rate Notes. The acquired rail properties are operated by our Jacksonville-based Rail Link Region and commenced operations on June 1, 2005.

     Rail Partners is composed of fourteen rail operations and ancillary businesses with locations throughout the South and Southeast United States, including Florida, Alabama, Mississippi, Georgia, Arkansas, Texas, North Carolina, Tennessee and Kentucky. There is also one rail property located in Wisconsin. The main operations are composed of: (i) five former industrial railroads serving the paper and forest products industry, (ii) seven short line railroads, and (iii) two port railroads. These railroads operate over 928 miles of track and own 86 locomotives and 1,109 freight cars. The railroads handle approximately 170,000 annual carloads, including switching and port operations, with approximately 50% of its customers being in the paper and forest products industry.

     The results of operations for the three-month and six-month periods ended June 30, 2005 include operations of Rail Partners for the month of June. The following condensed balance sheet reflects the allocation of assets and liabilities as of the acquisition date.

		May 31, 2005
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	4,919
Accounts receivable, net			12,819
Materials and supplies			1,152
Prepaid expenses and other			615
Total current assets			19,505
PROPERTY AND EQUIPMENT, net			185,202
INTANGIBLE ASSETS			60,406
GOODWILL			191
Total assets		$	265,304
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable		$	19,226
Accrued expenses			1,552
Total current liabilities			20,778
LONG-TERM BANK DEBT			1,403
Total non-current liabilities			1,403
TOTAL STOCKHOLDERS’ EQUITY			243,123
Total liabilities and stockholders’ equity		$	265,304

     On April 8, 2005, our subsidiary, the First Coast Railroad Inc. (FCRD) signed a 20-year agreement to lease 31 miles of rail line between Seals, Georgia and Fernandina, Florida from CSX Transportation, Inc. (CSX). The FCRD is operated by our Rail Link Region and commenced operations on April 9, 2005.

     In July 2005, our Homer City Branch, which was acquired in January of 2004, began operations upon completion of track rehabilitation, a portion of which was funded through government grants. The Homer City Branch rail line is operated by our New York-Pennsylvania Region and is contiguous to that Region’s existing railroad operation.

     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:

Schedule of Acquisition Restructuring Activity

		Quarter Ended
		June 30, 2005
Number of Employees:
Number of planned terminations related to acquisitions during the period			16
Additions to planned terminations during the period			—
Actual number of employees terminated during the period			—
Ending number of employees as of the end of the period to be terminated			16
Restructuring Reserves:
Liabilities established in purchase accounting for acquisitions		$	715,000
Additions to liability reserve during the period			—
Cash payments during the period			—
Balance at end of period		$	715,000

Pro Forma Financial Results (unaudited)

     The following table summarizes our unaudited pro forma operating results for the three-month and six month periods ended June 30, 2005 and 2004, as if Rail Partners had been acquired as of January 1, 2004 (in thousands, except per share amounts):

		Three Months								Six Months
		Ended June 30,								Ended June 30,
		2005				2004				2005				2004
Operating revenues		$	103,077			$	88,143			$	202,574			$	174,562
Net income		$	9,276			$	11,851			$	21,767			$	21,618
Basic earnings per share		$	0.38			$	0.50			$	0.89			$	0.92
Diluted earnings per share		$	0.33			$	0.43			$	0.79			$	0.79

     The unaudited pro forma operating results include the acquisition of Rail Partners adjusted, net of tax, for depreciation and amortization expense resulting from the step-up of the Rail Partners property and intangible assets based on appraised values, capitalization of certain track repairs which were historically expensed, and the inclusion of incremental interest expense related to borrowings used to fund the acquisition.

     The Rail Partners operating results reflected in these pro forma operating results include certain senior management, administrative, deferred compensation and other expenses that we do not believe will continue as ongoing expenses but do not qualify for elimination under the treatment and presentation of pro forma financials.

     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.

