GENESEE & WYOMING INC.

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

Shares of common stock outstanding as of the close of business on July 27, 2004:

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.

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

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,
	2004			2003			2004			2003
OPERATING REVENUES	$	74,062		$	62,937		$	146,464		$	121,798

OPERATING EXPENSES:
Transportation		23,360			20,905			48,026			41,752
Maintenance of ways and structures		7,599			6,963			14,486			13,101
Maintenance of equipment		11,048			9,157			22,729			18,153
General and administrative		13,720			11,032			26,693			22,199
Net loss (gain) on sale and impairment of assets		—			175			(94	)		176
Depreciation and amortization		4,754			3,843			9,484			7,568

Total operating expenses		60,481			52,075			121,324			102,949

INCOME FROM OPERATIONS		13,581			10,862			25,140			18,849
Interest expense		(2,283	)		(2,167	)		(4,718	)		(4,510	)
Other income, net		231			386			425			713

Income before income taxes and equity earnings		11,529			9,081			20,847			15,052
Provision for income taxes		4,351			3,702			7,984			5,875

Income before equity earnings		7,178			5,379			12,863			9,177
Equity in net income of international affiliates:
Australian Railroad Group		3,475			2,130			7,217			4,144
South America		183			186			223			(91	)

Net income	$	10,836		$	7,695		$	20,303		$	13,230


Net income available to common stockholders — Basic	$	9,580		$	6,252		$	17,310		$	10,674

Net income available to common stockholders — Diluted	$	10,658		$	7,402		$	19,824		$	12,644

Basic earnings per Class A common share	$	0.44		$	0.31		$	0.82		$	0.54

Weighted average Class A shares — Basic		21,726			19,938			21,051			19,879

Diluted earnings per common share	$	0.39		$	0.28		$	0.72		$	0.47

Weighted average shares — Diluted		27,544			26,707			27,490			26,650

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,
	2004			2003
ASSETS
CURRENTS ASSETS:
Cash and cash equivalents	$	8,450		$	11,118
Accounts receivable, net		54,899			54,656
Materials and supplies		5,879			5,204
Prepaid expenses and other		7,275			6,204
Deferred income tax assets, net		3,528			3,010

Total current assets		80,031			80,192

PROPERTY AND EQUIPMENT, net		315,863			315,345
INVESTMENT IN UNCONSOLIDATED AFFILIATES		118,618			117,664
GOODWILL		24,466			24,522
INTANGIBLE ASSETS, net		78,402			79,357
OTHER ASSETS, net		10,552			10,093

Total assets	$	627,932		$	627,173

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt	$	6,409		$	6,589
Accounts payable		61,758			57,472
Accrued expenses		16,741			13,902

Total current liabilities		84,908			77,963

LONG-TERM DEBT, less current portion		127,633			151,433
DEFERRED INCOME TAX LIABILITIES, net		45,495			41,840
DEFERRED ITEMS—grants from governmental agencies		42,704			42,667
DEFERRED GAIN—sale/leaseback		3,641			3,982
OTHER LONG-TERM LIABILITIES		14,083			14,843
MINORITY INTEREST		3,467			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; 27,740,265 and 23,697,287 shares issued and 24,208,813 and 20,167,875 shares outstanding (net of 3,531,452 and 3,529,412 shares in treasury) on June 30, 2004 and December 31, 2003, respectively		277			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 June 30, 2004 and December 31, 2003		27			27
Additional paid-in capital		158,855			131,890
Retained earnings		150,737			130,913
Accumulated other comprehensive income		8,734			16,599
Less treasury stock, at cost		(12,629	)		(12,580	)

Total stockholders’ equity		306,001			267,086

Total liabilities and stockholders’ equity	$	627,932		$	627,173

GENESEE & WYOMING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)


	Six Months Ended
	June 30,
	2004			2003
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	20,303		$	13,230
Adjustments to reconcile net income to net cash provided by operating activities — Depreciation and amortization		9,484			7,568
Deferred income taxes		2,929			4,128
(Gain) loss on disposition of property		(94	)		176
Equity in net income of international affiliates		(7,440	)		(4,053	)
Minority interest expense		102			67
Tax benefit realized upon exercise of stock options		956			648
Changes in assets and liabilities —
Accounts receivable		(605	)		3,922
Materials and supplies		(744	)		(493	)
Prepaid expenses and other		(1,138	)		1,496
Accounts payable and accrued expenses		7,263			(4,181	)
Other assets and liabilities, net		(305	)		558

Net cash provided by operating activities		30,711			23,066


CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net of proceeds from government grants		(11,561	)		(7,135	)
Locomotive upgrade project		—			(97	)
Dividend from unconsolidated international affiliate		—			132
Proceeds from disposition of property, including sale-leaseback		294			526

Net cash used in investing activities		(11,267	)		(6,574	)


CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term borrowings		(99,407	)		(71,743	)
Proceeds from issuance of long-term debt		76,300			55,000
Net proceeds from employee stock purchases		1,937			1,414
Dividends paid on Redeemable Convertible Preferred Stock		(411	)		(500	)

Net cash used in financing activities		(21,581	)		(15,829	)


EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS		(531	)		638

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(2,668	)		1,301
CASH AND CASH EQUIVALENTS, beginning of period		11,118			11,028

CASH AND CASH EQUIVALENTS, end of period	$	8,450		$	12,329

CASH PAID DURING PERIOD FOR:
Interest	$	4,767		$	4,023
Income taxes	$	1,413		$	1,044

GENESEE & WYOMING INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

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). In the opinion of management, the unaudited financial statements for the three-month and six-month periods ended June 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 EITF 03-06 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.

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, and 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 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:


	Three Months Ended
	June 30,
	2004
Number of Employees:
Number of planned terminations related to 2003 acquisitions — beginning of period		9
Additions to planned terminations during the period		1

Actual number of employees terminated during the period		8
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 — March 31, 2004	$	645,000
Additions to liability reserve during the period		89,000
Cash payments during the period		555,000

Balance at end of period	$	179,000

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.

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

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.

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,
	2004		2003		2004		2003
Numerators:
Net income	$	10,836	$	7,695	$	20,303	$	13,230
Preferred Stock dividends and accretion		178		293		479		586
Net income allocated to participating preferred stockholders		1,078		1,150		2,514		1,970

Net income available to Class A Common stockholders — Basic	$	9,580	$	6,252	$	17,310	$	10,674

Net income allocated to participating preferred stockholders		1,078		1,150		2,514		1,970

Net income available to Class A Common stockholders — Diluted	$	10,658	$	7,402	$	19,824	$	12,644

Denominators:
Weighted average Class A Common Shares outstanding — Basic		21,726		19,938		21,051		19,879
Weighted average Mandatory Redeemable Convertible Preferred Stock (converted to class A common stock in the second quarter of 2004)		2,445		3,668		3,057		3,668
Weighted average Class B Common Shares outstanding		2,689		2,708		2,698		2,708
Dilutive effect of employee stock options		684		393		684		395

Weighted average shares — Dilutive		27,544		26,707		27,490		26,650

Income per common share:
Basic	$	0.44	$	0.31	$	0.82	$	0.54

Diluted	$	0.39	$	0.28	$	0.72	$	0.47

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 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 accounted for the remaining 193,570 shares, all of which were sold. The Company incurred $523,000 of costs in the second quarter of 2004 related to this offering. The Company received no proceeds from the secondary offering.

Issue No. 03-06 — “Participating Securities and the Two-Class Method Under FASB Statement No. 128, Earnings Per Share”

During the second quarter the Company adopted EITF 03-06, “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 losses) to participating securities.

EITF 03-06 is effective for the quarter ending June 30, 2004 and requires 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 Series A 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 $.02 and $.01, respectively for the three months ended June 30, 2003 and $.02 and $.02, respectively for the six months ended June 30, 2003.

At the discretion of the Board of Directors, the Company can declare dividends to holders of Class A Common Stock. In the event that dividends are declared (other than stock dividends) to holders of Class B Common Stock, holders of Class A Common Stock would be entitled to dividends at least ten percent greater. In the event of a dividend other than a Regular Dividend as defined in the Certificate of Incorporation, holders of the previously issued Series A Preferred Stock would have also been entitled to equivalent dividends based on the number of common shares convertible, prior to the June 2004 conversion.

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 June 30, 2004 and December 31, 2003, and the related condensed consolidated statements of income and cash flows for the three-month and six-month periods ended June 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:

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


	June 30, 2004		December 31, 2003
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	32,977	$	26,618
Accounts receivable, net		47,182		47,764
Materials and supplies		10,195		10,033
Prepaid expenses and other		5,740		3,069

Total current assets		96,094		87,484
PROPERTY AND EQUIPMENT, net		453,905		478,808
DEFERRED INCOME TAX ASSETS, net		71,552		80,193
OTHER ASSETS, net		7,535		5,476

Total assets	$	629,086	$	651,961

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	44,938	$	42,310
Current income tax liabilities		148		—

Total current liabilities		45,086		42,310
LONG-TERM BANK DEBT		342,657		367,892
DEFERRED INCOME TAX LIABILITIES, net		16,148		14,271
OTHER LONG-TERM LIABILITIES		1,911		2,031
FAIR VALUE OF INTEREST RATE SWAPS		7,510		9,133
SUBORDINATED NOTES TO STOCKHOLDERS		10,769		11,562

Total non-current liabilities		378,995		404,889
REDEEMABLE PREFERRED STOCK OF STOCKHOLDERS		15,100		16,212
TOTAL STOCKHOLDERS’ EQUITY		189,905		188,550

Total liabilities and stockholders’ equity	$	629,086	$	651,961

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


	Three Months Ended						Six Months Ended
	June 30, 2004			June 30, 2003			June 30, 2004			June 30, 2003
Operating revenues	$	81,717		$	59,912		$	164,070		$	113,272

Operating expenses		65,257			46,574			129,970			87,607
Restructuring costs		—			—			—			267

Total operating expenses		65,257			46,574			129,970			87,874

Income from operations		16,460			13,338			34,100			25,398
Interest expense		(6,855	)		(7,633	)		(14,203	)		(14,697	)
Other income, net		338			779			741			1,538

Income before income taxes		9,943			6,484			20,638			12,239
Provision for income taxes		2,994			2,224			6,206			3,951

Net income	$	6,949		$	4,260		$	14,432		$	8,288

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


	Six Months Ended
	June 30, 2004			June 30, 2003
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	14,432		$	8,288
Adjustments to reconcile net income to net cash provided by operating activities —
Depreciation and amortization		13,097			10,875
Deferred income taxes		6,367			5,265
Net loss (gain) on sale and impairment of assets		471			(633	)
Changes in assets and liabilities		(3,675	)		(4,320	)

Net cash provided by operating activities		30,692			19,475

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		(22,883	)		(12,003	)
Proceeds from disposition of property and equipment		835			2,716
Transfer to restricted funds on deposit		—			(3,396	)

Net cash used in investing activities		(22,048	)		(12,683	)

EFFECT OF EXCHANGE RATE DIFFERENCES ON CASH AND CASH EQUIVALENTS		(2,285	)		1,809

INCREASE IN CASH AND CASH EQUIVALENTS		6,359			8,601
CASH AND CASH EQUIVALENTS, beginning of period		26,618			5,882

CASH AND CASH EQUIVALENTS, end of period	$	32,977		$	14,483

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 six-month periods ended June, 2004 and 2003 are based on accounting principles generally accepted in the United States (in thousands):

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

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 $249,000 and $141,000 for the three months and $456,000 and $288,000 for the six months ended June 30, 2004 and 2003, respectively, and is included in the Company’s equity income reported for South America for the three-month and six-month periods ended June 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. 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 June 30, 2004 amounted to $272,000. Because the $12.0 million of debt is serviced by the income generated by GWC, the Company’s loss of the 12.52% equity interest in Oriental would not have a material adverse impact on the Company’s future equity income. 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. The Company generates substantially all of its equity income through the 10.37% ownership interest.

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.

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.

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 six-month periods ended June, 2004 and 2003 (in thousands):


	Three Months Ended
	June 30,
	2004			2003
Net income	$	10,836		$	7,695

Other comprehensive income (loss):
Foreign currency translation adjustments Net unrealized gains (losses) on qualifying cash flow hedges, net of tax (benefit) of $674 and ($517), respectively Net unrealized gains (losses) on qualifying cash		(11,109	)		12,725
flow hedges of Australian Railroad Group, net of		1,099			(776	)
tax (benefit) of $427 and ($362), respectively		1,423			(1,046	)

Comprehensive income	$	2,249		$	18,598


	Six Months Ended
	June 30,
	2004			2003
Net income	$	20,303		$	13,230
Other comprehensive income (loss):
Foreign currency translation adjustments Net unrealized gains (losses) on qualifying cash flow hedges, net of tax (benefit) of $438 and (505), respectively Net unrealized gains (losses) on qualifying cash flow hedges of Australian Railroad Group, net of tax		(9,178	)		18,322
(benefit) of $256 and ($801), respectively		716			(758	)
Minimum pension liability adjustment, net of benefit of		598			(1,871	)
$0 and ($186), respectively		—			(435	)

Comprehensive income	$	12,439		$	28,488


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, 2004, and December 31, 2003 (in thousands):

	June 30, 2004			December 31, 2003
Net accumulated foreign currency translation adjustments	$	12,660		$	21,839
Net unrealized (losses) on qualifying cash flow hedges Net unrealized (losses) on qualifying cash flow hedges of Australian Railroad Group		(704	)		(1,420	)
Net unrealized minimum pension liability adjustment,		(2,598	)		(3,196	)
net of tax		(624	)		(624	)
Accumulated other comprehensive income as reported	$	8,734		$	16,599

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


	Three Months Ended				Six Months Ended
	2004		2003		2004		2003
Operating Revenues:
United States	$	56,178	$	44,962	$	109,742	$	87,404
Canada		10,071		9,509		21,443		18,360
Mexico		7,813		8,466		15,279		16,034

Total operating revenues	$	74,062	$	62,937	$	146,464	$	121,798


	As of
Long-lived assets located in:	June 30, 2004
United States	$	455,101
Canada		55,466
Mexico		37,334

Total long-lived assets	$	547,901

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 derivatives 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.

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 June 30, 2004 and December 31, 2003, the notional amount under these agreements was $57.9 million and $60.6 million, respectively and the fair value of these interest rate swaps was a negative $1.1 million and $2.2 million, respectively.

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 establishes exchange rates for converting Mexican Pesos to U.S. Dollars, two of which were outstanding as of June 30, 2004. One of these options, which expires in September 2004, gives the Company the right to sell Mexican Pesos for U.S. Dollars at an exchange rate of 12.61 Mexican Pesos to the U.S. Dollar. The other 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 up-front premiums for these options of $49,000 and $28,000 in the quarters ended September 30, 2003, and June 30, 2004, respectively. At June 30, 2004 and December 31, 2003, the notional amount under exchange rate options was $4.7 million and $5.3 million, respectively. At June 30, 2004 and December 31, 2003, the fair value of currency exchange rate options was $19,000 and $17,000, respectively.


INTANGIBLE ASSETS:	June 30, 2004						December 31, 2003
	Gross						Gross
Amortizable intangible	Carrying		Accumulated				Carrying		Accumulated		Net
assets:	Amount		Amortization		Net Assets		Amount		Amortization		Assets
Chiapas-Mayab Operating License (Mexico)	$	6,856	$	1,084	$	5,772	$	7,058	$	999	$	6,059
Amended and Restated Service Assurance Agreement (Illinois & Midland Railroad)		10,566		431		10,135		10,566		216		10,350
Transportation Services Agreement (GP Railroads)		27,055		451		26,604		27,055		—		27,055
Non-amortizable intangible assets:
Track Access Agreements (Utah Railway)		35,891		—		35,891		35,891		—		35,891

Total Intangible Assets		80,368		1,966		78,402		80,570		1,213		79,357

OTHER ASSETS:
Deferred financing costs		6,701		2,451		4,250		6,607		1,841		4,766
Other assets		6,364		62		6,302		5,370		43		5,327

Total Other Assets		13,065		2,513		10,552		11,977		1,884		10,093

Total Intangible and Other Assets	$	93,433	$	4,479	$	88,954	$	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 fixed 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:

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 June 30, 2004, $135,385 of contributions have been made. The Company presently anticipates contributing an additional $81,316 to fund its pension plan in 2004 for a total of $216,701.

Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act 0f 2003

In May 2004, the Financial Accounting Standards Board (FASB) recently issued the following FASB issued Staff Position (FSP) No. 106-2, “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003,” FSP 106-2. FSP 106-2 provides guidance on the accounting, disclosure, effective date and transition related to the Prescription Drug Act. FSP 106-2 is effective for the third quarter 2004, which begins on July 1, 2004. Accordingly, an actuarial assessment is being prepared to evaluate the potentially positive effects of FSP 106-2 on the Company’s postretirement benefit plans and 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.

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.

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 freight car switching and rail services such as railcar leasing, repair and storage to industrial companies with extensive railroad facilities within their complexes, to shippers along its lines, and to the Class I railroads that connect with its North American lines.

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 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, 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.

Operating revenues (which exclude revenues from the Company’s equity investments) were $74.1 million in the quarter ended June 30, 2004 compared to $62.9 million in the quarter ended June 30, 2003, an increase of $11.2 million or 17.7%. The increase was attributable to $6.2 million in revenues from the new GP Railroads and $5.0 million in revenues from existing operations. The $11.2 million increase in operating revenues consisted of $8.8 million in freight revenues of which $4.8 million was from the new GP Railroads and $4.0 million was from existing operations, and $2.4 million in non-freight revenues of which $1.4 million was from the new GP Railroads and $1.0 million was from existing operations. The $5.0 million increase on existing operations was primarily attributable to $4.0 million in freight revenues which mainly consisted of a $1.9 million increase in coal, coke and revenue in the Company’s Illinois, Utah and New York-Pennsylvania Regions, a $686,000 net increase in revenue from metals, a $481,000 net increase in revenue from chemicals and plastics, and a $1.0 million increase in switching revenues in the Company’s Rail Link Region. The following table compares freight revenues, carloads and average freight revenues per carload for the quarters ended June 30, 2004 and 2003:

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


																					Average
																					Freight
	Freight Revenues										Carloads										Revenues
			% of					% of					% of					% of			Per Carload
Commodity Group	2004		Total			2003		Total			2004		Total			2003		Total			2004		2003
Coal, Coke & Ores	$	12,062		21.6	%	$	9,805		20.8	%		49,259		31.3	%		40,132		29.9	%	$	245	$	244
Pulp & Paper		9,770		17.5	%		7,943		16.8	%		23,206		14.7	%		19,105		14.3	%		421		416
Lumber & Forest Products		6,327		11.3	%		4,580		9.7	%		19,428		12.3	%		14,777		11.0	%		326		310
Petroleum Products		6,134		11.0	%		6,183		13.1	%		8,185		5.2	%		7,707		5.8	%		749		802
Minerals & Stone		5,693		10.2	%		5,821		12.3	%		15,728		10.0	%		14,672		10.9	%		362		397
Metals		5,450		9.7	%		4,678		9.9	%		17,530		11.1	%		16,528		12.3	%		311		283
Chemicals & Plastics		4,103		7.3	%		2,856		6.1	%		7,808		5.0	%		5,958		4.4	%		525		479
Farm & Food Products		2,947		5.3	%		2,599		5.5	%		6,914		4.4	%		6,591		4.9	%		426		394
Autos & Auto Parts		1,854		3.3	%		1,706		3.6	%		4,213		2.7	%		4,234		3.2	%		440		403
Intermodal		630		1.1	%		431		0.9	%		1,736		1.1	%		1,692		1.3	%		363		255
Other		937		1.7	%		551		1.3	%		3,455		2.2	%		2,612		2.0	%		271		211

Total	$	55,907		100.0	%	$	47,153		100.0	%		157,462		100.0	%		134,008		100.0	%		355		352

Total carloads were 157,462 in the quarter ended June 30, 2004 compared to 134,008 in the quarter ended June 30, 2003, an increase of 23,454, or 17.5%. The increase consisted of 12,455 from the new GP Railroads and 10,999 from existing operations due largely to an increase of 8,084 from carloads of coal, coke and ores in the

Company’s Illinois, Utah and New York-Pennsylvania Regions, a net increase of 1,056 from carloads of minerals and stone, a net increase of 777 from carloads of metals and a net increase of 2,130 from carloads of all other commodities combined, offset by a net decrease of 1,048 carloads from pulp and paper primarily in the Company’s Oregon and New York-Pennsylvania Regions. The net increase of 1,056 carloads from minerals and stone consisted of an increase of 971 carloads in the Company’s Canada Region and a net increase of 809 carloads in the Company’s combined US Regions, offset by a decrease of 724 carloads in the Company’s Mexico Region. The net increase of 777 from carloads of metals consisted of an increase of 1,928 from carloads in the Company’s New York-Pennsylvania Region offset by a net decrease of 1,151 from carloads in all other regions combined. Average revenue per carload increased slightly to $355 in the quarter ended June 30, 2004, compared to $352 per carload in the quarter ended June 30, 2003, an increase of 0.9%.

Non-freight revenues were $18.2 million in the quarter ended June 30, 2004 compared to $15.8 million in the quarter ended June 30, 2003, an increase of $2.4 million or 15.0%. The $2.4 million increase was attributable to $1.5 million of non-freight revenues from the new GP Railroads of which $906,000 was car hire revenue, and a net increase of $883,000 from existing operations. The net increase of $883,000 from existing operations consisted of a $1.3 million increase in switching primarily in the Rail Link Region, offset by a net decrease of $414,000 from all other non-freight revenues combined. The following table compares non-freight revenues for the quarters ended June 30, 2004 and 2003:

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

Operating expenses were $60.5 million in the quarter ended June 30, 2004, compared to $52.1 million in the quarter ended June 30, 2003, an increase of $8.4 million or 13.9%. The increase was attributable to $3.8 million in operating expenses from the new GP Railroads and an increase of $4.6 million in operating expenses from existing operations. The following table sets forth a comparison of the Company’s operating expenses in the quarters ended June 30, 2004 and 2003:

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


	2004					2003
			% of					% of
			Operating					Operating
	$		Revenues			$		Revenues
Labor and benefits	$	24,950		33.7	%	$	21,933		34.8	%
Equipment rents		6,334		8.6	%		4,302		6.8	%
Purchased services		4,498		6.1	%		4,913		7.8	%
Depreciation and amortization		4,754		6.4	%		3,843		6.1	%
Diesel fuel		5,646		7.6	%		4,449		7.1	%
Casualties and insurance		3,653		4.9	%		3,328		5.3	%
Materials		3,611		4.9	%		3,969		6.3	%
Net loss on sale and impairment of assets		—		0.0	%		175		0.3	%
Other expenses		7,035		9.5	%		5,163		8.2	%

Total operating expenses	$	60,481		81.7	%	$	52,075		82.7	%

Labor and benefits expense was $24.9 million in the quarter ended June 30, 2004 compared to $21.9 million in the quarter ended June 30, 2003, an increase of $3.0 million or 13.8%. The increase was attributable to $1.3 million in labor and benefits expense from the new GP Railroads and an increase of $1.7 million from existing operations. The increase from existing operations was due to a $1.3 million increase in labor and benefits expense related to increased freight shipments and regular wage increases and $389,000 related to revised executive benefit plans.

Equipment rents were $6.3 million in the quarter ended June 30, 2004 compared to $4.3 million in the quarter ended June 30, 2003, an increase of $2.0 million or 47.2%. The increase was attributable to $978,000 in freight car operating lease and car hire expense from the new GP Railroads and an increase of $1.0 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 June 30, 2004 compared to $3.8 million in the quarter ended June 30, 2003, an increase of $911,000 or 23.7%. The increase was attributable to $566,000 from the new GP Railroads and an increase of $345,000 from existing operations including $107,000 related to the Amended and Restated Service Assurance Agreement which the Company began amortizing in July 2003.

Diesel fuel expense was $5.6 million in the quarter ended June 30, 2004 compared to $4.4 million in the quarter ended June 30, 2003, an increase of $5.5 million or 24.2%. The increase was attributable to $122,000 from the new GP Railroads and an increase of $1.1 million on existing operations primarily due to a 17.0% increase in the consolidated average price per gallon and increased consumption due to carload increases.

All other expenses combined were $18.8 million in the quarter ended June 30, 2004 compared to $17.5 million in the quarter ended June 30, 2003, an increase of $1.2 million or 7.1%. The increase was attributable to $958,000 from the new GP Railroads and $291,000 from existing operations. The increase of $291,000 was primarily due to $523,000 of costs related to the Company’s public offering (See Note 3 to Consolidated Financial Statements).

The Company’s operating ratio (total operating expenses as a percentage of operating revenues) improved to 81.7% in the quarter ended June 30, 2004 from 82.7% in the quarter ended June 30, 2003 due to the performance of both the Company’s existing and recently acquired railroads.

Interest expense was $2.3 million in the quarter ended June 30, 2004 compared to $2.2 million in the quarter ended June 30, 2003, an increase of $116,000, or 5.4%.

Other income, net in the quarter ended June 30, 2004, was $231,000 compared to $386,000 in the quarter ended June 30, 2003, a decrease of $155,000. Other income, net consists primarily of exchange rate transaction gains (losses) from foreign dollar-denominated cash accounts and interest income.

The Company’s effective income tax rate in the quarter ended June 30, 2004 was 37.7% compared to 40.8% in the quarter ended June 30, 2003. The decrease was primarily attributable to a decrease in the effective tax rate for the Company’s Canada and Mexico Regions. Canada’s rate reduction was due to a decrease in the statutory rate. 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 depreciation of the Mexican peso compared to the US dollar in the quarter ended June 30, 2004 compared to the quarter ended June 30, 2003 resulted in a lower effective tax rate.

Equity earnings of unconsolidated international affiliates, net were $3.7 million in the quarter ended June 30, 2004, compared to $2.3 million in the quarter ended June 30, 2003, an increase of $1.4 million. Equity earnings in the quarter ended June 30, 2004, consisted of $3.5 million from Australian Railroad Group and $183,000 from South America affiliates. Equity earnings in the quarter ended June 30, 2003, consisted of $2.1 million from Australian Railroad Group and $186,000 from South America affiliates. See additional information regarding ARG’s financial results in Supplemental Information – Australian Railroad Group.

The Company’s net income in the quarter ended June 30, 2004 was $10.8 million compared to net income of $7.7 million in the quarter ended June 30, 2003, an increase of $3.1 million. The increase in net income was the result of an increase in net income from operations of $1.8 million and an increase in equity in net income of unconsolidated international affiliates of $1.3 million.

Basic Earnings Per Share in the quarters ended June 30, 2004 and 2003 were $0.44 and $0.31 respectively, on weighted average shares of 21.7 million and 19.9 million respectively. Diluted Earnings Per Share in the quarters ended June 30, 2004 and 2003 were $0.39 and $0.28 respectively, on weighted average shares of 27.5 million and 26.7 million respectively.

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 June 30, 2004 was 12.5% more favorable than the rate for the quarter ended June 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 June 30, 2004 and 2003, the Company recorded $3.5 million and $2.1 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.

Australian Railroad Group
Freight Revenues and Carloads by Commodity Group
Quarters Ended June 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	$	25,670		37.9	%	$	15,662		31.8	%		69,661		28.1	%		41,005		19.9	%	$	368	$	382
Other Ores and Minerals		14,055		20.7	%		11,210		22.8	%		25,657		10.4	%		25,500		12.3	%		548		440
Iron Ore		10,872		16.0	%		8,194		16.6	%		51,050		20.6	%		41,597		20.1	%		213		197
Alumina		4,733		7.0	%		4,173		8.5	%		39,720		16.0	%		38,646		18.7	%		119		108
Bauxite		2,920		4.3	%		2,916		5.9	%		30,034		12.1	%		32,105		15.6	%		97		91
Hook and Pull (Haulage)		451		0.7	%		884		1.8	%		2,521		1.0	%		1,592		0.8	%		179		555
Gypsum		903		1.3	%		655		1.3	%		12,614		5.1	%		10,677		5.2	%		72		61
Other		8,169		12.1	%		5,527		11.3	%		16,629		6.7	%		15,321		7.4	%		491		361

Total	$	67,773		100.0	%	$	49,221		100.0	%		247,886		100.0	%		206,443		100.0	%		273		238

ARG’s freight revenues were $67.8 million in the quarter ended June 30, 2004, compared to $49.2 million in the quarter ended June 30, 2003, an increase of $18.6 million or 37.7%. The increase in freight revenues was led by a $10.0 million increase in grain, due to the record harvest in Western Australia and a new customer in New South Wales; a $2.8 million increase in other ores and minerals, led by increased nickel related shipments; and a $2.7 million increase in iron ore, due to production expansion at ARG’s largest iron ore customer and a new customer in Western Australia. All other commodities combined increased $3.1 million. In local currency, freight revenues increased 22.3% in the quarter ended June 30, 2004 compared to the quarter ended June 30, 2003.

Total ARG carloads were 247,886 in the quarter ended June 30, 2004, compared to 206,443 in the quarter ended June 30, 2003, an increase 41,443, or 20.1%. The increase was primarily the result of a 28,656 carload increase in grain, a 9,453 carload increase in iron ore, and a 1,937 carload increase in gypsum. Average freight revenue per carload increased from $238 to $273, primarily due to the appreciation of the Australian dollar relative to the U.S. dollar.

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

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

ARG’s non-freight revenues were $13.9 million in the quarter ended June 30, 2004, compared to $10.7 million in the quarter June 30, 2003, an increase of $3.3 million or 30.4%. ARG’s non-freight revenue increase was attributable to higher third party 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 revenue increased 16.8% in the quarter ended June 30, 2004 compared to the quarter ended June 30, 2003.

ARG’s operating expenses were $65.3 million in the quarter ended June 30, 2004, compared to $46.6 million in the quarter ended June 30, 2003, an increase of $18.7 million or 40.1%. The following table sets forth a comparison of ARG’s operating expenses in the quarters ended June 30, 2004 and 2003:

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


	2004						2003
				% of						% of
				Operating						Operating
	$			Revenues			$			Revenues
Labor and benefits	$	14,945			18.3	%	$	10,983			18.3	%
Equipment rents		821			1.0	%		368			0.6	%
Purchased services		20,263			24.8	%		14,190			23.7	%
Depreciation and amortization		6,383			7.8	%		5,718			9.5	%
Diesel fuel used in operations		5,871			7.2	%		3,590			6.0	%
Diesel fuel for sales to third parties		4,666			5.7	%		1,444			2.4	%
Casualties and insurance		1,339			1.6	%		3,031			5.1	%
Materials		3,549			4.3	%		2,590			4.3	%
Net loss (gain) on sale and impairment of assets		(13	)		0.0	%		(208	)		(0.3	%)
Other expenses		7,433			9.2	%		4,868			8.1	%

Total operating expenses	$	65,257			79.9	%	$	46,574			77.7	%

Labor and benefits expense, as a percentage of revenues, did not change in the quarter ended June 30, 2004, compared to the quarter ended June 30, 2003. In local currency, labor and benefits increased 21.1%. The increase was due to higher freight volumes, particularly the strong grain movements and the new business in New South Wales.

Purchased services expense increased to 24.8% of revenue in the quarter ended June 30, 2004, compared to 23.7% of revenues in the quarter ended June 30, 2003. In local currency, purchased services increased 27.6%. The increase was primarily due to the use of contract locomotive engineers and higher rail grinding expense.

Depreciation and amortization expense, as a percentage of revenues, decreased to 7.8% in the quarter ended June 30, 2004, compared to 9.5% in the quarter ended June 30, 2003. In local currency, depreciation and amortization decreased 0.4%. The decrease was due to lower amortization expense related to a reduction in prepaid lease premium intangible asset recorded in December 2003, partially offset by higher depreciation related to an increase in depreciable assets due to capital expenditures. The reduction in prepaid lease premium intangible asset was the result of a ruling issued by the Australian tax authorities whereby the tax basis of the asset was set at an amount greater than the financial statement basis. Accordingly, a deferred tax asset was recorded with a corresponding reduction in the prepaid lease premium intangible asset.

