10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2008

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission File No. 001-31456

GENESEE & WYOMING INC.

(Exact name of registrant as specified in its charter)

Delaware	06-0984624
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

66 Field Point Road, Greenwich, Connecticut	06830
(Address of principal executive offices)	(Zip Code)

(203) 629-3722

(Registrant’s telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    x  YES    ¨  NO

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check One):

Large Accelerated Filer	x	Accelerated filer	¨
Non-Accelerated Filer	¨	Smaller Reporting Company	¨

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):    ¨  YES    x  NO

Shares of common stock outstanding as of the close of business on August 1, 2008:

Class	Number of Shares Outstanding
Class A Common Stock	31,896,098
Class B Common Stock	3,975,178

INDEX

		Page
Part I.	Financial Information
Item 1.	Financial Statements (Unaudited):
	Consolidated Balance Sheets - As of June 30, 2008 and December 31, 2007	3
	Consolidated Statements of Operations - For the Three and Six Months Ended June 30, 2008 and 2007	4
	Consolidated Statements of Cash Flows - For the Six Months Ended June 30, 2008 and 2007	5
	Notes to Consolidated Financial Statements	6-16
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17-36
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
Item 4.	Controls and Procedures	37
Part II.	Other Information	38
Item 1.	Legal Proceedings	38-39
Item 1A.	Risk Factors	39
Item 2.	Unregistered Sales of Equity 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	40
Item 6.	Exhibits	40
Signatures		41
Index to Exhibits		42

2

GENESEE & WYOMING INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF JUNE 30, 2008 and DECEMBER 31, 2007

(dollars in thousands, except share amounts)

(Unaudited)

	June 30, 2008			December 31, 2007
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	40,181		$	46,684
Accounts receivable, net		140,052			125,934
Materials and supplies		9,019			7,555
Prepaid expenses and other		17,953			18,147
Current assets of discontinued operations		1,351			2,213
Deferred income tax assets, net		7,462			7,495
Total current assets		216,018			208,028
PROPERTY AND EQUIPMENT, net		783,683			696,990
INVESTMENT IN UNCONSOLIDATED AFFILIATES		4,805			4,696
GOODWILL		59,845			39,352
INTANGIBLE ASSETS, net		170,882			117,106
DEFERRED INCOME TAX ASSETS, net		768			1,353
OTHER ASSETS, net		5,538			10,276
Total assets	$	1,241,539		$	1,077,801
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt	$	2,393		$	2,247
Accounts payable		119,134			128,038
Accrued expenses		35,797			37,792
Current liabilities of discontinued operations		3,049			3,919
Deferred income tax liabilities, net		84			66
Total current liabilities		160,457			172,062
LONG-TERM DEBT, less current portion		335,235			270,519
DEFERRED INCOME TAX LIABILITIES, net		145,721			93,336
DEFERRED ITEMS - grants from governmental agencies		106,446			94,651
OTHER LONG-TERM LIABILITIES		18,271			15,144
COMMITMENTS AND CONTINGENCIES		—			—
MINORITY INTEREST		1,193			1,108
STOCKHOLDERS’ EQUITY:
Class A Common Stock, $0.01 par value, one vote per share; 90,000,000 shares authorized; 44,374,547 and 43,773,926 shares issued and 31,979,146 and 31,436,607 shares outstanding (net of 12,395,401 and 12,337,319 shares in treasury, respectively) on June 30, 2008 and December 31, 2007		444			438
Class B Common Stock, $0.01 par value, ten votes per share; 15,000,000 shares authorized; 3,975,178 shares issued and outstanding on June 30, 2008 and December 31, 2007		40			40
Additional paid-in capital		212,075			197,463
Retained earnings		433,155			407,367
Accumulated other comprehensive income		30,844			25,660
Less treasury stock, at cost		(202,342	)		(199,987	)
Total stockholders’ equity		474,216			430,981
Total liabilities and stockholders’ equity	$	1,241,539		$	1,077,801

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

3

GENESEE & WYOMING INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2008 and 2007

(dollars in thousands, except per share amounts)