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								Six Months Ended
		June 30,				June 30,				June 30,				June 30,
		2005				2004				2005				2004
Numerators:
Net income		$	11,365			$	10,836			$	22,265			$	20,303
Preferred Stock dividends and accretion			—				178				—				479
Net income allocated to participating preferred stockholders			—				1,078				—				2,514
Net income available to Class A Common stockholders			11,365				9,580			$	22,265				17,310
Net income allocated to participating preferred stockholders			—				1,078				—				2,514
Net income available to Class A Common stockholders — Basic and Diluted			11,365			$	10,658			$	22,265			$	19,824
Denominators:
Weighted average Class A Common Shares outstanding			24,534				21,726				24,476				21,051
Weighted average Mandatory Redeemable Convertible Preferred Stock (converted to Class A common stock in the second quarter of 2004)			—				2,445				—				3,057
Weighted average shares — Basic			24,534				24,171				24,476				24,108
Weighted average Class B Common Shares outstanding			2,650				2,689				2,650				2,698
Dilutive effect of employee stock options			529				684				557				684
Weighted average shares — Dilutive			27,713				27,544				27,683				27,490
Income per common share:
Basic		$	0.46			$	0.44			$	0.91			$	0.82
Diluted		$	0.41			$	0.39			$	0.80			$	0.72

Stock-based Compensation Plans

     The Compensation and Stock Option Committee of our Board of Directors has discretion to determine grantees, grant dates, amounts of grants, vesting and expiration dates for grants to our employees through our 2004 Omnibus Incentive Plan. We account for this plan under APB Opinion No. 25, under which no compensation cost has been recognized except for restricted stock. Had compensation cost for all options issued under these plans been determined consistent with SFAS No. 123, our net income and earnings per share would have been reduced as follows (in thousands, except EPS):

		Three Months Ended								Six Months Ended
		June 30,				June 30,				June 30,				June 30,
		2005				2004				2005				2004
Net Income: As reported		$	11,365			$	10,836			$	22,265			$	20,303
Deduct: Total stock-based employee compensation expense determined under fair value based methods for all awards, net of related tax effects			670				314				1,385				853
Pro Forma		$	10,695			$	10,522			$	20,880			$	19,450
Basic EPS: As reported		$	0.46			$	0.44			$	0.91			$	0.82
Pro Forma		$	0.44			$	0.43			$	0.85			$	0.78
Diluted EPS: As reported		$	0.41			$	0.39			$	0.80			$	0.72
Pro Forma		$	0.39			$	0.38			$	0.75			$	0.69

4. EQUITY INVESTMENTS

Australian Railroad Group

     The following are U.S. GAAP condensed balance sheets of ARG as of June 30, 2005 and December 31, 2004, and the related condensed consolidated statements of income and cash flows for the three-month and six-month periods ended June 30, 2005 and 2004 (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 June 30, 2005		$	0.761
As of December 31, 2004		$	0.782
Average for the three months ended June 30, 2005		$	0.767
Average for the three months ended June 30, 2004		$	0.720
Average for the six months ended June 30, 2005		$	0.771
Average for the six months ended June 30, 2004		$	0.740

Australian Railroad Group Pty. Ltd.

Condensed Consolidated Balance Sheets
(in thousands of U.S. dollars)

		June 30,
		2005				December 31, 2004
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	14,663			$	21,217
Accounts receivable, net			51,794				49,085
Materials and supplies			12,301				11,580
Prepaid expenses and other			5,312				3,055
Total current assets			84,070				84,937
PROPERTY AND EQUIPMENT, net			539,699				541,470
DEFERRED INCOME TAX ASSETS			73,076				77,325
OTHER ASSETS, net			8,133				8,522
Total assets		$	704,978			$	712,254
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable		$	15,767			$	19,832
Accrued expenses			25,655				31,989
Current income tax liabilities			285				364
Total current liabilities			41,707				52,185
LONG-TERM BANK DEBT			380,650				383,425
DEFERRED INCOME TAX LIABILITIES			23,054				21,207
OTHER LONG-TERM LIABILITIES			4,733				2,177
FAIR VALUE OF INTEREST RATE SWAPS			7,538				9,788
Total non-current liabilities			415,975				416,597
REDEEMABLE PREFERRED STOCK OF STOCKHOLDERS			16,439				16,897
TOTAL STOCKHOLDERS’ EQUITY			230,857				226,575
Total liabilities and stockholders’ equity		$	704,978			$	712,254

Australian Railroad Group Pty. Ltd.