Diesel fuel used in operations increased to 7.2% of revenues in the quarter ended June 30, 2004, compared to 6.0% of revenues in the quarter ended June 30, 2003. In local currency, fuel used in operations increased 47.0%. 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 an increase in fuel prices.

The cost of diesel fuel sold to third parties increased to 5.7% of revenues in the quarter ended June 30, 2004, compared to 2.4% of revenues in the quarter ended June 30, 2003. In local currency, the cost of diesel fuel sold to third parties increased 188.6%. The increase was due to a higher volume of fuel sales to other railroads and an increase in fuel prices.

Casualties and insurance costs decreased to 1.6% of revenues in the quarter ended June 30, 2004, compared to 5.1% of revenues in the quarter ended June 30, 2003. In local currency, casualties and insurance decreased 61.1%. The decrease was due to improved safety performance and a decrease in insurance costs.

Materials expense, as a percentage of revenues, did not change in the quarter ended June 30, 2004, compared to the quarter ended June 30, 2003. In local currency, materials expense increased 23.5%. The increase was due to higher rolling stock maintenance costs.

Other expenses, as a percentage of revenues, increased to 9.2% in the quarter ended June 30, 2004, compared to 8.1% in the quarter ended June 30, 2003. In local currency, other expenses increased 36.4%. The increase was primarily due to track access fees and various other increases in administrative costs.

Operating revenues (which exclude revenues from the Company’s equity investments) were $146.5 million in the six months ended June 30, 2004, compared to $121.8 million in the six months ended June 30, 2003, an increase of $24.7 million or 20.3%. The increase was attributable to $12.1 million in revenues from the new GP Railroads and $12.6 million in revenues from existing operations. The $24.7 million increase in operating revenues consisted of $19.0 million in freight revenues of which $9.3 million was from the new GP Railroads and $9.7 million was from existing

operations, and $5.7 million in non-freight revenues of which $2.9 million was from the new GP Railroads and $2.8 million was from existing operations. The $12.6 million increase in operating revenues from existing operations was attributable to a $4.4 million revenue increase from the Company’s Canada Region of which $1.9 million was due to the 8.4% appreciation of the Canadian dollar relative to the U.S. dollar and $2.5 million was primarily attributable to stronger freight revenues; a $2.6 million increase in operating revenues, primarily freight revenues, from the New York-Pennsylvania Region; a $1.5 million increase in operating revenues, primarily freight revenues, in the Oregon Region; and a $2.4 million increase in operating revenues in the Rail Link Region, primarily due to increased switching operations. The following table compares freight revenues, carloads and average freight revenues per carload for the six months ended June 30, 2004 and 2003:

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


																					Average
																					Freight
	Freight Revenues										Carloads										Revenues
			% of					% of					% of					% of			Per Carload
Commodity Group	2004		Total			2003		Total			2004		Total			2003		Total			2004		2003
Coal, Coke & Ores	$	22,799		20.6	%	$	19,648		21.4	%		93,301		30.2	%		82,111		31.1	%	$	244	$	239
Pulp & Paper		19,290		17.4	%		15,269		16.7	%		46,190		15.0	%		36,979		14.0	%		418		413
Petroleum Products		12,448		11.2	%		12,671		13.8	%		16,495		5.3	%		16,397		6.2	%		755		773
Lumber & Forest Products		12,165		11.0	%		8,443		12.1	%		37,462		12.1	%		26,856		10.9	%		325		314
Metals		11,105		10.0	%		8,585		9.4	%		35,368		11.5	%		30,388		11.5	%		314		283
Minerals & Stone		10,829		9.8	%		11,097		9.2	%		28,393		9.2	%		28,665		10.2	%		381		387
Chemicals & Plastics		7,975		7.2	%		5,434		6.0	%		15,276		4.9	%		11,633		5.6	%		522		467
Farm & Food Products		7,739		7.0	%		5,491		5.9	%		18,366		6.0	%		14,862		4.4	%		421		369
Autos & Auto Parts		3,596		3.2	%		3,235		3.5	%		8,410		2.7	%		7,991		3.0	%		428		405
Intermodal		1,182		1.1	%		788		0.9	%		3,100		1.0	%		2,988		1.1	%		381		264
Other		1,589		1.4	%		1,018		1.1	%		6,309		2.0	%		5,068		2.0	%		252		201

Total	$	110,717		100.0	%	$	91,679		100.0	%		308,670		100.0	%		263,938		100.0	%		359		347

Total carloads were 308,670 in the six months ended June 30, 2004, compared to 263,938 in the six months ended June 30, 2003, an increase of 44,732, or 16.9%. The increase consisted of 24,383 carloads from the new GP Railroads and 20,349 carloads from existing operations. The increase of 20,349 carloads from existing operations was due largely to a 9,527 increase from carloads of coal, coke and ores in the Illinois, Utah and New York-Pennsylvania Regions, a 4,484 increase from carloads of metals primarily in the New York-Pennsylvania Region, a 3,215 increase from carloads of farm and food products primarily in the Canada Region, and a 2,416 increase from carloads of lumber and forest products primarily in the Oregon and New York-Pennsylvania Regions. The average revenue per carload increased to $359 in the six months ended June 30, 2004, compared to $347 per carload in the six months ended June 30, 2003, an increase of 3.5%.

Non-freight revenues were $35.7 million in the six months ended June 30, 2004, compared to $30.1 million in the six months ended June 30, 2003, an increase of $5.6 million or 18.7%. The $5.6 million increase was attributable to $2.9 million of non-freight revenues from the new GP Railroads of which $1.7 million was car hire revenue, and a $2.7 million increase on existing operations of which $2.5 million

was switching primarily in the Company’s Rail Link Region. The following table compares non-freight revenues for the six months ended June 30, 2004 and 2003:

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

Operating expenses were $121.3 million in the six months ended June 30, 2004, compared to $102.9 million in the six months ended June 30, 2003, an increase of $18.4 million or 17.8%. The increase was attributable to $7.6 million in operating expenses from the new GP Railroads and an increase of $10.8 million in operating expenses from existing operations. The following table sets forth a comparison of the Company’s operating expenses in the six months ended June 30, 2004 and 2003:

Operating Expense Comparison
Six Months Ended June 30, 2004 and 2003
(dollars in thousands)


	2004						2003
				% of					% of
				Operating					Operating
	$			Revenues			$		Revenues
Labor and benefits	$	51,346			35.1	%	$	43,800		36.0	%
Equipment rents		13,215			9.0	%		8,800		7.2	%
Purchased services		8,779			6.0	%		8,956		7.4	%
Depreciation and amortization		9,484			6.5	%		7,568		6.2	%
Diesel fuel		11,291			7.7	%		9,620		7.9	%
Casualties and insurance		7,360			5.0	%		6,299		5.2	%
Materials		7,319			5.0	%		7,665		6.3	%
Net loss on sale and impairment of assets		(94	)		(0.1	%)		176		0.1	%
Other expenses		12,624			8.6	%		10,065		8.2	%

Total operating expenses	$	121,324			82.8	%	$	102,949		84.5	%

Labor and benefits expense was $51.3 million in the six months ended June 30, 2004, compared to $43.8 million in the six months ended June 30, 2003, an increase of $7.5 million or 17.2%. The increase was attributable to $2.7 million in labor and benefits expense from the new GP Railroads and an increase of $4.8 million from existing operations. The increase from existing operations was due to a $3.9 million increase in labor and benefits expense related to increased freight

shipments, regular wage increases, the 8.4% appreciation of the Canadian dollar and $872,000 related to revised executive benefit plans.

Equipment rents were $13.2 million in the six months ended June 30, 2004, compared to $8.8 million in the six months ended June 30, 2003, an increase of $4.4 million or 50.2%. The increase was attributable to $2.1 million in freight car operating lease and car hire expense from the new GP Railroads and an increase of $2.3 million from existing operations primarily due to car hire expense on increased freight shipments.

Depreciation and amortization expense was $9.5 million in the six months ended June 30, 2004, compared to $7.6 million in the six months ended June 30, 2003, an increase of $1.9 million or 25.3%. The increase was attributable to $1.1 million from the new GP Railroads and an increase of $785,000 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 $11.3 million in the six months ended June 30, 2004, compared to $9.6 million in the six months ended June 30, 2003, an increase of $1.7 million or 17.4%. The increase was attributable to $240,000 from the new GP Railroads and an increase of $1.4 million from existing operations due to an 8.2% increase in the consolidated average price per gallon and increased fuel consumption due to carload increases.

Casualties and insurance expense was $7.4 million in the six months ended June 30, 2004, compared to $6.3 million in the six months ended June 30, 2003, an increase of $1.1 million or 16.8%. The increase was primarily attributable to a $775,000 increase in derailment expense and a $316,000 increase in FELA and third party claims from existing operations.

All other expenses combined were $28.6 million in the six months ended June 30, 2004, compared to $26.9 million in the six months ended June 30, 2003, an increase of $1.7 million or 6.6%. The increase was attributable to $1.6 million from the new GP Railroads and $170,000 from existing operations.

The Company’s operating ratio (total operating expenses as a percentage of operating revenues) improved to 82.8% in the six months ended June 30, 2004 from 84.5% in the six months ended June 30, 2003 due to the performance of both the Company’s existing and recently acquired railroads.

Interest expense was $4.7 million in the six months ended June 30, 2004, compared to $4.5 million in the six months ended June 30, 2003, an increase of $208,000, or 4.6%.

Other income, net in the six months ended June 30, 2004, was $425,000 compared to $713,000 in the six months ended June 30, 2003, a decrease of $288,000. Other income, net consists primarily of exchange rate transaction gains (losses) on foreign dollar-denominated cash accounts and interest income.

The Company’s effective income tax rate in the six months ended June 30, 2004, was 38.3% compared to 39.0% in the six months ended June 30, 2003. The decrease was primarily attributable to a decrease in the effective tax rate of the Company’s Canada and Mexico Regions. Canada’s rate reduction was due to a decrease in the

statutory rate. 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 depreciation of the Mexican peso compared to the US dollar in the six months ended June 30, 2004 compared to the six months ended June 30, 2003 resulted in a lower effective tax rate.

Equity earnings of unconsolidated international affiliates, net, were $7.4 million in the six months ended June 30, 2004, compared to $4.0 million in the six months ended June 30, 2003, an increase of $3.4 million. Equity earnings in the six months ended June 30, 2004, consisted of $7.2 million from Australian Railroad Group and $223,000 from South America affiliates. Equity earnings in the six months ended June 30, 2003, consisted of $4.1 million from Australian Railroad Group offset by an equity loss of $91,000 from South America affiliates. See additional information regarding ARG’s financial results in Supplemental Information – Australian Railroad Group.

The Company’s net income was $20.3 million in the six months ended June 30, 2004, compared to net income of $13.2 million in the six months ended June 30, 2003, an increase of $7.1 million. The increase in net income was the result of an increase in net income from operations of $3.7 million and an increase in equity in net income of unconsolidated international affiliates of $3.4 million.

Basic Earnings Per Share in the six months ended June 30, 2004 and 2003 were $0.82 and $0.54 respectively, on weighted average shares of 21.1 million and 19.9 million respectively. Diluted Earnings Per Share in the six months ended June 30, 2004 and 2003 were $0.72 and $0.47 respectively, on weighted average shares of 27.5 million and 26.7 million respectively.

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 six months ended June 30, 2004 was 19.4% more favorable than the rate for the six months ended June 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 six months ended June 30, 2004 and 2003, the Company recorded $7.2 million and $4.1 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.

Australian Railroad Group
Freight Revenues and Carloads by Commodity Group
Six Months Ended June 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	$	51,931		37.4	%	$	27,411		29.6	%		136,224		27.5	%		68,817		17.2	%	$	381	$	398
Other Ores and Minerals		29,133		21.0	%		21,399		23.1	%		53,815		10.9	%		50,295		12.6	%		541		425
Iron Ore		22,334		16.1	%		15,680		16.9	%		101,529		20.5	%		84,604		21.2	%		220		185
Alumina		9,752		7.0	%		7,944		8.6	%		79,136		16.0	%		76,082		19.1	%		123		104
Bauxite		6,132		4.4	%		5,670		6.1	%		60,251		12.1	%		64,004		16.0	%		102		89
Hook and Pull (Haulage)		915		0.7	%		1,682		1.8	%		5,297		1.1	%		2,893		0.7	%		173		581
Gypsum		1,911		1.4	%		1,310		1.4	%		25,407		5.1	%		21,306		5.3	%		75		61
Other		16,605		12.0	%		11,481		12.5	%		33,822		6.8	%		31,335		7.9	%		491		366

Total	$	138,713		100.0	%	$	92,577		100.0	%		495,481		100.0	%		399,336		100.0	%		280		232

ARG’s freight revenues were $138.7 million in the six months ended June 30, 2004, compared to $92.6 in the six months ended June 30, 2003, an increase of $46.1 million or 49.8%. The increase in freight revenues was led by a $24.5 million increase in grain, due to the record harvest in Western Australia and a new customer in New South Wales; a $7.7 million increase in other ores and minerals, led by increased nickel related shipments; and a $6.7 million increase in iron ore, due to production expansion at ARG’s largest iron ore customer and a new customer in Western Australia. All other commodities combined increased $7.2 million. In local currency, freight revenues increased 24.9% in the six months ended June 30, 2004 compared to the six months ended June 30, 2003.

Total ARG carloads were 495,481 in the six months ended June 30, 2004, compared to 399,336 in the six months ended June 30, 2003, an increase 96,145, or 24.1%. The increase was primarily the result of a 67,407 carload increase in grain, a 16,925 carload increase in iron ore, a 4,101 carload increase in gypsum, and a 3,520 carload increase in other ores and minerals. Average freight revenue per carload increased from $232 to $280, primarily due to the strength of the Australian dollar relative to the U.S. dollar.

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

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

ARG’s non-freight revenues were $25.4 million in the six months ended June 30, 2004, compared to $20.7 million in the six months June 30, 2003, an increase of $4.7 million or 22.5%. ARG’s non-freight revenue increase was primarily attributable to the appreciation of the Australian dollar. In local currency, non-freight revenue increased 2.7% in the six months ended June 30, 2004, compared to the six months ended June 30, 2003. The increase was due to higher third party 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.

ARG’s operating expenses were $130.0 million in the six months ended June 30, 2004, compared to $87.9 million in the six months ended June 30, 2003, an increase of $42.1 million or 47.9%. The following table sets forth a comparison of ARG’s operating expenses in the six months ended June 30, 2004 and 2003:

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


	2004					2003
			% of						% of
			Operating						Operating
	$		Revenues			$			Revenues
Labor and benefits	$	29,201		17.8	%	$	20,617			18.2	%
Equipment rents		1,531		0.9	%		722			0.6	%
Purchased services		39,325		24.0	%		26,850			23.7	%
Depreciation and amortization		13,097		8.0	%		10,875			9.6	%
Diesel fuel used in operations		12,026		7.3	%		7,011			6.2	%
Diesel fuel for sales to third parties		8,164		5.0	%		2,963			2.6	%
Casualties and insurance		4,798		2.9	%		4,881			4.3	%
Materials		6,852		4.2	%		5,434			4.8	%
Net loss (gain) on sale and impairment of assets		471		0.3	%		(633	)		(0.6	%)
Other expenses		14,505		8.8	%		9,154			8.2	%

Total operating expenses	$	129,970		79.2	%	$	87,874			77.6	%

Labor and benefits expense, as a percentage of revenues, decreased to 17.8% in the six months ended June 30, 2004, compared to 18.2% in the six months ended June 30, 2003. In local currency, labor and benefits increased 18.1%. The increase was due to higher freight volumes, particularly the strong grain movements and the new business in New South Wales.

Purchased services expense increased to 24.0% of revenue in the six months ended June 30, 2004, compared to 23.7% of revenues in the six months ended June 30, 2003. In local currency, purchased services increased 22.4%. The increase was primarily due to the use of contract locomotive engineers.

Depreciation and amortization expense, as a percentage of revenues, decreased to 8.0% in the six months ended June 30, 2004, compared to 9.6% in the six months ended June 30, 2003. In local currency, depreciation and amortization increased 0.4%.