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2008			2007			2008			2007
OPERATING REVENUES	$	152,715		$	125,294		$	293,396		$	250,401
OPERATING EXPENSES:
Transportation		52,876			40,267			100,732			79,752
Maintenance of ways and structures		12,379			12,340			24,531			23,047
Maintenance of equipment		17,929			17,701			35,870			35,196
Diesel fuel sold to third parties		10,379			5,750			18,946			11,071
General and administrative		22,505			20,514			46,715			41,552
Net gain on sale of assets		(2,481	)		(432	)		(3,031	)		(463	)
Depreciation and amortization		9,453			7,840			18,652			15,546
Total operating expenses		123,040			103,980			242,415			205,701
INCOME FROM OPERATIONS		29,675			21,314			50,981			44,700
Interest income		571			2,609			1,156			5,962
Interest expense		(4,044	)		(3,519	)		(7,953	)		(7,014	)
Minority interest		(60	)		—			(85	)		—
Other income, net		561			977			659			894
Income from continuing operations before income taxes		26,703			21,381			44,758			44,542
Provision for income taxes		10,577			5,780			17,396			12,858
Income from continuing operations		16,126			15,601			27,362			31,684
Loss from discontinued operations, net of tax		(735	)		(4,858	)		(1,574	)		(6,621	)
Net income	$	15,391		$	10,743		$	25,788		$	25,063
Basic earnings per common share from continuing operations	$	0.51		$	0.44		$	0.87		$	0.87
Basic loss per common share from discontinued operations		(0.02	)		(0.14	)		(0.05	)		(0.18	)
Basic earnings per common share	$	0.48		$	0.30		$	0.82		$	0.69
Weighted average shares - Basic		31,755			35,847			31,626			36,554
Diluted earnings per common share from continuing operations	$	0.44		$	0.39		$	0.76		$	0.77
Diluted loss per common share from discontinued operations		(0.02	)		(0.12	)		(0.04	)		(0.16	)
Diluted earnings per common share	$	0.42		$	0.27		$	0.71		$	0.61
Weighted average shares - Diluted		36,378			40,425			36,197			41,141

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

4

GENESEE & WYOMING INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2008 and 2007

(dollars in thousands)

(Unaudited)

	Six Months Ended June 30,
	2008			2007
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	25,788		$	25,063
Adjustments to reconcile net income to net cash provided by operating activities:
Loss from discontinued operations		1,574			6,621
Depreciation and amortization		18,652			15,546
Compensation cost related to equity awards		2,598			2,754
Excess tax benefit from share-based compensation		(3,937	)		(815	)
Deferred income taxes		8,268			3,836
Net gain on sale of assets		(3,031	)		(463	)
Minority interest		85			—
Changes in assets and liabilities which provided (used) cash, net of effect of acquisitions:
Accounts receivable, net		(4,633	)		(476	)
Materials and supplies		(678	)		1,692
Prepaid expenses and other		849			1,986
Accounts payable and accrued expenses		(12,591	)		(4,095	)
Income taxes payable - Australia		(2,349	)		(94,103	)
Other assets and liabilities, net		4,698			451
Net cash provided by (used in) operating activities from continuing operations		35,293			(42,003	)
Net cash used in operating activities from discontinued operations		(1,166	)		(4,450	)
Net cash provided by (used in) operating activities		34,127			(46,453	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		(40,891	)		(27,476	)
Grant proceeds from government agencies		16,786			7,233
Cash paid for acquisitions, net of cash acquired		(97,616	)		—
Insurance proceeds for the replacement of assets		419			1,715
Proceeds from disposition of property and equipment		4,597			521
Net cash used in investing activities from continuing operations		(116,705	)		(18,007	)
Net cash used in investing activities from discontinued operations		—			(481	)
Net cash used in investing activities		(116,705	)		(18,488	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term borrowings, including capital leases		(70,505	)		(985	)
Proceeds from issuance of long-term debt		135,000			—
Net proceeds from employee stock purchases		8,057			2,431
Treasury stock purchases		(2,355	)		(65,144	)
Excess tax benefit from share-based compensation		3,937			815
Net cash provided by (used in) financing activities from continuing operations		74,134			(62,883	)
Net cash used in financing activities from discontinued operations		—			(13,301	)
Net cash provided by (used in) financing activities		74,134			(76,184	)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS		1,947			6,542
CHANGE IN CASH BALANCES INCLUDED IN CURRENT ASSETS OF DISCONTINUED OPERATIONS		(6	)		—
DECREASE IN CASH AND CASH EQUIVALENTS		(6,503	)		(134,583	)
CASH AND CASH EQUIVALENTS, beginning of period		46,684			240,206
CASH AND CASH EQUIVALENTS, end of period	$	40,181		$	105,623