Condensed Consolidated Statements of Income
(in thousands of U.S. dollars)

		Three Months Ended								Six Months Ended
		June 30, 2005				June 30, 2004				June 30, 2005				June 30, 2004
Operating revenues		$	86,041			$	81,717			$	170,420			$	164,070
Operating expenses			72,452				65,257				143,029				129,970
Income from operations			13,589				16,460				27,391				34,100
Interest expense			(7,284	)			(6,855	)			(14,696	)			(14,203	)
Other income, net			228				338				407				741
Income before income taxes			6,533				9,943				13,102				20,638
Provision for income taxes			1,976				2,994				3,959				6,206
Net income		$	4,557			$	6,949			$	9,143			$	14,432

Australian Railroad Group Pty. Ltd.

Condensed Consolidated Statements of Cash Flows
(in thousands of U.S. dollars)

		Six Months Ended
		June 30,				June 30,
		2005				2004
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		$	9,143			$	14,432
Adjustments to reconcile net income to net cash provided by operating activities-
Depreciation and amortization			15,922				13,097
Deferred income taxes			4,631				6,367
Net (gain) loss on sale and impairment of assets			(319	)			471
Changes in assets and liabilities			(14,476	)			(3,675	)
Net cash provided by operating activities			14,901				30,692
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment			(30,301	)			(22,883	)
Proceeds from disposition of property and equipment			1,692				835
Net cash used in investing activities			(28,609	)			(22,048	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings			7,707				—
Net cash provided by financing activities			7,707				—
EFFECT OF EXCHANGE RATE DIFFERENCES ON CASH AND CASH EQUIVALENTS			(553	)			(2,285	)
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS			(6,554	)			6,359
CASH AND CASH EQUIVALENTS, beginning of period			21,217				26,618
CASH AND CASH EQUIVALENTS, end of period		$	14,663			$	32,977

South America

     The following condensed results of operations for Oriental for the three-month and six-month periods ended June 30, 2005 and 2004 have a U.S. dollar functional currency and are based on accounting principles generally accepted in the United States (in thousands). We have a 22.89% indirect ownership interest in Oriental which is located in eastern Bolivia.

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2005				2004				2005				2004
Operating revenues		$	8,829			$	7,851			$	15,295			$	14,490
Net income			2,287				1,705				3,227				2,737

Condensed balance sheet information for Oriental as of June 30, 2005 and December 31, 2004:

		June 30, 2005				December 31, 2004
Current assets		$	10,347			$	15,702
Non-current assets			58,428				58,365
Total assets		$	68,775			$	74,067
Current liabilities		$	5,403			$	7,306
Non-current liabilities			6,414				6,042
Long-term debt			605				892
Shareholders’ equity			56,353				59,827
Total liabilities and shareholders’ equity		$	68,775			$	74,067

     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. Our share of the various costs from the intermediate unconsolidated affiliates is $45,000 and $249,000 for the three months and $72,000 and $456,000 for the six months ended June 30, 2005 and 2004, respectively.

     As noted previously, we hold our equity interest in Oriental through a number of intermediate holding companies, and we account for our interest in Oriental under the equity method of accounting. We indirectly hold a 12.52% equity interest in Oriental through an interest in Genesee & Wyoming Chile (GWC), and we hold our 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 we have 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 we were to lose our 12.52% equity stake in Oriental due to creditors exercising their lien on GWC’s indirect equity interest in Oriental, we would write-off our investment in Oriental held through GWC, which on June 30, 2005 amounted to $400,000. A default, acceleration or effort to foreclose on the lien under the non-recourse debt will have no impact on our remaining 10.37% equity interest in Oriental because that equity interest is held indirectly through holding companies outside of GWC’s ownership in Oriental. As a result of the uncertainty surrounding the $12.0 million debt, we discontinued equity accounting for our 12.52% equity interest in Oriental held through our interest in GWC.