Diesel fuel used in operations increased to 7.3% of revenues in the six months ended June 30, 2004, compared to 6.2% of revenues in the six months ended June 30, 2003. In local currency, fuel used in operations increased 43.4%. 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 an increase in fuel prices.

The cost of diesel fuel sold to third parties increased to 5.0% of revenues in the six months ended June 30, 2004, compared to 2.6% of revenues in the six months ended June 30, 2003. In local currency, the cost of diesel fuel sold to third parties increased 130.5%. The increase was due to a higher volume of fuel sales to third parties and an increase in fuel prices.

Casualties and insurance costs decreased to 2.9% of revenues in the six months ended June 30, 2004, compared to 4.3% of revenues in the six months ended June 30, 2003. In local currency, casualties and insurance decreased 19.2%. The decrease was due to improved safety performance and a decrease in insurance costs.

Materials expense, as a percentage of revenues, decreased to 4.2% in the six months ended June 30, 2004, compared to 4.8% in the six months ended June 30, 2003. In local currency, materials expense increased 5.5%. The increase was due to higher rolling stock maintenance costs.

Net loss (gain) on sale and impairment of assets as a percentage of revenues, changed from a gain of 0.6% in the six months ended June 30, 2003 to a loss of 0.3% in the six months ended June 30, 2004. The net loss in the six months ended June 30, 2004 was due to asset write offs in South Australia related to a detailed asset review. In the six months ended June 30, 2003 asset dispositions resulted in a net gain.

Other expenses, as a percentage of revenues, increased to 8.8% in the six months ended June 30, 2004, compared to 8.2% in the six months ended June 30, 2003. In local currency, other expenses increased 32.6%. 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.

During the six months ended June 30, 2004 the Company generated cash flow from operating activities of $30.7 million, invested $11.6 million in capital assets (net of $1.6 million in state grant funds received for track rehabilitation and construction) and received $1.9 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 $23.1 million during this same period primarily by using cash provided by operations.

During the six months ended June 30, 2003 the Company generated cash flows from operating activities of $23.1 million, invested $7.2 million in capital assets (net of $469,000 in state grant funds received for track rehabilitation and construction), received $132,000 in cash from unconsolidated affiliates, received $526,000 in proceeds from the disposition of property, and received $1.4 million in proceeds from employee stock purchases. The Company paid $500,000 of dividends on the Company’s Redeemable Convertible Preferred Stock and reduced its debt by $16.7 million during this same period primarily by using cash provided by operations

The Company has budgeted approximately $29.2 million in capital expenditures in 2004, of which $19.8 million is for track rehabilitation and $9.4 million is for equipment. Included in the budget is approximately $2.7 million to exercise an early buyout of 36 leased locomotives and approximately $3.0 million to rehabilitate 16 miles of track to access a new coal-fired power plant customer. The capital expenditures for track rehabilitation are net of $4.3 million that is expected to be funded by rehabilitation grants from state and federal agencies. Due to seasonal weather restrictions on track rehabilitation projects primarily in the northeast United States and Canada, only approximately $11.6 million of budgeted capital expenditures was completed as of June 30, 2004.

At June 30, 2004 the Company had long-term debt, including current portion, totaling $134.0 million, which comprised 30.5% 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 Convertible Preferred.

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.

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 principal payments of $750,000 due semi-annually which began March 15, 2003, with a 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. Based on current circumstances, it is probable that the Company will have to fund a portion of its funding obligation in order to meet the future principal repayment obligations of the Notes. The Notes contain certain financial covenants which Servicios is in compliance with as of June 30, 2004.

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.

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:

Impact of Foreign Currencies on Operating Revenues – In the six months ending June 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:

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:

Impact of Foreign Currency on ARG’s Operating Revenues and Net Income – In the six months ending June 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:

During 2004 and 2003, the Company entered into various exchange rate options that established exchange rates for converting Mexican Pesos to U.S. Dollars, one of which expires in September 2004, and gives the Company the right to sell Mexican Pesos for U.S. Dollars at an exchange rate of 12.61 Mexican Pesos to the U.S. Dollar, the other which expires in March 2005, and 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 up-front premiums for these options of $49,000 and $28,000 in the quarters ended March 31, 2003, and June 30, 2004, respectively. At June 30, 2004 and December 31, 2003, the notional amount under exchange rate options was $4.7 million and $5.3 million, respectively. At June 30, 2004 and December 31, 2003, the fair value of exchange rate currency options was $19,000 and $15,000, respectively.

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 June 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.

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. CHANGES IN SECURITIES AND USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES — NONE

On May 12, 2004, the Stockholders of the Company voted on the following proposals at the Annual Meeting:

Proposal 1: To elect three directors to serve for a three-year term expiring in 2007:

The other directors, whose terms of office continued after the meeting, are Robert W. Anestis, Mortimer B. Fuller, III, T. Michael Long, Robert M. Melzer, Peter O. Scannell and Hon. M. Douglas Young, P.C.

Proposal 3: To approve and ratify the selection of PricewaterhouseCoopers LLP as the Company’s independent auditors for the year ending December 31, 2004:


(A).	EXHIBITS — SEE INDEX TO EXHIBITS

(B).	REPORTS ON FORM 8-K

	(a)	Report dated May 3, 2004 reporting on Item 5. Other Events and Regulation FD Disclosure. This report furnished the Company’s press release regarding its filing a registration statement on Form S-3 with the Securities and Exchange Commission.

	(b)	Report dated May 3, 2004 reporting on Item 12. Disclosure of Results of Operations and Financial Condition. This report furnished the Company’s press release regarding the Company’s financial results for the first quarter of 2004.

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

41 EX-10.1 2 l08623aexv10w1.txt EX-10.1 2004 DEFERRED COMPENSATION PLAN EXHIBIT 10.1 GENESEE & WYOMING INC. 2004 Deferred Compensation Plan Master Plan Document EFFECTIVE JANUARY 1, 2004 1 GENESEE & WYOMING INC. 2004 Deferred Compensation Plan Master Plan Document TABLE OF CONTENTS

-i- GENESEE & WYOMING INC. 2004 Deferred Compensation Plan Master Plan Document 7.1 DISABILITY BENEFIT.................................................................................... 16 7.2 PAYMENT OF DISABILITY BENEFIT......................................................................... 16 ARTICLE 8 DEATH BENEFIT......................................................................................... 17 8.1 DEATH BENEFIT......................................................................................... 17 8.2 PAYMENT OF DEATH BENEFIT.............................................................................. 17 ARTICLE 9 BENEFICIARY DESIGNATION............................................................................... 17 9.1 BENEFICIARY........................................................................................... 17 9.2 BENEFICIARY DESIGNATION; CHANGE; SPOUSAL CONSENT...................................................... 17 9.3 ACKNOWLEDGEMENT....................................................................................... 17 9.4 NO BENEFICIARY DESIGNATION............................................................................ 17 9.5 DOUBT AS TO BENEFICIARY............................................................................... 18 9.6 DISCHARGE OF OBLIGATIONS.............................................................................. 18 ARTICLE 10 LEAVE OF ABSENCE...................................................................................... 18 10.1 PAID LEAVE OF ABSENCE................................................................................. 18 10.2 UNPAID LEAVE OF ABSENCE............................................................................... 18 ARTICLE 11 TERMINATION OF PLAN, AMENDMENT OR MODIFICATION........................................................ 18 11.1 TERMINATION OF PLAN................................................................................... 18 11.2 AMENDMENT............................................................................................. 19 11.3 PLAN AGREEMENT........................................................................................ 19 11.4 EFFECT OF PAYMENT..................................................................................... 19 ARTICLE 12 ADMINISTRATION........................................................................................ 19 12.1 COMMITTEE DUTIES...................................................................................... 19 12.2 ADMINISTRATION UPON CHANGE IN CONTROL................................................................. 19 12.3 AGENTS................................................................................................ 20 12.4 BINDING EFFECT OF DECISIONS........................................................................... 20 12.5 INDEMNITY OF COMMITTEE................................................................................ 20 12.6 EMPLOYER INFORMATION.................................................................................. 20 ARTICLE 13 OTHER BENEFITS AND AGREEMENTS.......................................................................... 20 13.1 COORDINATION WITH OTHER BENEFITS...................................................................... 20 ARTICLE 14 CLAIMS PROCEDURES...................................................................................... 21 14.1 PRESENTATION OF CLAIM................................................................................. 21 14.2 NOTIFICATION OF DECISION.............................................................................. 21

-ii- GENESEE & WYOMING INC. 2004 Deferred Compensation Plan Master Plan Document 14.3 REVIEW OF A DENIED CLAIM.............................................................................. 21 14.4 DECISION ON REVIEW.................................................................................... 22 14.5 LEGAL ACTION.......................................................................................... 22 ARTICLE 15 TRUST.................................................................................................. 22 15.1 ESTABLISHMENT OF THE TRUST............................................................................ 22 15.2 INTERRELATIONSHIP OF THE PLAN AND THE TRUST........................................................... 22 15.3 DISTRIBUTIONS FROM THE TRUST.......................................................................... 23 ARTICLE 16 MISCELLANEOUS......................................................................................... 23 16.1 STATUS OF PLAN........................................................................................ 23 16.2 UNSECURED GENERAL CREDITOR............................................................................ 23 16.3 EMPLOYER'S LIABILITY.................................................................................. 23 16.4 NONASSIGNABILITY...................................................................................... 23 16.5 NOT A CONTRACT OF EMPLOYMENT.......................................................................... 23 16.6 FURNISHING INFORMATION................................................................................ 23 16.7 TERMS................................................................................................. 24 16.8 CAPTIONS.............................................................................................. 24 16.9 GOVERNING LAW......................................................................................... 24 16.10 NOTICE................................................................................................ 24 16.11 SUCCESSORS............................................................................................ 24 16.12 SPOUSE'S INTEREST..................................................................................... 24 16.13 VALIDITY.............................................................................................. 24 16.14 INCOMPETENT........................................................................................... 24 16.15 COURT ORDER........................................................................................... 25 16.16 DEDUCTION LIMITATION ON BENEFIT PAYMENTS.............................................................. 25 16.17 INSURANCE............................................................................................. 25