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

5

GENESEE & WYOMING INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION:

The interim consolidated financial statements presented herein include the accounts of Genesee & Wyoming Inc. and its subsidiaries (the Company). All references to currency amounts included in this Quarterly Report on Form 10-Q, including the consolidated financial statements, are in United States dollars unless specifically noted otherwise. All significant intercompany transactions and accounts have been eliminated in consolidation. These interim consolidated financial statements have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) and accordingly do not contain all disclosures which would be required in a full set of financial statements in accordance with accounting principles generally accepted in the United States of America (United States GAAP). In the opinion of management, the unaudited financial statements for the three and six months ended June 30, 2008 and 2007, are presented on a basis consistent with the audited financial statements and contain all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation. The results of operations for interim periods are not necessarily indicative of results of operations for the full year. The consolidated balance sheet data for 2007 was derived from the audited financial statements in the Company’s 2007 Annual Report on Form 10-K but does not include all disclosures required by United States GAAP.

The interim consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2007, included in the Company’s 2007 Annual Report on Form 10-K. Certain prior period balances have been reclassified to conform to the 2008 presentation.

2. CHANGES IN OPERATIONS:

United States

CAGY Industries, Inc.: On May 30, 2008, the Company acquired 100% of CAGY Industries, Inc. (CAGY) for cash consideration of approximately $71.5 million (net of $17.2 million cash acquired). An additional $2.9 million of purchase price was recorded in the second quarter of 2008 to reflect adjustments for working capital. In addition, the Company has agreed to pay contingent consideration of up to $18.6 million upon satisfaction of certain conditions over the next two years, which will be recorded as additional cost of the acquisition when the contingencies are resolved. The results of operations for CAGY are included in the Company’s consolidated statements of operations as of the date of acquisition.

CAGY is the parent company of three short line railroads, Columbus & Greenville Railway in Mississippi; Chattooga & Chickamauga Railway in Georgia and Tennessee; and Luxapalila Valley Railroad in Mississippi and Alabama. CAGY’s three railroads employ 48 people, own and operate a fleet of 22 locomotives, as well as own and lease more than 280 miles of track. The Company has included 100% of the value of CAGY’s net assets ($91.6 million) in its consolidated balance sheet since May 31, 2008.

6

While the Company expects to complete its purchase price allocation among the respective assets and liabilities of CAGY during 2008, the following table sets forth its preliminary allocation as of June 30, 2008 (dollars in thousands):

Cash	$	17,242
Other current assets		5,237
Property and equipment		66,343
Intangible assets		55,677
Other assets		99
Total assets		144,598
Current liabilities		7,158
Long-term debt, including current portion		1,361
Deferred tax liability, net		44,107
Other long-term liabilities		363
Total liabilities		52,989
Net assets	$	91,609

Maryland Midland Railway, Inc.: On December 31, 2007, the Company acquired 87.4% of Maryland Midland Railway, Inc. (Maryland Midland) for cash consideration of approximately $19.4 million (net of $7.5 million cash acquired). An additional $3.6 million was paid in the first quarter of 2008 to reflect adjustments for final working capital. The purchase price was preliminarily allocated as follows: current assets ($9.2 million, including cash acquired), property and equipment ($47.0 million), less current liabilities ($5.4 million), debt assumed ($1.5 million), deferred income tax liabilities ($17.9 million) and minority interest ($0.8 million). The 12.6% minority shareholder of Maryland Midland has the option to sell its interest to the Company for $4.4 million at its discretion until December 31, 2012. Headquartered 50 miles northwest of Baltimore, the Maryland Midland operates over 63 miles of track between Glyndon and Highfield, Maryland (near the Pennsylvania border), and between Walkersville and Taneytown, Maryland. Maryland Midland has 30 employees, 10 locomotives and is an interline carrier with CSX Corporation (CSX).