     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 our 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 1999 to us of their ownership interests in certain of our Canadian operations. Under the terms of the purchase agreement, among other things, the plaintiffs were granted options to purchase up to 270,000 shares of our Class A Common Stock at an exercise price of $2.56 per share if certain of our Canadian operations had achieved certain financial performance targets in any annual period between 1999 and 2003. The complaint alleges that these financial performance targets have been met, and the plaintiffs are seeking, among other things, a declaratory judgment that the options granted under the purchase agreement have vested and are exercisable. We believe the claim is without merit, and we intend to vigorously defend this lawsuit. On January 5, 2005 the plaintiffs filed a motion for summary judgment. On March 15, 2005, we filed our own motion for summary judgment. The Delaware Chancery Court held oral arguments on the cross motions on May 24, 2005. Following the argument, the Court ordered additional discovery and briefing, which has been completed. We are currently awaiting the Court’s decision on the summary judgment motions.

     In addition, from time to time we are a defendant in certain lawsuits resulting from our operations. Management believes that we have adequate provisions in the financial statements for any expected liabilities which may result from disposition of such lawsuits. While it is possible that some of the foregoing matters may be resolved at a cost greater than that provided for, it is the opinion of management that the ultimate liability, if any, will not be material to our operating results, financial position 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 our comprehensive income, net of tax, for the three-month and six-month periods ended June 30, 2005 and 2004 (in thousands):

		Three Months Ended
		June 30,
		2005				2004
Net income		$	11,365			$	10,836
Other comprehensive income (loss):
Foreign currency translation adjustments			49				(11,109	)
Net unrealized (losses) gains on qualifying cash flow hedges, net of (benefit) tax of ($66) and $674, respectively			(141	)			1,099
Net unrealized (losses) gains on qualifying cash flow hedges of Australian Railroad Group, net of (benefit) tax of ($373) and $427, respectively			(870	)			1,423
Comprehensive income		$	10,403			$	2,249

		Six Months Ended
		June 30,
		2005				2004
Net income		$	22,265			$	20,303
Other comprehensive income (loss):
Foreign currency translation adjustments			(1,611	)			(9,178	)
Net unrealized gains on qualifying cash flow hedges, net of tax of $30 and $438, respectively			70				716
Net unrealized gains on qualifying cash flow hedges of Australian Railroad Group, net of tax of $338 and $256, respectively			788				598
Comprehensive income		$	21,512			$	12,439

     The following table sets forth the components of accumulated other comprehensive income, net of tax, included in the consolidated balance sheets as of June 30, 2005, and December 31, 2004 (in thousands):

		June 30,				December 31,
		2005				2004
Net accumulated foreign currency translation adjustments		$	28,331			$	29,942
Net unrealized losses on qualifying cash flow hedges			(687	)			(757	)
Net unrealized losses on qualifying cash flow hedges of Australian Railroad Group			(2,638	)			(3,426	)
Net unrealized minimum pension liability adjustment, net of tax			(531	)			(531	)
Accumulated other comprehensive income as reported		$	24,475			$	25,228

7. GEOGRAPHIC AREA INFORMATION:

     The table below sets forth our geographic area revenues for our consolidated operations for the three-month and six-month periods ended June 30, 2005 and 2004, and geographic area long-lived assets as of June 30, 2005 and December 31, 2004 (in thousands):

Geographic Area Data

		Three Months Ended June 30,
		2005								2004
Operating Revenues:
United States		$	70,946				76.5	%		$	56,178				75.9	%
Canada			12,437				13.4	%			10,071				13.6	%
Mexico			9,359				10.1	%			7,813				10.5	%
Total operating revenues		$	92,742				100.0	%		$	74,062				100.0	%

		Six Months Ended June 30,
		2005								2004
Operating Revenues:
United States		$	133,519				75.5	%		$	109,742				74.9	%
Canada			25,600				14.5	%			21,443				14.6	%
Mexico			17,705				10.0	%			15,279				10.5	%
Total operating revenues		$	176,824				100.0	%		$	146,464				100.0	%

		As of
		June 30,				2005				As of December 31,				2004
Long-lived assets:
United States		$	729,870				87.6	%		$	479,251				82.3	%
Canada			59,969				7.2	%			62,162				10.7	%
Mexico			43,370				5.2	%			40,613				7.0	%
Total long-lived assets		$	833,209				100.0	%		$	582,026				100.0	%