-iii- GENESEE & WYOMING INC. 2004 Deferred Compensation Plan Master Plan Document GENESEE & WYOMING INC. 2004 DEFERRED COMPENSATION PLAN Effective January 1, 2004 PURPOSE The purpose of this Plan is to provide specified benefits to a select group of management or highly compensated Employees and Directors who contribute to the continued growth, development and future business success of Genesee & Wyoming Inc., a Delaware corporation, and its subsidiaries, if any, that sponsor this Plan. This Plan shall be unfunded for tax purposes and for purposes of Title I of ERISA. ARTICLE 1 DEFINITIONS For the purposes of this Plan, unless otherwise clearly apparent from the context, the following phrases or terms shall have the following indicated meanings: 1.1 "Account Balance" shall mean, with respect to a Participant, an entry on the records of the Employer equal to the sum of (i) the Deferral Account balance, (ii) the Company Contribution Account balance, and (iii) the Company Restoration Matching Account balance. The Account Balance shall be a bookkeeping entry only and shall be utilized solely as a device for the measurement and determination of the amounts to be paid to a Participant, or his or her designated Beneficiary, pursuant to this Plan. 1.2 "Annual Deferral Amount" shall mean that portion of a Participant's Base Salary, Bonus and Director Fees that a Participant defers in accordance with Article 3 for any one Plan Year, without regard to whether such amounts are withheld and credited during such Plan Year. In the event of a Participant's Separation of Service, Disability or death prior to the end of a Plan Year, such year's Annual Deferral Amount shall be the actual amount withheld prior to such event. 1.3 "Annual Installment Method" shall be an annual installment payment over the number of years selected by the Participant in accordance with this Plan, calculated as follows: (i) for the first annual installment, the Participant's vested Account Balance shall be calculated as of the close of business on or around the Participant's Benefit Distribution Date, as determined by the Committee, in its sole and absolute discretion, and (ii) for remaining annual installments, the Participant's vested Account Balance shall be calculated on every anniversary of such calculation date, as applicable. Each annual installment shall be calculated by multiplying this balance by a fraction, the numerator of which is one (1) and the denominator of which is the remaining number of annual payments due the Participant. By way of example, if the Participant elects a ten (10) year Annual Installment Method for the benefit payable on his or her Benefit Distribution Date, the first payment shall be 1/10 of the vested Account Balance, calculated as described in this definition. The following year, the payment shall be 1/9 of the vested Account Balance, calculated as described in this definition. 1.4 "Base Salary" shall mean the annual cash compensation relating to services performed during any calendar year, excluding distributions from nonqualified deferred compensation plans, -1- GENESEE & WYOMING INC. 2004 Deferred Compensation Plan Master Plan Document bonuses, commissions, overtime, fringe benefits, stock options, relocation expenses, incentive payments, non-monetary awards, director fees and other fees, and automobile and other allowances paid to a Participant (whether or not such allowances are included in the Employee's gross income). Base Salary shall be calculated before reduction for compensation voluntarily deferred or contributed by the Participant pursuant to all qualified or nonqualified plans of any Employer and shall be calculated to include amounts not otherwise included in the Participant's gross income under Code Sections 125, 402(e)(3), 402(h), or 403(b) pursuant to plans established by any Employer; provided, however, that all such amounts will be included in compensation only to the extent that had there been no such plan, the amount would have been payable in cash to the Employee. 1.5 "Beneficiary" shall mean one or more persons, trusts, estates or other entities, designated in accordance with Article 9, that are entitled to receive benefits under this Plan upon the death of a Participant. 1.6 "Beneficiary Designation Form" shall mean the form established from time to time by the Committee that a Participant completes, signs and returns to the Committee (or its designated agent) to designate one or more Beneficiaries. 1.7 "Benefit Distribution Date" shall mean the date or the event that triggers distribution of a Participant's vested Account Balance, as elected by the Participant in connection with his or her commencement of participation in this Plan. The Benefit Distribution Date selected by the Participant may be any one of the following: (a) The date of the Participant's Separation of Service; or (b) The Participant's attainment of an age specified by the Participant; or (c) The earlier of (i) the date of the Participant's Separation of Service, or (ii) the Participant's attainment of an age specified by the Participant; or (d) The later of (i) the date of the Participant's Separation of Service, or (ii) the Participant's attainment of an age specified by the Participant. If a Participant does not make any election with respect to the Benefit Distribution Date in connection with his or her commencement of participation in this Plan, then such Participant shall be deemed to have elected that his or her Benefit Distribution Date be the date described in 1.7(a) above. 1.8 "Board" shall mean the board of directors of the Company. 1.9 "Bonus" shall mean any compensation, in addition to Base Salary, attributable to a Plan Year, as further specified on an Election Form approved by the Committee, in its sole and absolute discretion, under any Employer's annual bonus and cash incentive plans. 1.10 "Change In Control" shall mean a change in control of the Company of a nature that would be required to be reported (assuming such event has not been "previously reported") in response to Item 1(a) of a Current Report on Form 8-K, as in effect on December 31, 1996, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 ("Exchange Act"); provided that, without limitation, a Change In Control shall be deemed to have occurred at such time as: -2- GENESEE & WYOMING INC. 2004 Deferred Compensation Plan Master Plan Document (a) Any "person" within the meaning of Section 14(d) of the Exchange Act, other than a Permitted Holder becomes the beneficial owner, as defined in Rule 13d-3 under the Exchange Act, directly or indirectly, of twenty-five percent (25%) or more of the combined voting power of the outstanding securities of the Company ordinarily having the right to vote in the election of directors; provided, however, that the following will not constitute a Change In Control: any acquisition by any corporation if, immediately following such acquisition, more than seventy-five percent (75%) of the outstanding securities of the acquiring corporation (or the parent thereof) ordinarily having the right to vote in the election of directors is beneficially owned by all or substantially all of those persons who, immediately prior to such acquisition, were the beneficial owners of the outstanding securities of the Company ordinarily having the right to vote in the election of directors; (b) The individuals who constitute the Board on May 12, 2004 (the "Incumbent Board") have ceased for any reason to constitute at least a majority thereof, provided that any person becoming a director subsequent to May 12, 2004 whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least three-quarters (3/4) of the directors comprising the Incumbent Board, either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director without objection to such nomination (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened "tender offer," as such term is used in Section 14(d) of the Exchange Act), shall be, for purposes of this Plan, considered as though such person were a member of the Incumbent Board; (c) Upon the consummation by the Company of a reorganization, merger or consolidation, other than one with respect to which all or substantially all of those persons who were the beneficial owners, immediately prior to such reorganization, merger or consolidation, of outstanding securities of the Company ordinarily having the right to vote in the election of directors own, immediately after such transaction, more than seventy-five percent (75%) of the outstanding securities of the resulting corporation ordinarily having the right to vote in the election of directors; or (d) Upon the approval by the Company's stockholders of a complete liquidation and dissolution of the Company or the sale or other disposition of all or substantially all of the assets of the Company other than to a subsidiary in which the Company, directly or indirectly, has an ownership interest of twenty percent (20%) or more. 1.11 "Change In Control Benefit" shall have the meaning set forth in Article 6. 1.12 "Claimant" shall have the meaning set forth in Section 14.1. 1.13 "Code" shall mean the Internal Revenue Code of 1986, as it may be amended from time to time. 1.14 "Committee" shall mean the committee described in Article 12. 1.15 "Company" shall mean Genesee & Wyoming Inc., a Delaware corporation, and any successor to all or substantially all of the Company's assets or business. -3- GENESEE & WYOMING INC. 2004 Deferred Compensation Plan Master Plan Document 1.16 "Company Contribution Account" shall mean (i) the sum of the Participant's Company Contribution Amounts, plus (ii) amounts credited or debited to the Participant's Company Contribution Account in accordance with this Plan, less (iii) all distributions made to the Participant or his or her Beneficiary pursuant to this Plan that relate to the Participant's Company Contribution Account. 1.17 "Company Contribution Amount" shall mean, for any one Plan Year, the amount determined in accordance with Section 3.5. 1.18 "Company Restoration Matching Account" shall mean (i) the sum of all of a Participant's Company Restoration Matching Amounts, plus (ii) amounts credited or debited to the Participant's Company Restoration Matching Account in accordance with this Plan, less (iii) all distributions made to the Participant or his or her Beneficiary pursuant to this Plan that relate to the Participant's Company Restoration Matching Account. 1.19 "Company Restoration Matching Amount" shall mean, for any one Plan Year, the amount determined in accordance with Section 3.6. 1.20 "Death Benefit" shall mean the benefit set forth in Article 8. 1.21 "Deduction Limitation" shall mean the limitation on a benefit that may otherwise be distributable pursuant to the provisions of this Plan, as set forth in Section 3.6. 1.22 "Deferral Account" shall mean (i) the sum of all of a Participant's Annual Deferral Amounts, plus (ii) amounts credited or debited to the Participant's Deferral Account in accordance with this Plan, less (iii) all distributions made to the Participant or his or her Beneficiary pursuant to this Plan that relate to his or her Deferral Account. 1.23 "Director" shall mean any member of the board of directors of any Employer. 1.24 "Director Fees" shall mean the annual fees earned by a Director from any Employer, including retainer fees and meetings fees, as compensation for serving on a board of directors or a committee at the request of the Employer. 1.25 "Disability" or "Disabled" shall mean that a Participant is permanently and totally disabled within the meaning of Code Section 22(e)(3). 1.26 "Disability Benefit" shall mean the benefit set forth in Article 7. 1.27 "Election Form" shall mean the form established from time to time by the Committee that a Participant completes, signs and returns to the Committee (or its designated agent) to make an election under this Plan. 1.28 "Employee" shall mean a person who is an employee of any Employer. 1.29 "Employer(s)" shall mean the Company and/or any of its subsidiaries (now in existence or hereafter formed or acquired) that have been selected by the Board to participate in this Plan and have adopted this Plan as a sponsor. 1.30 "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as it may be amended from time to time. -4- GENESEE & WYOMING INC. 2004 Deferred Compensation Plan Master Plan Document 1.31 "401(k) Plan" shall mean, with respect to an Employer, a plan qualified under Code Section 401(a) that contains a cash or deferral arrangement described in Code Section 401(k), adopted by the Employer, as it may be amended from time to time, or any successor thereto. 1.32 "Participant" shall mean any Employee or Director (i) who is selected to participate in this Plan, (ii) who submits an executed Plan Agreement, Election Form and Beneficiary Designation Form, all of which are accepted by the Committee (or its designated agent), and (iii) whose Plan Agreement has not terminated. 1.33 "Permitted Holder" shall mean: (i) the Company or a subsidiary in which the Company, directly or indirectly, has an ownership interest of twenty percent (20%) or more, (ii) any employee benefit plan sponsored by the Company or such a subsidiary, or (iii) Mortimer B. Fuller III ("MBF"), or his spouse, siblings, children or grandchildren ("Family Members") or a trust, corporation, partnership or limited liability company, so long as all of the beneficial interests in which are held exclusively by MBF and/or one or more Family Members ("Family Member Entity"), where such person(s) or entity acquired their Company stock from MBF, a Family Member or a Family Member Entity. 1.34 "Plan" shall mean this Genesee & Wyoming Inc. 2004 Deferred Compensation Plan, which shall be evidenced by this instrument and by each Plan Agreement, as they may be amended from time to time. 1.35 "Plan Agreement" shall mean a written agreement, as may be amended from time to time, which is entered into by and between an Employer and a Participant. Each Plan Agreement executed by a Participant and the Participant's Employer shall provide for the entire benefit to which such Participant is entitled under this Plan; should there be more than one Plan Agreement, the Plan Agreement bearing the latest date of acceptance by the Employer shall supersede all previous Plan Agreements in their entirety and shall govern such entitlement. The terms of any Plan Agreement may be different for any Participant, and any Plan Agreement may provide additional benefits not set forth in this Plan or limit the benefits otherwise provided under this Plan; provided, however, that any such additional benefits or benefit limitations must be agreed to by both the Employer and the Participant. 1.36 "Plan Year" shall mean a period beginning on January 1 of each calendar year and continuing through December 31 of such calendar year. 1.37 "Retirement," "Retire(s)" or "Retired" shall mean, with respect to an Employee, severance from employment from all Employers for any reason other than a leave of absence, death or Disability on or after the attainment of age sixty-two (62); and shall mean with respect to a Director who is not an Employee, severance of his or her directorships with all Employers on or after the later of (y) the attainment of age seventy (70), or (z) in the sole and absolute discretion of the Committee, an age later than age seventy (70). If a Participant is both an Employee and a Director, Retirement shall not occur until he or she Retires as both an Employee and a Director, which Retirement shall be deemed to be a Retirement as a Director; provided, however, that such a Participant may elect, at least three years prior to Retirement and in accordance with the policies and procedures established by the Committee, to Retire for purposes of this Plan at the time he or she Retires as an Employee, which Retirement shall be deemed to be a Retirement as an Employee. -5- GENESEE & WYOMING INC. 2004 Deferred Compensation Plan Master Plan Document 1.38 "Scheduled Distribution" shall mean the distribution set forth in Section 4.1. 1.39 "Separation of Service" shall mean the severing of employment or service as a Director with all Employers, voluntarily or involuntarily, for any reason other than Disability, death or an authorized leave of absence. If a Participant is both an Employee and a Director, a Separation of Service shall occur only upon the termination of the last position held; provided, however, that such a Participant may elect, at least three (3) years before the Separation of Service and in accordance with the policies and procedures established by the Committee, to be treated for purposes of this Plan as having experienced a Separation of Service at the time he or she ceases employment with an Employer as an Employee. 1.40 "Terminate the Plan" or "Termination of the Plan" shall mean a determination by an Employer's board of directors that (i) all of its Participants shall no longer be eligible to participate in this Plan, (ii) all deferral elections for such Participants shall terminate, and (iii) such Participants shall no longer be eligible to receive company contributions under this Plan. 1.41 "Trust" shall mean one or more trusts established by the Company in accordance with Article 15. 1.42 "Unforeseeable Financial Emergency" shall mean an unanticipated emergency that is caused by an event beyond the control of the Participant that would result in severe financial hardship to the Participant resulting from (i) a sudden and unexpected illness or accident of the Participant, the Participant's spouse, or a dependent of the Participant, (ii) a loss of the Participant's property due to casualty, or (iii) such other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant, all as determined by the Committee, in its sole and absolute discretion. 1.43 "Years of Service" shall mean the total number of full years in which an Employee has been employed by one or more Employers. For purposes of this definition, a year of employment shall be a 365-day period (or 366-day period in the case of a leap year) that, for the first year of employment, commences on the Employee's date of hiring and that, for any subsequent year, commences on an anniversary of that hiring date. The Committee shall make a determination as to whether any partial year of employment shall be counted as a Year of Service. ARTICLE 2 SELECTION, ENROLLMENT, ELIGIBILITY 2.1 SELECTION BY COMMITTEE. Participation in this Plan shall be limited to a select group of management and highly compensated Employees and Directors of an Employer, as determined by the Committee, in its sole and absolute discretion. From that group, the Committee shall select, in its sole and absolute discretion, which Employees and Directors may participate in this Plan. 2.2 ENROLLMENT AND ELIGIBILITY REQUIREMENTS; COMMENCEMENT OF PARTICIPATION. (a) As a condition to participation, each Employee or Director who is eligible to participate in this Plan effective as of the first day of a Plan Year shall complete, execute and return to the Committee (or its designated agent) a Plan Agreement, an Election Form and a Beneficiary Designation Form, prior to the first day of such Plan Year, or such other -6- GENESEE & WYOMING INC. 2004 Deferred Compensation Plan Master Plan Document earlier deadline as may be established by the Committee, in its sole and absolute discretion. In addition, the Committee shall establish from time to time such other enrollment requirements as it determines, in its sole and absolute discretion, are necessary. (b) As a condition to participation, each Employee or Director who is eligible to participate in this Plan effective after the first day of a Plan Year shall complete, execute and return to the Committee a Plan Agreement, an Election Form and a Beneficiary Designation Form, all within thirty (30) days after such Employee's or Director's eligibility to participate in this Plan becomes effective. In addition, the Committee shall establish from time to time such other enrollment requirements as it determines, in its sole and absolute discretion, are necessary. (c) Each Employee or Director who is eligible to participate in this Plan shall commence participation in this Plan on the date that the Committee determines, in its sole and absolute discretion, that the Employee or Director has met all enrollment requirements set forth in this Plan and required by the Committee, including the return of all required documents to the Committee (or its designated agent) within the specified time period. Notwithstanding the foregoing, the Committee shall process a Participant's deferral election as soon as administratively practicable after such Participant's deferral election is submitted to and accepted by the Committee (or its designated agent). (d) If an Employee or a Director fails to meet all of the requirements contained in this Section 2.2 within the period required, that Employee or Director shall not be eligible to participate in this Plan during such Plan Year. 2.3 TERMINATION OF A PARTICIPANT'S ELIGIBILITY. If the Committee determines that a Participant is no longer eligible to participate in this Plan, the Committee shall have the right, in its sole and absolute discretion, to (i) terminate any deferral election that the Participant has made for the remainder of the Plan Year in which the Participant's eligibility status changes, (ii) prevent the Participant from making future deferral elections, and/or (iii) take such further action that the Committee deems appropriate. Notwithstanding the foregoing, in the event of a Termination of this Plan in accordance with Section 1.40, the termination of the affected Participant's eligibility for participation in this Plan shall not be governed by this Section 2.3, but rather shall be governed by Section 1.40 and Section 11.1. ARTICLE 3 DEFERRAL COMMITMENTS/COMPANY CONTRIBUTION AMOUNTS/ COMPANY RESTORATION MATCHING AMOUNTS/VESTING/CREDITING/TAXES 3.1 MINIMUM DEFERRALS. (a) ANNUAL DEFERRAL AMOUNT. For each Plan Year, a Participant may elect to defer, as his or her Annual Deferral Amount, Base Salary, Bonus and/or Director Fees in the following minimum amounts for each deferral elected: -7- GENESEE & WYOMING INC. 2004 Deferred Compensation Plan Master Plan Document DEFERRAL MINIMUM AMOUNT Base Salary and/or Bonus $2,000 aggregate Director Fees No Minimum If an election is made for less than the stated minimum amounts, or if no election is made, the amount deferred shall be zero. (b) SHORT PLAN YEAR. Notwithstanding the foregoing, if a Participant first becomes a Participant after the first day of a Plan Year, the minimum Annual Deferral Amount shall be an amount equal to the minimum set forth above, multiplied by a fraction, the numerator of which is the number of complete months remaining in the Plan Year and the denominator of which is twelve (12). 3.2 MAXIMUM DEFERRAL. (a) ANNUAL DEFERRAL AMOUNT. For each Plan Year, a Participant may elect to defer, as his or her Annual Deferral Amount, Base Salary, Bonus and/or Director Fees up to the following maximum percentages for each deferral elected: DEFERRAL MAXIMUM PERCENTAGE Base Salary 50% Bonus 100% Director Fees 100% (b) SHORT PLAN YEAR. Notwithstanding the foregoing, if a Participant first becomes a Participant after the first day of a Plan Year, the maximum Annual Deferral Amount shall be limited to the amount of compensation not yet earned by the Participant as of the date the Participant submits a Plan Agreement and Election Form to the Committee for acceptance. 3.3 ELECTION TO DEFER; EFFECT OF ELECTION FORM. (a) FIRST PLAN YEAR. In connection with a Participant's commencement of participation in this Plan, the Participant shall make an irrevocable deferral election for the Plan Year in which the Participant commences participation in this Plan, along with such other elections as the Committee deems necessary or desirable under this Plan. For these elections to be valid, the Election Form must be completed and signed by the Participant, timely delivered to the Committee (or its designated agent) in accordance with Section 2.2 and accepted by the Committee (or its designated agent). (b) SUBSEQUENT PLAN YEARS. For each succeeding Plan Year, an irrevocable deferral election for that Plan Year, and such other elections as the Committee deems necessary or desirable under this Plan, shall be made by timely delivering a new Election Form to the Committee (or its designated agent), in accordance with its rules and procedures, before the end of the Plan Year preceding the Plan Year for which the election is made. If no -8- GENESEE & WYOMING INC. 2004 Deferred Compensation Plan Master Plan Document such Election Form is timely delivered for a succeeding Plan Year, the Annual Deferral Amount shall be zero for that Plan Year. 3.4 WITHHOLDING AND CREDITING OF ANNUAL DEFERRAL AMOUNTS. For each Plan Year, the Base Salary portion of the Annual Deferral Amount shall be withheld from each regularly scheduled Base Salary payroll in equal amounts, as adjusted from time to time for increases and decreases in Base Salary. The Bonus and/or Director Fees portion of the Annual Deferral Amount shall be withheld at the time the Bonus or Director Fees are or otherwise would be paid to the Participant, whether or not this occurs during the Plan Year itself. Annual Deferral Amounts shall be credited to a Participant's Deferral Account at the time such amounts would otherwise have been paid to the Participant. 3.5 COMPANY CONTRIBUTION AMOUNT. (a) If an Employer agrees to credit certain amounts to a Participant's Company Contribution Account for certain Plan Years pursuant to an employment or other agreement between the Employer and the Participant, then the Employer shall credit such Participant's Company Contribution Account for those Plan Years in accordance with the terms of such employment or other agreement. Such amounts shall be credited in the amounts and on the date or dates prescribed by such agreements. (b) An Employer, in its sole and absolute discretion, may, but shall not be required to, make a Company Contribution Amount contribution for a Participant for any Plan Year. If the Employer decides to make such a contribution for a Participant for a given Plan Year, the Participant's Company Contribution Amount for such Plan Year shall be the amount determined by the Employer, in its sole and absolute discretion. The amount so credited to a Participant may be smaller or larger than the amount credited to any other Participant, may differ from the amount credited to such Participant in the preceding Plan Year and the amount credited to any Participant for a Plan Year may be zero, even though one or more other Participants receive a Company Contribution Amount for that Plan Year. A Participant's Company Contribution Amount, if any, shall be credited to the Participant's Company Contribution Account on a date or dates to be determined by the Committee, in its sole and absolute discretion. 