Netherlands

Rotterdam Rail Feeding: On April 8, 2008, the Company acquired 100% of Rotterdam Rail Feeding (RRF) for cash consideration of approximately $22.5 million. The purchase price was preliminarily allocated as follows: current assets ($2.7 million), property and equipment ($0.8 million), goodwill ($20.8 million), less current liabilities ($1.8 million). In addition, the Company has agreed to pay contingent consideration of up to €1.5 million (or $2.4 million at the June 30, 2008 exchange rate) payable over the next three years. Headquartered in the Port of Rotterdam in the Netherlands, RRF is an independent provider of short-haul rail and switching services. RRF’s principal business is “last mile” rail services within the Port of Rotterdam for long-haul railroads and industrial customers. In addition, RRF provides locomotives, railroad operating personnel and rail-related services throughout the Netherlands to track construction and maintenance companies as well as government-owned operators. RRF’s operations include 12 locomotives (leased and owned) and 35 employees.

Mexico

During the third quarter of 2007, the Company’s Mexican subsidiary, Ferrocarriles Chiapas-Mayab, S.A. de C.V. (FCCM), ceased its operations and initiated formal liquidation proceedings. Results from the Company’s Mexican operations for the three and six months ended June 30, 2008 and 2007, are included in results from discontinued operations. See Note 9 for additional information regarding the Company’s discontinued operations.

Results of Operations

When comparing the Company’s results of operations from one reporting period to another, you should consider that the Company has historically experienced fluctuations in revenues and expenses due to one-time freight moves, hurricanes, droughts, heavy snowfall, freezing and flooding, customer plant expansions and shut-downs, sales of land and

7

equipment and derailments. In periods when these events occur, results of operations are not easily comparable to other periods. Also, the Company has completed or entered into a number of transactions recently which have changed and will change its results of operations. Because of variations in the structure, timing and size of these transactions, the Company’s operating results in any reporting period may not be directly comparable to its operating results in other reporting periods.

Certain of the Company’s railroads have commodity shipments which are sensitive to general economic conditions including paper products and lumber and forest products. However, shipments of other commodities are less affected by economic conditions and are more closely affected by other factors, such as inventory levels maintained at a customer power plant (coal), winter weather (salt) and seasonal rainfall (grain in South Australia).

Pro Forma Financial Results

The following table summarizes the Company’s unaudited pro forma operating results for the three and six months ended June 30, 2008 and 2007, as if CAGY had been acquired as of January 1, 2007 (dollars in thousands, except per share amounts):

	Three Months Ended June 30,				Six Months Ended June 30,
	2008		2007		2008		2007
Operating Revenues	$	156,902	$	127,835	$	301,890	$	254,857
Net Income	$	13,289	$	15,693	$	27,217	$	31,651
Basic Earnings per common share from continuing operations	$	0.42	$	0.44	$	0.86	$	0.87
Diluted Earnings per common share from continuing operations	$	0.37	$	0.39	$	0.75	$	0.77

The unaudited pro forma operating results include the acquisition of CAGY adjusted, net of tax, for depreciation and amortization expense resulting from the property and equipment and intangible assets acquired based on assigned values and the inclusion of interest expense related to borrowings used to fund the acquisition. CAGY’s results for the three and six months ended June 30, 2008, reflected in these pro forma operating results, include certain senior management compensation that the Company does not believe would have continued as ongoing expenses but do not qualify for elimination under the treatment and presentation of pro forma financial results.