8. DERIVATIVE FINANCIAL INSTRUMENTS:

     We actively monitor our exposure to interest rate and foreign currency exchange rate risks and use derivative financial instruments to manage the impact of certain of these risks. We use derivatives only for purposes of managing risk associated with underlying exposures. We do not trade or use instruments with the objective of earning financial gains on the interest rate or exchange rate fluctuations alone, nor do we use instruments where there are not underlying cash exposures. Complex instruments involving leverage or multipliers are not used. We manage our hedging position and monitor the credit ratings of counterparties and do not anticipate losses due to counterparty nonperformance. Management believes that our use of derivative instruments to manage risk is in our best interest. However, our 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

     We use interest rate swap agreements to manage our exposure to changes in interest rates for our floating rate debt. Interest rate swap agreements are accounted for as cash flow hedges. 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 is recorded in earnings and reported in the consolidated statements of income in interest expense.

     During 2004, 2003 and 2002, we entered into various interest rate swaps fixing our base interest rate by exchanging our variable LIBOR interest rates on long-term debt for a fixed interest rate. Several interest rate swaps were terminated in November 2004 in conjunction with the debt refinancing. The remaining swaps expire at various dates through September 2007, and the fixed base rates range from 4.5% to 5.46%. At June 30, 2005 and December 31, 2004, the notional amount under these agreements was $30.2 million and $32.8 million, respectively, and the fair value of these interest rate swaps was negative $995,000 and negative $1.1 million, respectively.

Foreign Currency Exchange Rate Risk

     We use 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 2005 and 2004, we entered into various exchange rate options that establish exchange rates for converting Mexican Pesos to U.S. Dollars. One of the options expired in March 2005. The remaining options, which expire September 2005 and March 2006, respectively, give us the right to sell Mexican Pesos for U.S. Dollars at exchange rates of 12.68 and 13.64 Mexican Pesos to the U.S. Dollar, respectively. We paid up-front premiums of $20,000 for the options in the quarter ended March 31, 2005. At June 30, 2005, the notional amount under exchange rate options was $3.6 million and the fair value was approximately $0.

9. INTANGIBLE AND OTHER ASSETS, NET AND GOODWILL:

     Acquired intangible and other assets are as follows (in thousands):

		June 30, 2005												December 31, 2004
		Gross												Gross
		Carrying				Accumulated				Net				Carrying				Accumulated				Net
		Amount				Amortization				Assets				Amount				Amortization				Assets
INTANGIBLE ASSETS:
Amortizable intangible assets:
Chiapas-Mayab Operating License (Mexico)		$	7,343			$	1,407			$	5,936			$	7,047			$	1,233			$	5,814
Amended and Restated Service Assurance Agreement (Illinois & Midland Railroad)			10,566				863				9,703				10,566				647				9,919
Transportation Services Agreement (GP Railroads)			27,056				1,353				25,703				27,055				901				26,154
Customer Contracts and Relationships (Rail Partners)			60,407				198				60,209
Non-amortizable intangible assets:
Track Access Agreements (Utah Railway)			35,891				—				35,891				35,891				—				35,891
Total Intangible Assets		$	141,263			$	3,821			$	137,442			$	80,559			$	2,781			$	77,778
OTHER ASSETS:
Deferred financing costs			8,132				3,168				4,964				6,584				3,015				3,569
Other assets			6,881				599				6,282				7,030				585				6,445
Total Other Assets			15,013				3,767				11,246				13,614				3,600				10,014
Total Intangible and Other Assets		$	156,276			$	7,588			$	148,688			$	94,173			$	6,381			$	87,792

     The Chiapas-Mayab Operating License is being amortized over 30 years, which is the original 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, we 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 our estimate that the useful life of the coal-fired electricity generation plant, to which the Illinois and Midland Railroad provides service, will be through 2027.

     The Transportation Services Agreement (the TSA), entered into in conjunction with the Georgia-Pacific Corporation (GP) transaction, is a 20-year agreement to provide exclusive rail transportation service to GP facilities. We believe that the customer’s facilities have a 30-year economic life and that we 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 which began January 1, 2004.