3.6 COMPANY RESTORATION MATCHING AMOUNT. The Committee, in its sole and absolute discretion, may, but shall not be required to, make a Company Restoration Matching Amount contribution for a Participant for any Plan Year. If the Committee decides to make such a contribution for a Participant for a given Plan Year, the Participant's Company Restoration Matching Amount for such Plan Year shall be the amount determined by the Committee, in its sole and absolute discretion, to make up for certain limits applicable to the 401(k) Plan or other qualified plan for such Plan Year, as identified by the Committee, or for such other purposes as determined by the Committee, in its sole and absolute discretion. The amount so credited to a Participant under this Plan for any Plan Year (i) may be smaller or larger than the amount credited to any other Participant, and (ii) may differ from the amount credited to such Participant in the preceding Plan Year. A Participant's Company Restoration Matching Amount, if any, shall be credited to the Participant's Company Restoration Matching Account on a date or dates to be determined by the Committee, in its sole and absolute discretion. -9- GENESEE & WYOMING INC. 2004 Deferred Compensation Plan Master Plan Document 3.7 CREDITING OF AMOUNTS AFTER BENEFIT DISTRIBUTION. Notwithstanding any provision in this Plan to the contrary, should the complete distribution of a Participant's vested Account Balance occur prior to the date on which any portion of (i) the Annual Deferral Amount that a Participant has elected to defer in accordance with Section 3.3, (ii) the Company Contribution Amount, or (iii) the Company Restoration Matching Amount, would otherwise be credited to the Participant's Account Balance, such amounts shall not be credited to the Participant's Account Balance, but shall be paid to the Participant in a manner determined by the Committee, in its sole and absolute discretion. 3.8 VESTING. (a) A Participant shall at all times be one hundred percent (100%) vested in his or her Deferral Account and Company Restoration Matching Account. (b) A Participant shall be vested in his or her Company Contribution Account in accordance with the vesting schedule(s) set forth in his or her Plan Agreement, employment agreement or any other agreement entered into between the Participant and his or her Employer. If not addressed in such agreements, a Participant shall vest in his or her Company Contribution Account on the basis of the Participant's Years of Service, in accordance with the following schedule: YEARS OF SERVICE VESTED PERCENTAGE Less than 1 year 0% 1 year or more, but less than 2 33% 2 years or more, but less than 3 67% 3 years or more 100% (c) Notwithstanding anything to the contrary contained in this Section 3.8, in the event of a Change In Control, or upon a Participant's Retirement, death while employed by an Employer, or Disability, a Participant's Company Contribution Account shall immediately become one hundred percent (100%) vested (to the extent that it is not already vested). (d) Notwithstanding subsection 3.8(c) above, the vesting schedule for a Participant's Company Contribution Account shall not be accelerated upon a Change In Control to the extent that the Committee determines that such acceleration would cause the deduction limitations of Code Section 280G to become effective. In the event that all of a Participant's Company Contribution Account is not vested pursuant to such a determination, the Participant may request independent verification of the Committee's calculations with respect to the application of Section 280G. In such case, the Committee must provide to the Participant within ninety (90) days of such a request an opinion from a nationally recognized accounting firm selected by the Participant (the "Accounting Firm"). The opinion shall state the Accounting Firm's opinion that any limitation in the vested percentage hereunder is necessary to avoid the limits of Section 280G and contain supporting calculations. The cost of such opinion shall be paid for by the Company. -10- GENESEE & WYOMING INC. 2004 Deferred Compensation Plan Master Plan Document (e) Section 3.8(d) shall not prevent the acceleration of the vesting schedule applicable to a Participant's Company Contribution Account if such Participant is entitled to a "gross-up" payment, to eliminate the effect of the Code Section 4999 excise tax, pursuant to his or her employment agreement or other agreement entered into between such Participant and the Employer. 3.9 CREDITING/DEBITING OF ACCOUNT BALANCES. In accordance with, and subject to, the rules and procedures that are established from time to time by the Committee, in its sole and absolute discretion, amounts shall be credited or debited to a Participant's Account Balance in accordance with the following rules: (a) MEASUREMENT FUNDS. The Participant may elect one or more of the measurement funds selected by the Committee, in its sole and absolute discretion, which are based on certain mutual funds (the "Measurement Funds"), for the purpose of crediting or debiting additional amounts to his or her Account Balance. As necessary, the Committee may, in its sole and absolute discretion, discontinue, substitute or add a Measurement Fund. Each such action will take effect as of the first day of the first calendar quarter that begins at least thirty (30) days after the day on which the Committee gives Participants advance written notice of such change, or if necessary to comply with applicable tax law, including but not limited to guidance issued after the effective date of this Plan, such other date designated by the Committee, in its sole and absolute discretion. (b) ELECTION OF MEASUREMENT FUNDS. A Participant, in connection with his or her initial deferral election in accordance with Section 3.3(a) above, shall elect, on the Election Form, one or more Measurement Fund(s) (as described in Section 3.9(a) above) to be used to determine the amounts to be credited or debited to his or her Account Balance. If a Participant does not elect any of the Measurement Funds as described in the previous sentence, the Participant's Account Balance shall automatically be allocated into the lowest-risk Measurement Fund, as determined by the Committee, in its sole and absolute discretion. The Participant may (but is not required to) elect, by submitting an Election Form to the Committee (or its designated agent) that is accepted by the Committee (or its designated agent), to add or delete one or more Measurement Fund(s) to be used to determine the amounts to be credited or debited to his or her Account Balance, or to change the portion of his or her Account Balance allocated to each previously or newly elected Measurement Fund. If an election is made in accordance with the previous sentence, it shall apply as of the first business day deemed reasonably practicable by the Committee, in its sole and absolute discretion, and shall continue thereafter for each subsequent day in which the Participant participates in this Plan, unless changed in accordance with the previous sentence. (c) PROPORTIONATE ALLOCATION. In making any election described in Section 3.9(b) above, the Participant shall specify on the Election Form, in increments of one percent (1%), the percentage of his or her Account Balance or Measurement Fund, as applicable, to be allocated and/or reallocated. (d) CREDITING OR DEBITING METHOD. The performance of each Measurement Fund (either positive or negative) will be determined by the Committee, in its sole and absolute -11- GENESEE & WYOMING INC. 2004 Deferred Compensation Plan Master Plan Document discretion, on a daily basis based on the manner in which such Participant's Account Balance has been hypothetically allocated among the Measurement Funds by the Participant. (e) NO ACTUAL INVESTMENT. Notwithstanding any other provision of this Plan that may be interpreted to the contrary, the Measurement Funds are to be used for measurement purposes only, and a Participant's election of any such Measurement Fund, the allocation of his or her Account Balance thereto, the calculation of additional amounts and the crediting or debiting of such amounts to a Participant's Account Balance shall not be considered or construed in any manner as an actual investment of his or her Account Balance in any ----- --- such Measurement Fund. In the event that the Company or the Trustee (as that term is defined in the Trust), in its own discretion, decides to invest funds in any or all of the investments on which the Measurement Funds are based, no Participant shall have any rights in or to such investments themselves. Without limiting the foregoing, a Participant's Account Balance shall at all times be a bookkeeping entry only and shall not represent any investment made on his or her behalf by the Company or the Trust; the Participant shall at all times remain an unsecured creditor of the Company. 3.10 FICA AND OTHER TAXES. (a) ANNUAL DEFERRAL AMOUNTS. For each Plan Year in which an Annual Deferral Amount is being withheld from a Participant, the Participant's Employer(s) shall withhold from that portion of the Participant's Base Salary and/or Bonus that is not being deferred, in a manner determined by the Employer(s), the Participant's share of FICA and other employment taxes on such Annual Deferral Amount. If necessary, the Committee may reduce the Annual Deferral Amount in order to comply with this Section 3.10. (b) COMPANY CONTRIBUTION ACCOUNT. When a Participant becomes vested in a portion of his or her Company Contribution Account, the Participant's Employer(s) shall withhold from that portion of the Participant's Base Salary and/or Bonus that is not being deferred, in a manner determined by the Employer(s), the Participant's share of FICA and other employment taxes on such Company Contribution Amount. If necessary, the Committee may reduce the vested portion of the Participant's Company Contribution Account, as applicable, in order to comply with this Section 3.10. (c) DISTRIBUTIONS. The Participant's Employer(s), or the Trustee of the Trust, shall withhold from any payments made to a Participant under this Plan all federal, state and local income, employment and other taxes required to be withheld by the Employer(s), or the Trustee of the Trust, in connection with such payments, in the amounts and in the manner determined by the Employer(s) or the Trustee of the Trust, in each case in their sole and absolute discretion. ARTICLE 4 SCHEDULED DISTRIBUTION; UNFORESEEABLE FINANCIAL EMERGENCIES 4.1 SCHEDULED DISTRIBUTION. In connection with each election to defer an Annual Deferral Amount, a Participant may irrevocably elect to receive a Scheduled Distribution from this Plan with -12- GENESEE & WYOMING INC. 2004 Deferred Compensation Plan Master Plan Document respect to all or a portion of (i) the Annual Deferral Amount, (ii) the Company Contribution Amount, and (iii) the Company Restoration Matching Amount. The Scheduled Distribution shall be a lump sum payment in an amount that is equal to the portion of the Annual Deferral Amount, the vested portion of the Company Contribution Amount and the portion of the Company Restoration Matching Amount that the Participant elected to have distributed as a Scheduled Distribution, plus amounts credited or debited in the manner provided in Section 3.9 above on that amount, calculated as of the close of business on or around the date on which the Scheduled Distribution becomes payable, as determined by the Committee, in its sole and absolute discretion. Subject to the other terms and conditions of this Plan, each Scheduled Distribution elected shall be paid out during a sixty (60) day period commencing immediately after the first day of any Plan Year designated by the Participant. The Plan Year designated by the Participant must be at least three (3) Plan Years after the end of the Plan Year to which the Participant's deferral election described in Section 3.3 relates. By way of example, if a Scheduled Distribution is elected for Annual Deferral Amounts, Company Contribution Amounts, and Company Restoration Matching Amounts that are earned and/or contributed in the Plan Year commencing January 1, 2004, the Scheduled Distribution would become payable during a sixty (60) day period commencing January 1, 2008. Notwithstanding the language set forth above, the Committee shall, in its sole and absolute discretion, adjust the amount distributable as a Scheduled Distribution if any portion of the Company Contribution Amount is unvested on the Scheduled Distribution Date. 4.2 POSTPONING SCHEDULED DISTRIBUTIONS. A Participant may make a one time election to postpone any lump sum distribution described in Section 4.1 above, and have such amount paid out during a sixty (60) day period commencing immediately after an allowable alternative distribution date designated by the Participant in accordance with this Section 4.2. In order to make this one time election, the Participant must submit a new Scheduled Distribution Election Form to the Committee (or its designated agent) in accordance with the following criteria: (a) Such Scheduled Distribution Election Form must be submitted to and accepted by the Committee (or its designated agent), in its sole and absolute discretion, at least twelve (12) months prior to the Participant's previously designated Scheduled Distribution date; (b) The new Scheduled Distribution date selected by the Participant must be the first day of a Plan Year, and must be at least five years after the previously designated Scheduled Distribution date; and (c) The election of the new Scheduled Distribution Date shall have no effect until at least twelve (12) months after the date on which the election is made. 4.3 OTHER BENEFITS TAKE PRECEDENCE OVER SCHEDULED DISTRIBUTIONS. Should a Participant become eligible to receive a benefit under Articles 5, 6, 7 or 8, then any Annual Deferral Amount, Company Contribution Amount and/or Company Restoration Matching Amount, plus the amounts credited or debited thereon, that are subject to a Scheduled Distribution election under Section 4.1 shall not be paid in accordance with Section 4.1, but shall be paid in accordance with the other applicable Article. -13- GENESEE & WYOMING INC. 2004 Deferred Compensation Plan Master Plan Document 4.4 WITHDRAWAL PAYOUT/SUSPENSIONS FOR UNFORESEEABLE FINANCIAL EMERGENCIES. (a) If the Participant experiences an Unforeseeable Financial Emergency, the Participant may petition the Committee to suspend deferrals of Base Salary, Bonus, and Director Fees to the extent deemed necessary by the Committee, in its sole and absolute discretion) to satisfy the Unforeseeable Financial Emergency. If suspension of deferrals is not sufficient to satisfy the Participant's Unforeseeable Financial Emergency, or if suspension of deferrals is not required under applicable tax law, the Participant may further petition the Committee to receive a partial or full payout from this Plan. The Participant shall only receive a payout from this Plan to the extent such payout is deemed necessary by the Committee, in its sole and absolute discretion, to satisfy the Participant's Unforeseeable Financial Emergency. (b) The payout to satisfy a Participant's Unforeseeable Financial Emergency shall not exceed the lesser of (i) the Participant's vested Account Balance, calculated as of the close of business on or around the date on which the amount becomes payable, as determined by the Committee, in its sole and absolute discretion, or (ii) the amount necessary to satisfy the Unforeseeable Financial Emergency. Notwithstanding the foregoing, a Participant may not receive a payout from this Plan to the extent that the Unforeseeable Financial Emergency is or may be relieved (A) through reimbursement or compensation by insurance or otherwise, (B) by liquidation of the Participant's assets, to the extent the liquidation of such assets would not itself cause severe financial hardship or (C) by suspension of deferrals under this Plan, if the Committee, in its sole and absolute discretion, determines that suspension is required by applicable tax law. (c) If the Committee, in its sole and absolute discretion, approves a Participant's petition for suspension, the Participant's deferrals under this Plan shall be suspended as of the date of such approval. If the Committee, in its sole and absolute discretion, approves a Participant's petition for suspension and payout, the Participant's deferrals under this Plan shall be suspended as of the date of such approval and the Participant shall receive a payout from this Plan within sixty (60) days of the date of such approval. (d) Notwithstanding the foregoing, the Committee shall interpret all provisions relating to suspension and/or payout under this Section 4.4 in a manner that is consistent with applicable tax law, including but not limited to guidance issued after the effective date of this Plan. 4.5 WITHDRAWAL ELECTION. A Participant may elect, at any time, to withdraw all or a portion of his or her vested Account Balance. For purposes of this Section 4.5, the value of a Participant's vested Account Balance shall be calculated as of the close of business on or around the date on which receipt of the Participant's election is acknowledged by the Committee, as determined by the Committee, in its sole and absolute discretion, less a withdrawal penalty equal to ten percent (10%) of the amount withdrawn (the net amount shall be referred to as the "Withdrawal Amount"). This election can be made at any time, before or after a Participant's Benefit Distribution Date, and whether or not the Participant is in the process of being paid pursuant to an installment payment schedule. The Participant shall make this election by giving the Committee (or its designated agent) advance written notice of the election in a form determined -14- GENESEE & WYOMING INC. 2004 Deferred Compensation Plan Master Plan Document from time to time by the Committee. The Participant shall be paid the Withdrawal Amount within sixty (60) days of his or her election. Once the Withdrawal Amount is paid, the Participant's participation in this Plan shall be suspended for the remainder of the Plan Year in which the withdrawal is elected and for one full Plan Year thereafter (the "Suspension Period"). During the Suspension Period, the Participant will continue to be eligible for the benefits provided in Articles 4, 5, 6, 7 and 8 in accordance with the provisions of those Articles. However, the Participant's Annual Deferral Amount shall not be withheld during the Suspension Period, and the Participant shall not be allowed to make any deferral elections during the Suspension Period. ARTICLE 5 BENEFIT PAYABLE UPON BENEFIT DISTRIBUTION DATE 5.1 BENEFIT PAYABLE UPON BENEFIT DISTRIBUTION DATE. Upon a Participant's Benefit Distribution Date, the Participant shall receive his or her vested Account Balance, calculated as of the close of business on or around the Participant's Benefit Distribution Date, as determined by the Committee, in its sole and absolute discretion. 5.2 PAYMENT OF BENEFIT. (a) A Participant, in connection with his or her commencement of participation in this Plan, shall elect on an Election Form to receive the benefit described in Section 5.1 in a lump sum or pursuant to an Annual Installment Method of up to fifteen (15) years, subject to Section 5.2(b) below. The Participant may change his or her election to an allowable alternative payout period by submitting a new Election Form to the Committee (or its designated agent), provided that any such Election Form is submitted to and accepted by the Committee (or its designated agent), in its sole and absolute discretion, at least twelve (12) months prior to the Participant's Benefit Distribution Date. The Election Form most recently accepted by the Committee (or its designated agent) shall govern the payout of the benefit described in Section 5.1. If a Participant does not make any election with respect to the payment of the benefit described in Section 5.1, then the Participant shall be deemed to have elected to receive such benefit in a lump sum. (b) Notwithstanding the Participant's election described in Section 5.2(a), a Participant shall receive the benefit described in Section 5.1 in a lump sum if any of the following events occur: (i) The Participant becomes employed with a competitor of his or her Employer within the geographical area that is then served by such Employer, during the Participant's employment with the Employer or during a period of two (2) years after the Participant's Separation of Service with his or her Employer; or (ii) The Participant's employment with his or her Employer is terminated for cause. For purposes of this Section 5.2(b)(ii), "Cause" with respect to a Participant shall mean the Participant's (i) willful and continued failure to substantially perform his or her duties with his or her Employer after written warnings identifying the lack of substantial performance are delivered to him or her to specifically identify the -15- GENESEE & WYOMING INC. 2004 Deferred Compensation Plan Master Plan Document manner in which his or her Employer believes that he or she has not substantially performed his or her duties, (ii) willful engaging in illegal conduct which is materially and demonstrably injurious to his or her Employer, (iii) commission of a felony, (iv) material breach of a fiduciary duty owed by him or her to his or her Employer, (v) intentional unauthorized disclosure to any person of confidential information or trade secrets of a material nature relating to the business of his or her Employer, or (vi) engaging in any conduct that the written rules, regulations or policies of his or her Employer specify as constituting grounds for discharge. (c) With respect to the benefit described in Section 5.1, the lump sum payment shall be made, or installment payments shall commence, no later than sixty (60) days after the Participant's Benefit Distribution Date. Remaining installments, if any, shall be paid no later than sixty (60) days after each anniversary of the Participant's Benefit Distribution Date. ARTICLE 6 CHANGE IN CONTROL BENEFIT 6.1 CHANGE IN CONTROL BENEFIT. A Participant will receive a Change In Control Benefit, which shall be equal to the Participant's vested Account Balance, calculated as of the close of business on or around the date of the Change In Control, as selected by the Committee, in its sole and absolute discretion, if (i) the Participant has elected to receive a Change In Control Benefit, as set forth in Section 6.2 below, and (ii) if a Change In Control occurs prior to the receipt by such Participant of his or her entire Account Balance. 6.2 PAYMENT OF CHANGE IN CONTROL BENEFIT. A Participant, in connection with his or her commencement of participation in this Plan, may irrevocably elect on his or her Election Form whether to (i) receive a Change In Control Benefit, or (ii) have his or her Account Balance remain in this Plan upon the occurrence of a Change In Control and to have his or her Account Balance remain subject to the terms and conditions of this Plan. If a Participant does not make any election with respect to the payment of the Change In Control Benefit, then such Participant's Account Balance shall remain in this Plan upon a Change In Control and shall be subject to the terms and conditions of this Plan. The Change In Control Benefit, if any, shall be paid to the Participant in a lump sum no later than sixty (60) days after a Change In Control. ARTICLE 7 DISABILITY BENEFIT 7.1 DISABILITY BENEFIT. If a Participant becomes Disabled prior to his or her Benefit Distribution Date, the Participant shall receive a Disability Benefit, which shall be equal to the Participant's vested Account Balance, calculated as of the close of business on or around the date on which the Participant becomes Disabled, as selected by the Committee, in its sole and absolute discretion. 7.2 PAYMENT OF DISABILITY BENEFIT. The Disability Benefit shall be paid to the Participant in a lump sum payment no later than sixty (60) days after the date on which the Participant becomes Disabled. -16- GENESEE & WYOMING INC. 2004 Deferred Compensation Plan Master Plan Document ARTICLE 8 DEATH BENEFIT 8.1 DEATH BENEFIT. If a Participant dies prior to the complete distribution of his or her vested Account Balance, the Participant's Beneficiary(ies) shall receive a Death Benefit, which will be equal to the Participant's vested Account Balance, calculated as of the close of business on or around the date of the Participant's death, as selected by the Committee, in its sole and absolute discretion. 8.2 PAYMENT OF DEATH BENEFIT. The Death Benefit shall be paid to the Participant's Beneficiary(ies) in a lump sum payment no later than sixty (60) days after the Participant's Benefit Distribution Date. ARTICLE 9 BENEFICIARY DESIGNATION 9.1 BENEFICIARY. Each Participant shall have the right, at any time, to designate his or her Beneficiary(ies) (both primary as well as contingent) to receive any benefits payable under this Plan to a beneficiary upon the death of a Participant. The Beneficiary designated under this Plan may be the same as or different from the Beneficiary designation under any other plan of an Employer in which the Participant participates. 9.2 BENEFICIARY DESIGNATION; CHANGE; SPOUSAL CONSENT. A Participant shall designate his or her Beneficiary(ies) by completing and signing a Beneficiary Designation Form, and returning it to the Committee (or its designated agent). A Participant shall have the right to change his or her Beneficiary(ies) by completing, signing and otherwise complying with the terms of the Beneficiary Designation Form and the Committee's rules and procedures, as in effect from time to time. If the Participant names someone other than his or her spouse as a Beneficiary, the Committee may, in its sole and absolute discretion, determine that spousal consent is required to be provided in a form designated by the Committee, executed by such Participant's spouse and returned to the Committee (or its designated agent). Upon the acceptance by the Committee of a new Beneficiary Designation Form, all Beneficiary designations previously filed shall be canceled. The Committee shall be entitled to rely on the last Beneficiary Designation Form filed by the Participant and accepted by the Committee (or its designated agent) prior to the Participant's death. 9.3 ACKNOWLEDGMENT. No designation or change in designation of a Beneficiary shall be effective until received and acknowledged in writing by the Committee (or its designated agent). 