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

8

3. EARNINGS PER SHARE:

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

	Three Months Ended June 30,						Six Months Ended June 30,
	2008			2007			2008			2007
Numerator:
Income from continuing operations	$	16,126		$	15,601		$	27,362		$	31,684
Loss from discontinued operations, net of tax		(735	)		(4,858	)		(1,574	)		(6,621	)
Net income	$	15,391		$	10,743		$	25,788		$	25,063
Denominators:
Weighted average Class A common shares outstanding—Basic		31,755			35,847			31,626			36,554
Weighted average Class B common shares outstanding		3,975			3,975			3,975			3,975
Dilutive effect of employee stock grants		648			603			596			612
Weighted average shares—Dilutive		36,378			40,425			36,197			41,141
Earnings per common share:
Basic:
Earnings per common share from continuing operations	$	0.51		$	0.44		$	0.87		$	0.87
Loss per common share from discontinued operations		(0.02	)		(0.14	)		(0.05	)		(0.18	)
Earnings per common share	$	0.48		$	0.30		$	0.82		$	0.69
Diluted:
Earnings per common share from continuing operations	$	0.44		$	0.39		$	0.76		$	0.77
Loss per common share from discontinued operations		(0.02	)		(0.12	)		(0.04	)		(0.16	)
Earnings per common share	$	0.42		$	0.27		$	0.71		$	0.61

For the three months ended June 30, 2008 and 2007, a total of 384,062 and 1,156,113 shares, respectively, and for the six months ended June 30, 2008 and 2007, a total of 422,445 and 1,171,113 shares, respectively, of Class A common stock issuable under the assumed exercises of stock options computed based on the treasury stock method, were excluded from the calculation of diluted earnings per common share, as the effect of including these shares would have been anti-dilutive.

Stock Repurchase

During the three and six months ended June 30, 2007, the Company repurchased 975,430 and 2,452,530 shares, respectively, of the Company’s Class A common stock under a repurchase plan previously authorized by its Board of Directors. These shares were repurchased at an average cost of $28.15 and $26.46 per share, respectively. As of December 31, 2007, the Company had fully exhausted all of its existing authorizations to repurchase shares.

4. ACCOUNTS RECEIVABLE:

Accounts receivable consisted of the following as of June 30, 2008 and December 31, 2007 (dollars in thousands):

	June 30, 2008			December 31, 2007
Accounts receivable—trade	$	134,883		$	116,671
Accounts receivable—government grants		7,510			11,320
Total accounts receivable		142,393			127,991
Less: allowance for doubtful accounts		(2,341	)		(2,057	)
Accounts receivable, net	$	140,052		$	125,934

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5. INTANGIBLE ASSETS AND GOODWILL:

Intangible assets were as follows (dollars in thousands):

	June 30, 2008						Weighted- Average Amortization Period
	Gross Carrying Amount		Accumulated Amortization		Net Assets
INTANGIBLE ASSETS:
Amortizable intangible assets:
Service Agreements	$	37,622	$	6,215	$	31,407	28 years
Customer Contracts and Relationships		54,859		6,850		48,009	27 years
Acquired CAGY Intangible Assets		55,678		103		55,575	45 years
Non-amortizable intangible assets:
Track Access/Maintenance Agreements		35,891		—		35,891	—
Total Intangible Assets	$	184,050	$	13,168	$	170,882	34 years
	December 31, 2007						Weighted- Average Amortization Period
	Gross Carrying Amount		Accumulated Amortization		Net Assets
INTANGIBLE ASSETS:
Amortizable intangible assets:
Service Agreements	$	37,622	$	5,547	$	32,075	28 years
Customer Contracts and Relationships		54,859		5,719		49,140	27 years
Non-amortizable intangible assets:
Track Access/Maintenance Agreements		35,891		—		35,891	—
Total Intangible Assets	$	128,372	$	11,266	$	117,106	28 years

In the preliminary purchase price allocation of the CAGY acquisition, the Company allocated $55.7 million to amortizable intangible assets as of June 30, 2008. Based on the Company’s preliminary estimate of their expected economic life, these intangible assets are being amortized on a straight line basis over a weighted average of 45 years, which began on May 31, 2008.

The Track Access/Maintenance Agreements are perpetual trackage agreements on one of the Company’s railroads. Under Statement of Financial Accounting Standards (SFAS) No. 142, “Goodwill and Other Intangible Assets” (SFAS 142), these assets have been determined to have an indefinite useful life and, therefore, are not subject to amortization. However, these assets are tested for impairment on an annual basis.