     We allocated $60.4 million of the purchase price for the Rail Partners acquisition to intangible assets. These intangible assets were valued as customer relationships or contracts and, as of June 1, 2005, are amortized on a straight line basis over the expected economic longevity of the customer relationship, the facility served or the length of the customer contract. The weighted average life of the intangible assets is 27 years.

     The Track Access Agreements are perpetual trackage agreements assumed in our 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 we funded but that are owned by executive officers. We retain a collateral interest in a portion of 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:

		Six Months Ended				Twelve Months Ended
		June 30, 2005				December 31, 2004
Goodwill:
Balance at beginning of period		$	24,682			$	24,522
Goodwill from acquisitions			191				—
Currency translation adjustment			(44	)			160
Balance at end of period		$	24,829			$	24,682

10. PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS:

Components of net periodic benefit cost (in thousands):

										Other
										Retirement
		Pension								Benefits
Three months ended June 30,		2005				2004				2005				2004
Service cost		$	42			$	57			$	28			$	28
Interest cost			51				53				56				68
Expected return on plan assets			(38	)			(32	)			—				—
Amortization of transition liability			36				36				—				—
Amortization of prior service cost			—				—				—				—
Amortization of loss			3				6				9				21
Net periodic benefit cost		$	94			$	120			$	93			$	117

										Other
										Retirement
		Pension								Benefits
Six months ended June 30,		2005				2004				2005				2004
Service cost		$	84			$	114			$	56			$	55
Interest cost			101				107				111				137
Expected return on plan assets			(77	)			(65	)			—				—
Amortization of transition liability			71				71				—				—
Amortization of prior service cost			—				—				—				—
Amortization of loss			8				13				20				42
Net periodic benefit cost		$	187			$	240			$	187			$	234

Employer Contributions

     We previously disclosed in our financial statements for the year ended December 31, 2004, that we expected to contribute $212,000 to our pension plan in 2005. As of June 30, 2005, $95,945 of contributions has been made. We presently anticipate contributing an additional $116,055 to fund our pension plan in 2005 for a total of $212,000.

11. RECENTLY ISSUED ACCOUNTING STANDARDS:

     In December 2004, the Financial Accounting Standards Board (FASB) issued Statement No. 123(R), Share-Based Payments. This statement requires that companies recognize compensation expense equal to the fair value of stock options or other share-based payments. On April 14, 2005, the Securities and Exchange Commission deferred the effective date of this statement to January 1, 2006. We plan to early adopt FASB No. 123(R) in the third quarter of 2005 and we are in the process of evaluating the impact on our consolidated financial statements.

     In March 2005, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations—an interpretation of FASB Statement No. 143. This Interpretation clarifies that the term conditional asset retirement obligation, as used in FASB Statement No. 143, refers to a legal obligation to perform an asset retirement activity in which the timing or method of settlement, or both, are conditional on a future event that may or may not be within the control of the entity. An entity is required to recognize a liability for the fair value of a conditional asset retirement obligation if the fair value of the liability can be reasonably estimated. We are assessing the impact of the interpretation on its financial statements. The Interpretation will require the recording of a cumulative effect of a change in accounting principle in the fourth quarter of 2005, if applicable.

     In May 2005, the FASB issued Statement No. 154, Accounting Changes and Error Corrections (SFAS 154) which supersedes APB Opinion No. 20, Accounting Changes and SFAS NO. 3, Reporting Accounting Changes in Interim Financial Statements. SFAS 154 changes the requirements for the accounting for and reporting of voluntary changes in accounting principle and changes required by an accounting pronouncement when the pronouncement does not include specific transition provisions. This statement requires the retroactive application to prior periods’ financial statements of changes in accounting principles, unless it is impracticable to determine either the period specific effects or the cumulative effect of the change. SFAS 154 is effective for accounting changes and correction of errors made in fiscal years beginning after December 15, 2005. We do not expect the adoption of SFAS 154 to have a material impact on the consolidated results of operations and financial condition.