9.4 NO BENEFICIARY DESIGNATION. If a Participant fails to designate any Beneficiary(ies) as provided in Sections 9.1, 9.2 and 9.3 above or, if all designated Beneficiaries predecease the Participant or die prior to complete distribution of the Participant's benefits, then the Participant's designated Beneficiary shall be deemed to be his or her surviving spouse. If the Participant has no surviving spouse, the benefits remaining under this Plan to be paid to a Beneficiary shall be payable to the executor or personal representative of the Participant's estate. -17- GENESEE & WYOMING INC. 2004 Deferred Compensation Plan Master Plan Document 9.5 DOUBT AS TO BENEFICIARY. If the Committee has any doubt as to the proper Beneficiary to receive payments pursuant to this Plan, the Committee shall have the right, exercisable in its discretion, to cause the Participant's Employer to withhold such payments until this matter is resolved to the Committee's satisfaction. 9.6 DISCHARGE OF OBLIGATIONS. The payment of benefits under this Plan to a Beneficiary shall fully and completely discharge all Employers and the Committee from all further obligations under this Plan with respect to the Participant, and that Participant's Plan Agreement shall terminate upon such full payment of benefits. ARTICLE 10 LEAVE OF ABSENCE 10.1 PAID LEAVE OF ABSENCE. If a Participant is authorized by his or her Employer to take a paid leave of absence from the employment of the Employer, (i) the Participant shall continue to be considered eligible for the benefits provided in Articles 4, 5, 6, 7 and 8 in accordance with the provisions of those Articles, and (ii) the Annual Deferral Amount shall continue to be withheld during such paid leave of absence in accordance with Section 3.3. 10.2 UNPAID LEAVE OF ABSENCE. If a Participant is authorized by his or her Employer to take an unpaid leave of absence from the employment of the Employer for any reason, such Participant shall continue to be eligible for the benefits provided in Articles 4, 5, 6, 7 and 8 in accordance with the provisions of those Articles. However, the Participant shall be excused from fulfilling his or her Annual Deferral Amount commitment that would otherwise have been withheld during the remainder of the Plan Year in which the unpaid leave of absence is taken. During the unpaid leave of absence, the Participant shall not be allowed to make any additional deferral elections. However, if the Participant returns to employment, the Participant may elect to defer an Annual Deferral Amount for the Plan Year following his or her return to employment and for every Plan Year thereafter while a participant in this Plan, provided such deferral elections are otherwise allowed and an Election Form is delivered to and accepted by the Committee (or its designated agent) for each such election in accordance with Section 3.3 above. ARTICLE 11 TERMINATION OF PLAN, AMENDMENT OR MODIFICATION 11.1 TERMINATION OF PLAN. Although the Company anticipates that it will continue this Plan for an indefinite period of time, there is no guarantee that any particular Employer will continue its participation in this Plan or will not terminate its participation in this Plan at any time in the future. Accordingly, each Employer reserves the right to Terminate the Plan. In the event of a Termination of the Plan by an Employer, the Measurement Funds available to Participants following the Termination of the Plan shall be comparable in number and type to those Measurement Funds available to Participants in the Plan Year preceding the Plan Year in which the Termination of the Plan is effective. Following a Termination of the Plan, Participant Account Balances shall remain in this Plan until the Participant becomes eligible for the benefits provided in Articles 4, 5, 6, 7 or 8 in accordance with the provisions of those Articles. The -18- GENESEE & WYOMING INC. 2004 Deferred Compensation Plan Master Plan Document Termination of the Plan by an Employer shall not adversely affect any Participant or Beneficiary who has become entitled to the payment of any benefits under this Plan as of the date of termination. 11.2 AMENDMENT. An Employer may, at any time, amend or modify this Plan in whole or in part with respect to that Employer. Notwithstanding the foregoing, (i) no amendment or modification shall be effective to decrease the value of a Participant's vested Account Balance in existence at the time the amendment or modification is made, and (ii) no amendment or modification of this Section 11.2 or Section 12.2 of this Plan shall be effective. 11.3 PLAN AGREEMENT. Despite the provisions of Sections 11.1 and 11.2 above, if a Participant's Plan Agreement contains benefits or limitations that are not in this Plan document, the Employer may only amend or terminate such provisions with the written consent of the Participant. 11.4 EFFECT OF PAYMENT. The full payment of a Participant's vested Account Balance under Articles 4, 5, 6, 7 or 8 of this Plan shall completely discharge all obligations to such Participant and his or her designated Beneficiary(ies) under this Plan, and the Participant's Plan Agreement shall terminate. ARTICLE 12 ADMINISTRATION 12.1 COMMITTEE DUTIES. Except as otherwise provided in this Article 12, this Plan shall be administered by the Committee, which shall consist of the entire Board, or such other persons as the Board shall appoint thereto. Members of the Committee may be Participants under this Plan. The Committee shall also have the discretion and authority to (i) make, amend, interpret, and enforce all appropriate rules and regulations for the administration of this Plan and (ii) decide or resolve any and all questions including interpretations of this Plan, as may arise in connection with this Plan. Any individual serving on the Committee who is a Participant shall not vote or act on any matter relating solely to himself or herself. When making a determination or calculation, the Committee shall be entitled to rely on information furnished by a Participant or the Company. 12.2 ADMINISTRATION UPON CHANGE IN CONTROL. For purposes of this Plan, the Committee shall be the "Administrator" at all times prior to the occurrence of a Change In Control. Within one hundred and twenty (120) days following a Change In Control, an independent third party "Administrator" may be selected by the individual who, immediately prior to the Change In Control, was the Company's Chief Executive Officer or, if not so identified, the Company's highest ranking officer (the "Ex-CEO"), and approved by the Trustee. The Committee, as constituted prior to the Change In Control, shall continue to be the Administrator until the earlier of (i) the date on which such independent third party is selected and approved, or (ii) the expiration of the one hundred and twenty (120) day period following the Change In Control. If an independent third party is not selected within one hundred and twenty (120) days of such Change In Control, the Committee, as described in Section 12.1, shall be the Administrator. The Administrator shall have the discretionary power to determine all questions arising in connection with the administration of this Plan and the interpretation of this Plan and Trust including, but -19- GENESEE & WYOMING INC. 2004 Deferred Compensation Plan Master Plan Document not limited to benefit entitlement determinations; provided, however, upon and after the occurrence of a Change In Control, the Administrator shall have no power to direct the investment of Plan or Trust assets or select any investment manager or custodial firm for this Plan or Trust. Upon and after the occurrence of a Change In Control, the Company must: (1) pay all reasonable administrative expenses and fees of the Administrator; (2) indemnify the Administrator against any costs, expenses and liabilities including, without limitation, attorney's fees and expenses arising in connection with the performance of the Administrator hereunder, except with respect to matters resulting from the gross negligence or willful misconduct of the Administrator or its employees or agents; and (3) supply full and timely information to the Administrator on all matters relating to this Plan, the Trust, the Participants and their Beneficiaries, the Account Balances of the Participants, the date and circumstances of the Separation of Service, Disability or death of the Participants, and such other pertinent information as the Administrator may reasonably require. Upon and after a Change In Control, the Administrator may be terminated (and a replacement appointed) by the Trustee only with the approval of the Ex-CEO. Upon and after a Change In Control, the Administrator may not be terminated by the Company. 12.3 AGENTS. In the administration of this Plan, the Committee may, from time to time, employ agents and delegate to them such administrative duties as it sees fit (including acting through a duly appointed representative) and may from time to time consult with counsel who may be counsel to any Employer. 12.4 BINDING EFFECT OF DECISIONS. The decision or action of the Administrator with respect to any question arising out of or in connection with the administration, interpretation and application of this Plan and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in this Plan. 12.5 INDEMNITY OF COMMITTEE. All Employers shall indemnify and hold harmless the members of the Committee, any individual to whom the duties of the Committee may be delegated, and the Administrator against any and all claims, losses, damages, expenses or liabilities arising from any action or failure to act with respect to this Plan, except in the case of willful misconduct by the Committee, any of its members, any such individual or the Administrator. 12.6 EMPLOYER INFORMATION. To enable the Committee and/or Administrator to perform its functions, the Company and each Employer shall supply full and timely information to the Committee and/or Administrator, as the case may be, on all matters relating to the compensation of its Participants, the date and circumstances of the Separation of Service, Disability or death of its Participants, and such other pertinent information as the Committee or Administrator may reasonably require. ARTICLE 13 OTHER BENEFITS AND AGREEMENTS 13.1 COORDINATION WITH OTHER BENEFITS. The benefits provided to a Participant and his or her Beneficiary under this Plan are in addition to any other benefits available to such Participant under any other plan or program for the Employees or Directors of the Participant's Employer. -20- GENESEE & WYOMING INC. 2004 Deferred Compensation Plan Master Plan Document This Plan shall supplement and shall not supersede, modify or amend any other such plan or program except as may otherwise be expressly provided. ARTICLE 14 CLAIMS PROCEDURES 14.1 PRESENTATION OF CLAIM. Any Participant or Beneficiary of a deceased Participant (such Participant or Beneficiary being referred to below as a "Claimant") may deliver to the Committee a written claim for a determination with respect to the amounts distributable to such Claimant from this Plan. If such a claim relates to the contents of a notice received by the Claimant, the claim must be made within sixty (60) days after such notice was received by the Claimant. All other claims must be made within one hundred and eighty (180) days of the date on which the event that caused the claim to arise occurred. The claim must state with particularity the determination desired by the Claimant. 14.2 NOTIFICATION OF DECISION. The Committee shall consider a Claimant's claim within a reasonable time, but no later than ninety (90) days after receiving the claim. If the Committee determines that special circumstances require an extension of time for processing the claim, written notice of the extension shall be furnished to the Claimant prior to the termination of the initial ninety (90) day period. In no event shall such extension exceed a period of ninety (90) days from the end of the initial period. The extension notice shall indicate the special circumstances requiring an extension of time and the date by which the Committee expects to render the benefit determination. The Committee shall notify the Claimant in writing: (a) that the Claimant's requested determination has been made, and that the claim has been allowed in full; or (b) that the Committee has reached a conclusion contrary, in whole or in part, to the Claimant's requested determination, and such notice must set forth in a manner calculated to be understood by the Claimant: (i) the specific reason(s) for the denial of the claim, or any part of it; (ii) specific reference(s) to pertinent provisions of this Plan upon which such denial was based; (iii) a description of any additional material or information necessary for the Claimant to perfect the claim, and an explanation of why such material or information is necessary; (iv) an explanation of the claim review procedure set forth in Section 14.3 below; and (v) a statement of the Claimant's right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination on review. 14.3 REVIEW OF A DENIED CLAIM. On or before sixty (60) days after receiving a notice from the Committee that a claim has been denied, in whole or in part, a Claimant (or the Claimant's duly authorized representative) may file with the Committee a written request for a review of the denial of the claim. The Claimant (or the Claimant's duly authorized representative): -21- GENESEE & WYOMING INC. 2004 Deferred Compensation Plan Master Plan Document (a) may, upon request and free of charge, have reasonable access to, and copies of, all documents, records and other information relevant to the claim for benefits; (b) may submit written comments or other documents; and/or (c) may request a hearing, which the Committee, in its sole and absolute discretion, may grant. 14.4 DECISION ON REVIEW. The Committee shall render its decision on review promptly, and no later than sixty (60) days after the Committee receives the Claimant's written request for a review of the denial of the claim. If the Committee determines that special circumstances require an extension of time for processing the claim, written notice of the extension shall be furnished to the Claimant prior to the termination of the initial sixty (60) day period. In no event shall such extension exceed a period of sixty (60) days from the end of the initial period. The extension notice shall indicate the special circumstances requiring an extension of time and the date by which the Committee expects to render the benefit determination. In rendering its decision, the Committee shall take into account all comments, documents, records and other information submitted by the Claimant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination. The decision must be written in a manner calculated to be understood by the Claimant, and it must contain: (a) specific reasons for the decision; (b) specific reference(s) to the pertinent Plan provisions upon which the decision was based; (c) a statement that the Claimant is entitled to receive, upon request and free of charge, reasonable access to and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the Claimant's claim for benefits; and (d) a statement of the Claimant's right to bring a civil action under ERISA Section 502(a). 14.5 LEGAL ACTION. A Claimant's compliance with the foregoing provisions of this Article 14 is a mandatory prerequisite to a Claimant's right to commence any legal action with respect to any claim for benefits under this Plan. ARTICLE 15 TRUST 15.1 ESTABLISHMENT OF THE TRUST. In order to provide assets from which to fulfill the obligations of the Participants and their beneficiaries under this Plan, the Company may establish a trust by a trust agreement with a third party, the trustee, to which each Employer may, in its discretion, contribute cash or other property, including securities issued by the Company, to provide for the benefit payments under this Plan (the "Trust"). 15.2 INTERRELATIONSHIP OF THIS PLAN AND THE TRUST. The provisions of this Plan and the Plan Agreement shall govern the rights of a Participant to receive distributions pursuant to this Plan. The provisions of the Trust shall govern the rights of the Employers, Participants and the creditors of the Employers to the assets transferred to the Trust. Each Employer shall at all times remain liable to carry out its obligations under this Plan. -22- GENESEE & WYOMING INC. 2004 Deferred Compensation Plan Master Plan Document 15.3 DISTRIBUTIONS FROM THE TRUST. Each Employer's obligations under this Plan may be satisfied with Trust assets distributed pursuant to the terms of the Trust, and any such distribution shall reduce the Employer's obligations under this Plan. ARTICLE 16 MISCELLANEOUS 16.1 STATUS OF PLAN. This Plan is intended to be a plan that is not qualified within the meaning of Code Section 401(a) and that "is unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees" within the meaning of ERISA Sections 201(2), 301(a)(3) and 401(a)(1). This Plan shall be administered and interpreted to the extent possible in a manner consistent with that intent. 16.2 UNSECURED GENERAL CREDITOR. Participants and their Beneficiaries, heirs, successors and assigns shall have no legal or equitable rights, interests or claims in any property or assets of an Employer. For purposes of the payment of benefits under this Plan, any and all of an Employer's assets shall be, and remain, the general, unpledged unrestricted assets of the Employer. An Employer's obligation under this Plan shall be merely that of an unfunded and unsecured promise to pay money in the future. 16.3 EMPLOYER'S LIABILITY. An Employer's liability for the payment of benefits shall be defined only by this Plan and the Plan Agreement, as entered into between the Employer and a Participant. An Employer shall have no obligation to a Participant under this Plan except as expressly provided in this Plan and his or her Plan Agreement. 16.4 NONASSIGNABILITY. Neither a Participant nor any other person shall have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate, alienate or convey in advance of actual receipt, the amounts, if any, payable hereunder, or any part thereof, which are, and all rights to which are expressly declared to be, unassignable and non-transferable. No part of the amounts payable shall, prior to actual payment, be subject to seizure, attachment, garnishment or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by a Participant or any other person, be transferable by operation of law in the event of a Participant's or any other person's bankruptcy or insolvency or be transferable to a spouse as a result of a property settlement or otherwise. 16.5 NOT A CONTRACT OF EMPLOYMENT. The terms and conditions of this Plan shall not be deemed to constitute a contract of employment or service between any Employer and a Participant. Such employment or service is hereby acknowledged to be an "at will" employment or service relationship that can be terminated at any time for any reason, or no reason, with or without cause, and with or without notice, unless expressly provided in a written employment or other agreement. Nothing in this Plan shall be deemed to give a Participant the right to be retained in the service of any Employer, either as an Employee or a Director, or to interfere with the right of any Employer to discipline or discharge the Participant at any time. 16.6 FURNISHING INFORMATION. A Participant or his or her Beneficiary(ies) will cooperate with the Committee by furnishing any and all information requested by the Committee and take such -23- GENESEE & WYOMING INC. 2004 Deferred Compensation Plan Master Plan Document other actions as may be requested in order to facilitate the administration of this Plan and the payments of benefits hereunder, including but not limited to taking such physical examinations as the Committee may deem necessary. 16.7 TERMS. Whenever any words are used herein in the masculine, they shall be construed as though they were in the feminine in all cases where they would so apply; and whenever any words are used herein in the singular or in the plural, they shall be construed as though they were used in the plural or the singular, as the case may be, in all cases where they would so apply. 16.8 CAPTIONS. The captions of the articles, sections and paragraphs of this Plan are for convenience only and shall not control or affect the meaning or construction of any of its provisions. 16.9 GOVERNING LAW. Subject to ERISA, the provisions of this Plan shall be construed and interpreted according to the internal laws of the State of Delaware without regard to its conflicts of laws principles. 16.10 NOTICE. Any notice or filing required or permitted to be given to the Committee under this Plan shall be sufficient if in writing and hand-delivered, or sent by registered or certified mail, to the address below: Genesee & Wyoming Inc. Attn: Human Resources 1200-C Scottsville Road Suite 200 Rochester, New York 14624 Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification. Any notice or filing required or permitted to be given to a Participant under this Plan shall be sufficient if in writing and hand-delivered, or sent by mail, to the last known address of the Participant. 16.11 SUCCESSORS. The provisions of this Plan shall bind and inure to the benefit of the Participant's Employer and its successors and assigns and the Participant and the Participant's designated Beneficiaries. 16.12 SPOUSE'S INTEREST. The interest in the benefits hereunder of a spouse of a Participant who has predeceased the Participant shall automatically pass to the Participant and shall not be transferable by such spouse in any manner, including but not limited to such spouse's will, nor shall such interest pass under the laws of interstate succession. 16.13 VALIDITY. In case any provision of this Plan shall be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Plan shall be construed and enforced as if such illegal or invalid provision had never been inserted herein. 16.14 INCOMPETENT. If the Committee determines in its discretion that a benefit under this Plan is to be paid to a minor, a person declared incompetent or to a person incapable of handling the disposition of that person's property, the Committee may direct payment of such benefit to the guardian, legal representative or person having the care and custody of such minor, incompetent or incapable person. The Committee may require proof of minority, incompetence, incapacity or -24- GENESEE & WYOMING INC. 2004 Deferred Compensation Plan Master Plan Document guardianship, as it may deem appropriate prior to distribution of the benefit. Any payment of a benefit shall be a payment for the account of the Participant and the Participant's Beneficiary, as the case may be, and shall be a complete discharge of any liability under this Plan for such payment amount. 16.15 COURT ORDER. The Committee is authorized to comply with any court order in any action in which this Plan or the Committee has been named as a party, including any action involving a determination of the rights or interests in a Participant's benefits under this Plan. Notwithstanding the foregoing, the Committee shall interpret this provision in a manner that is consistent with applicable tax law, including but not limited to guidance issued after the effective date of this Plan. 16.16 DEDUCTION LIMITATION ON BENEFIT PAYMENTS. If an Employer determines in good faith that there is a reasonable likelihood that any compensation paid to a Participant for a taxable year of the Employer would not be deductible by the Employer solely by reason of the limitation under Code Section 162(m), then to the extent deemed necessary by the Employer to ensure that the entire amount of any distribution to the Participant pursuant to this Plan is deductible, the Employer may defer all or any portion of a distribution under this Plan. Any amounts deferred pursuant to this limitation shall continue to be credited/debited with additional amounts in accordance with Section 3.9 above, even if such amount is being paid out in installments. The amounts so deferred and amounts credited thereon shall be distributed to the Participant or his or her Beneficiary (in the event of the Participant's death) at the earliest possible date, as determined by the Employer in good faith, on which the deductibility of compensation paid or payable to the Participant for the taxable year of the Employer during which the distribution is made will not be limited by Code Section 162(m). 16.17 INSURANCE. The Employers, on their own behalf or on behalf of the trustee of the Trust, and, in their sole and absolute discretion, may apply for and procure insurance on the life of the Participant, in such amounts and in such forms as the Trust may choose. The Employers or the trustee of the Trust, as the case may be, shall be the sole owner and beneficiary of any such insurance. The Participant shall have no interest whatsoever in any such policy or policies, and at the request of the Employers shall submit to medical examinations and supply such information and execute such documents as may be required by the insurance company or companies to whom the Employers have applied for insurance. IN WITNESS WHEREOF, the Company has signed this Plan document as of May 17, 2004. GENESEE & WYOMING INC. By: /s/ Adam B. Frankel Title: General Counsel and Corporate Secretary -25- EX-31.1 3 l08623aexv31w1.txt EX-31.1 302 CERTIFICATION FOR CEO Exhibit 31.1 Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer I, Mortimer B. Fuller, III, certify that: 1. I have reviewed this Quarterly Report on Form 10-Q of Genesee & Wyoming Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluations; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: August 6, 2004 /s/ Mortimer B. Fuller, III --------------------------- Mortimer B. Fuller, III, Chairman and Chief Executive Officer EX-31.2 4 l08623aexv31w2.txt EX-31.2 302 CERTIFICATION FOR CFO Exhibit 31.2 Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer I, John C. Hellmann, certify that: 1. I have reviewed this Quarterly Report on Form 10-Q of Genesee & Wyoming Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluations; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: August 6, 2004 /s/ John C. Hellmann -------------------------------------------- John C. Hellmann, Chief Financial Officer EX-32.1 5 l08623aexv32w1.txt EX-32.1 906 CERTIFICATION FOR CEO AND CFO Exhibit 32.1 Section 1350 Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 ("Section 906"), Mortimer B. Fuller, III and John C. Hellmann, Chairman and Chief Executive Officer and Chief Financial Officer, respectively, of Genesee & Wyoming Inc., certify that (i) the Quarterly Report on Form 10-Q for the quarter ended June 30, 2004, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of Genesee & Wyoming Inc. /s/ Mortimer B. Fuller, III ----------------------------------------- Mortimer B. Fuller, III Chairman and Chief Executive Officer Date: August 6, 2004 /s/ John C. Hellmann ----------------------------------------- John C. Hellmann Chief Financial Officer Date: August 6, 2004 -----END PRIVACY-ENHANCED MESSAGE-----