10

For the three and six months ended June 30, 2008, the aggregate amortization expense associated with intangible assets was approximately $1.0 million and $1.9 million, respectively. For the three and six months ended June 30, 2007, the aggregate amortization expense associated with intangible assets was approximately $0.9 million and $1.8 million, respectively. The Company estimates the future aggregate amortization expense related to intangible assets will be as follows for the periods presented (dollars in thousands):

2008 (July through December)	$	2,332
2009		4,713
2010		4,713
2011		4,713
2012		4,713
Thereafter		113,807
Total	$	134,991

In accordance with SFAS 142, goodwill is not amortized. The changes in the carrying amount of goodwill were as follows (dollars in thousands):

	Six Months Ended June 30, 2008			Year Ended December 31, 2007
Goodwill:
Balance at beginning of period	$	39,352		$	37,788
Goodwill additions		20,842			—
Currency translation adjustment		(349	)		1,564
Balance at end of period	$	59,845		$	39,352

In the preliminary purchase price allocation of the RRF acquisition, the Company allocated $20.8 million to goodwill as of June 30, 2008. The $20.8 million of goodwill will not be deductible for tax purposes.

Under SFAS 142, goodwill and other indefinite-lived intangibles must be tested for impairment annually (or in interim periods if events indicate possible impairment).

6. INCOME TAXES:

The Company’s effective income tax rate in the three months ended June 30, 2008, was 39.6% compared with 27.0% in the three months ended June 30, 2007. The Company’s effective income tax rate in the six months ended June 30, 2008, was 38.9% compared with 28.9% in the six months ended June 30, 2007. The increase in 2008 was primarily attributable to the expiration of the United States railroad track maintenance credit on December 31, 2007.

7. COMMITMENTS AND CONTINGENCIES:

Litigation

Mexico

As previously disclosed, on June 25, 2007, FCCM formally notified the Secretaria de Comunicaciones y Transportes (SCT) of its intent to exercise its right to resign its 30-year concession from the Mexican government and to cease its rail operations. In response to this notification, on July 24, 2007, the SCT issued an official letter informing FCCM that the SCT did not accept the resignation of the concession. On August 8, 2007, the SCT issued another official letter to initiate a proceeding to impose sanctions on FCCM. The amount of the sanctions has not been specified. The proposed sanctions are based, in part, on allegations that FCCM has violated the Railroad Service Law in Mexico and the terms of its concession. On August 30, 2007, FCCM filed a brief with the SCT that challenged the proposed sanctions and introduced evidence supporting FCCM’s right to resign its concession. On September 21, 2007, FCCM also filed a

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proceeding in the Tax and Administrative Federal Court in Mexico seeking an annulment of the SCT’s July 24, 2007, official letter and recognition of FCCM’s right to resign its concession. The SCT has also seized substantially all of FCCM’s operating assets in response to FCCM’s resignation of the concession. On September 19, 2007, FCCM filed a proceeding in the Second District Court in Merida (District Court) challenging the SCT’s seizure of its operating assets as unconstitutional. The District Court admitted the proceeding on October 11, 2007, and a hearing on the constitutional grounds for the seizure and the legality of the SCT’s actions took place on February 1, 2008. The District Court has not yet issued a decision. In addition to the allegations made by the SCT, FCCM is subject to claims and lawsuits from aggrieved customers as a result of its cessation of rail operations and the initiation of formal liquidation proceedings. The Company believes the SCT and customer actions are without merit and unlawful and the Company will continue to pursue appropriate legal remedies to support FCCM’s resignation of the concession and to recover FCCM’s operating assets. As of June 30, 2008, there was a net liability of $1.7 million remaining on the Company’s balance sheet associated with its Mexican operations.