     In June 2005, the FASB issued FASB Staff Position (FSP) No. FAS 143-1, Accounting for Electronic Equipment Waste Obligations. FSP No. 143-1 was issued to address the accounting for obligations associated with Directive 2002/96/EC on Waste Electrical and Electronic Equipment adopted by the European Union. FSP No. 143-1 is effective for reporting periods after June 8, 2005 and we adopted effective June 30, 2005. The adoption of this FSP has no material impact on the consolidated results of operations and financial condition.

12. SUBSEQUENT EVENT – DEBT REFINANCING:

     On July 26, 2005, we completed a private placement of $100.0 million 10-Year senior notes and $25.0 million floating rate 7-year senior notes. The senior notes are unsecured but are guaranteed by substantially all of our U.S. subsidiaries. The $100.0 million senior notes bear interest at 5.36%, and the $25.0 million

floating rate notes have a borrowing rate of LIBOR plus 0.70% and had an interest rate of 4.35% as of the July 26, 2005 closing date. We used the proceeds of the senior notes to repay the $125.0 million 10-Year Floating Rate Notes issued in connection with the acquisition of Rail Partners (see Note 2).

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

     The following discussion should be read in conjunction with our 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 our 2004 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 our 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 our 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 we are subject; general economic and business conditions; and additional risks associated with our 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 our 2004 Form 10-K under “Risk Factors.” We undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

General

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

     On June 1, 2005, we completed the acquisition of substantially all of RMC’s rail operations for $238.2 million in cash (net of $4.9 million received), the assumption of $1.4 million of non-interest bearing debt and $1.3 million in acquisition costs. The purchase price was allocated to current assets ($19.5 million including $4.9 million in cash received), property and equipment ($185.2 million), intangible assets ($60.4 million), and goodwill ($0.2 million) less current liabilities ($20.8 million) and debt assumed ($1.4 million). We funded the $243.0 million cash purchase price through a combination of our newly expanded $225.0 million senior revolving credit facility and by completing a private placement of $125.0 million 10-Year Senior Floating Rate Notes. The acquired rail properties are operated by our Rail Link Region and commenced operations on June 1, 2005.

     On April 8, 2005, the FCRD signed a 20-year agreement to lease 31 miles of rail line between Seals, Georgia and Fernandina, Florida from CSX. The FCRD is operated by our Rail Link Region and commenced operations on April 9, 2005.

     In July 2005, our Homer City Branch, which was acquired in January of 2004, began operations upon completion of track rehabilitation, a portion of which was funded

through government grants. The Homer City Branch rail line is operated by our New York-Pennsylvania Region and is contiguous to that Region’s existing railroad operation.

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

     For a complete description of our accounting policies, see Note 2 to the audited consolidated financial statements for the year ended December 31, 2004 included in our 2004 Form 10-K. Results of Operations

Three Months Ended June 30, 2005 Compared to Three Months Ended June 30, 2004

North American Operating Revenues

     Overview

     Operating revenues (which exclude revenues from our equity investments) were $92.7 million in the quarter ended June 30, 2005, compared to $74.1 million in the quarter ended June 30, 2004, an increase of $18.6 million or 25.2%. The $18.6 million increase in operating revenues consisted of $5.0 million, $2.7 million, $900,000 and $600,000 in revenues from Rail Partners, TZPR, FCRD and Savannah Wharf operations, respectively, and an increase of $9.5 million, or 12.9%, in revenues on existing North American operations. The following table sets forth operating revenues by acquisitions and existing operations for the quarters ended June 30, 2005 and 2004 (in thousands):

		2005												2004				2005-2004 Variance Information
																										Increase in
		Total				New				Existing				Total				Increase in								Existing
		Operations				Operations				Operations				Operations				Total Operations								Operations
		$				$				$				$				$				%				$				%
Freight revenues		$	69,030			$	5,924			$	63,106			$	55,907			$	13,123				23.5	%		$	7,199				12.9	%
Non-freight revenues			23,712				3,221				20,491				18,155				5,557				30.6	%			2,336				12.9	%
Total operating revenues		$	92,742			$	9,145			$	83,597			$	74,062			$	18,680				25.2	%		$	9,535				12.9	%