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.)


Part I — Financial Information

Item 1. Financial Statements (Unaudited):		Page

	Consolidated Statements of Income — For the Three Month and Six Month Periods Ended June 30, 2004 and 2003	3

	Consolidated Balance Sheets — As of June 30, 2004 and December 31, 2003	4

	Consolidated Statements of Cash Flows — For the Three Month and Six Month Periods Ended June 30, 2004 and 2003	5

	Notes to Consolidated Financial Statements	6 - 18

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19 - 37

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38

Item 4.	Controls and Procedures	38

Part II — Other Information		39

Item 1.	Legal Proceedings	39

Item 2.	Changes in Securities and Use of Proceeds	39

Item 3.	Defaults Upon Senior Securities	39

Item 4.	Submission of Matters to a Vote of Security Holders.	39

Item 5.	Other Information	39 - 40

Item 6.	Exhibits and Reports on Form 8-K	40

Index to Exhibits		40

Signatures		41


As of June 30, 2004	$	0.70
As of December 31, 2003	$	0.75
Average for the three months ended June 30, 2004	$	0.72
Average for the three months ended June 30, 2003	$	0.64
Average for the six months ended June 30, 2004	$	0.74
Average for the six months ended June 30, 2003	$	0.62


	June 30, 2004		December 31, 2003
Current assets	$	10,380	$	14,374
Non-current assets		56,792		55,237

Total assets	$	67,172	$	69,611

Current liabilities		4,858		5,617
Non-current liabilities		5,097		4,702
Senior debt		1,665		1,568
Shareholders’ equity		55,552		57,724

Total liabilities and shareholders’ equity	$	67,172	$	69,611


			% of					% of
	2004		Total			2003		Total
Third party track access fees	$	5,924		42.4	%	$	3,886		36.3	%
Alice Springs to Darwin Line		1,574		11.3	%		4,047		37.9	%
Other operating income		6,446		46.3	%		2,758		25.8	%

Total non-freight revenues	$	13,944		100.0	%	$	10,691		100.0	%


Class	Number of Shares Outstanding
Class A Common Stock		24,221,761
Class B Common Stock		2,650,122


	Six Months Ended			Twelve Months Ended
	June 30, 2004			December 31, 2003
Goodwill:
Balance at beginning of period	$	24,522		$	24,174
Goodwill acquired during period		—			—
Amortization		—			—
Currency translation adjustment		(56	)		348
Impairment losses		—			—

Balance at end of period	$	24,466		$	24,522


							Other
							Retirement
	Pension						Benefits
	2004			2003			2004		2003
Service cost	$	57		$	45		$	28	$	25
Interest cost		53			48			68		69
Expected return on plan assets		(32	)		(23	)		—		—
Amortization of transition liability		36			36			—		—
Amortization of prior service cost		—			—			—		—
Amortization of (gain) loss		6			3			21		5

Net periodic benefit cost	$	120		$	109		$	117	$	99


	Six Months Ended June,
	2004							2003
			Currency			Revenue Excluding
	As Reported		Translation Impact			Currency Impact		As Reported
U.S. Operating Revenues	$	101,580		n/a		$	101,580	$	87,404
Canada Operating Revenues		29,605	$	2,293			27,312		18,360
Mexico Operating Revenues		15,279		(857	)		16,136		16,034

Total Operating Revenues	$	146,464	$	1,436		$	145,028	$	121,798


	Six Months Ended June 30,
	2004						2003
			Currency		Revenue Excluding
	As Reported		Translation Impact		Currency Impact		As Reported
Operating Revenues	$	164,070	$	26,606	$	137,464	$	113,272

Net Income	$	14,432	$	2,340	$	12,092	$	8,288


	For		Authority Withheld
Louis S. Fuller		48,471,413		765,008
Philip J. Ringo		47,941,681		1,294,740
Mark A. Scudder		48,479,005		757,416


For			44,928,813
Against			1,466,485
Abstain			8,425
Broker non-votes			2,832,698


(10.1)		Genesee & Wyoming Inc. 2004 Deferred Compensation Plan for highly compensated employees and directors dated May 7, 2004

(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: August 6, 2004	By:	/s/John C. Hellmann

		Name: John C. Hellmann Title: Chief Financial Officer

Date: August 6, 2004	By:	/s/James M. Andres

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