          The $13.1 million increase in freight revenues consisted of $3.6 million, $1.5 million and $776,000 in freight revenues from Rail Partners, TZPR and FCRD operations, respectively, and $7.2 million in freight revenues on existing North American operations. The $5.6 million increase in non-freight revenues consisted of $1.4 million, $1.2 million, $100,000 and $600,000 in non-freight revenues from Rail Partners, TZPR, FCRD and Savannah Wharf operations, respectively, and $2.3 million in non-freight revenues on existing North American operations. The following table compares North American freight revenues, carloads and average freight revenues per carload for the quarters ended June 30, 2005 and 2004:

Freight Revenues and Carloads Comparison by Commodity Group
Three Months Ended June 30, 2005 and 2004

																																		Average
																																		Freight
																																		Revenues
		Freight Revenues																				Carloads												Per Carload
		(in thousands, except average per carload)
						% of								% of								% of								% of
Commodity Group		2005				Total				2004				Total				2005				Total				2004				Total				2005				2004
Pulp & Paper		$	13,310				19.3	%		$	9,770				17.5	%			30,686				16.9	%			23,206				14.7	%		$	434			$	421
Coal, Coke & Ores			13,144				19.0	%			12,062				21.6	%			49,786				27.4	%			49,259				31.3	%			264				245
Lumber & Forest Products			8,801				12.7	%			6,327				11.3	%			24,536				13.5	%			19,428				12.3	%			359				326
Minerals & Stone			7,225				10.5	%			5,693				10.2	%			17,724				9.8	%			15,728				10.0	%			408				362
Metals			6,988				10.1	%			5,450				9.7	%			19,754				10.9	%			17,530				11.1	%			354				311
Petroleum Products			6,835				9.9	%			6,134				11.0	%			8,730				4.8	%			8,185				5.2	%			783				749
Chemicals & Plastics			5,249				7.6	%			4,103				7.3	%			9,768				5.4	%			7,808				5.0	%			537				525
Farm & Food Products			3,689				5.3	%			2,947				5.3	%			11,035				6.1	%			6,914				4.4	%			334				426
Autos & Auto Parts			2,053				3.0	%			1,854				3.3	%			4,254				2.3	%			4,213				2.7	%			483				440
Intermodal			497				0.7	%			630				1.1	%			1,155				0.6	%			1,736				1.1	%			430				363
Other			1,239				1.9	%			937				1.7	%			4,215				2.3	%			3,455				2.2	%			294				271
Total		$	69,030				100.0	%		$	55,907				100.0	%			181,643				100.0	%			157,462				100.0	%			380				355

     The following table sets forth freight revenues by acquisitions and existing operations for the three months ended June 30, 2005 and 2004 (dollars in thousands):

		2005												2004				2005-2004 Variance Information
																										Increase in
		Total				New				Existing				Total				Increase in Total								Existing
Freight revenues		Operations				Operations				Operations				Operations				Operations								Operations
		$				$				$				$				$				%				$				%
Pulp & Paper		$	13,310			$	1,711			$	11,599			$	9,770			$	3,540				36.2	%		$	1,829				18.7	%
Coal, Coke & Ores			13,144				569				12,575				12,062				1,082				9.0	%			513				4.3	%
Lumber & Forest Products			8,801				780				8,021				6,327				2,474				39.1	%			1,694				26.8	%
Minerals & Stone			7,225				507				6,718				5,693				1,532				26.9	%			1,025				18.0	%
Metals			6,988				563				6,425				5,450				1,538				28.2	%			975				17.9	%
Petroleum Products			6,835				226				6,609				6,134				701				11.4	%			475				7.7	%
Chemicals & Plastics			5,249				578				4,671				4,103				1,146				27.9	%			568				13.8	%
Farm & Food Products			3,689				817				2,872				2,947				742				25.2	%			(75	)			-2.5	%
Autos & Auto Parts			2,053				7				2,046				1,854				199				10.7	%			192				10.4	%
Intermodal			497				—				497				630				(133	)			-21.1	%			(133	)			-21.1	%
Other			1,239				166				1,073				937				302				32.2	%			136				14.5	%
Total freight revenues		$	69,030			$	5,924			$	63,106			$	55,907			$	13,123				23.5	%		$	7,199				12.9	%