M&B Arbitration

As previously disclosed, Meridian & Bigbee Railroad LLC (M&B), the Company’s subsidiary, CSX and Kansas City Southern (KCS) were parties to a Haulage Agreement governing the movement of traffic between Meridian, Mississippi, and Burkeville, Alabama. On November 17, 2007, M&B initiated arbitration with the American Arbitration Association against CSX in an effort to collect on outstanding claims under the Haulage Agreement and on March 26, 2008, M&B filed an amended demand for arbitration to add KCS. To date, the Company’s total claims against CSX and KCS under the Haulage Agreement are $7.1 million, which amount could increase pending receipt of additional information and resolution of pending legal actions. On March 21, 2008, CSX filed an amended arbitration response, answering statement and counterclaim. On July 30, 2008, CSX filed a complaint-bill of summary in Superior Court in Connecticut seeking information from the Company related to the ongoing arbitration. CSX alleges it has suffered damages in an amount exceeding $3.0 million, but yet to be finally determined. The Company plans to vigorously defend itself against CSX’s claims, which it believes to be without merit, and will pursue insurance recovery as appropriate. Although the Company believes it is entitled to payment for its claims, and that it has meritorious defenses against CSX’s claims, arbitration is inherently uncertain, and it is possible that an unfavorable ruling could have a material adverse impact on the Company’s results of operations, financial position or liquidity as of and for the period in which the determination occurs.

Sheperdsville, Kentucky Litigation

As previously disclosed, on January 16, 2007, CSX’s freight train Q502-15 derailed in Sheperdsville, Kentucky. The derailment involved approximately 13 railcars carrying a variety of chemicals. As a consequence of this derailment, the Company was named as a defendant in two personal injury lawsuits and one class action lawsuit. On May 16, 2008, the United States District Court for the Western District of Kentucky at Louisville entered an order dismissing with prejudice the remaining claim against the Company associated with the aforementioned derailment.

Other

In addition to the lawsuits set forth above, from time to time the Company is a defendant in certain lawsuits resulting from its operations. Management believes there are adequate provisions in the financial statements for any expected liabilities that may result from disposition of pending lawsuits. Nevertheless, litigation is subject to inherent uncertainties, and unfavorable rulings could occur. Were an unfavorable ruling to occur, there would exist the possibility of a material adverse impact on the Company’s results of operations, financial position or liquidity as of and for the period in which the ruling occurs.

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8. COMPREHENSIVE INCOME:

Comprehensive income is the total of net income and all other non-owner changes in equity. The following table sets forth the Company’s comprehensive income, net of tax, for the three and six months ended June 30, 2008 and 2007 (dollars in thousands):

	Three Months Ended June 30,
	2008		2007
Net Income	$	15,391	$	10,743
Other comprehensive income, net of tax:
Foreign currency translation adjustments		4,341		7,135
Net unrealized gains on qualifying cash flow hedges, net of tax provision of $6		—		12
Changes in pension and other postretirement benefit, net of tax provision (benefit) of $24 and ($19), respectively		45		(36	)
Comprehensive income	$	19,777	$	17,854
	Six Months Ended June 30,
	2008		2007
Net Income	$	25,788	$	25,063
Other comprehensive income, net of tax:
Foreign currency translation adjustments		5,093		8,956
Net unrealized gains on qualifying cash flow hedges, net of tax provision of $13		—		30
Changes in pension and other postretirement benefit, net of tax provision of $49 and $33, respectively		91		62
Comprehensive income	$	30,972	$	34,111

Accumulated other comprehensive income, net of tax, included in the consolidated balance sheets as of June 30, 2008 and December 31, 2007 (dollars in thousands):

	Foreign Currency Translation Adjustment		Defined Benefit Plans			Accumulated Other Comprehensive Income
Balances, December 31, 2007	$	25,741	$	(81	)	$	25,660
Current period change		5,093		91			5,184
Balances, June 30, 2008	$	30,834	$	10		$	30,844

The change in the foreign currency translation adjustment for the six months ended June 30, 2008, relates primarily to the Company’s operations with a functional currency in Australian dollars, Canadian dollars and Euros.

9. DISCONTINUED OPERATIONS:

In October 2005, the Company’s wholly-owned subsidiary, FCCM, was struck by Hurricane Stan which destroyed or damaged approximately 70 bridges and washed out segments of track in the State of Chiapas between the town of Tonala and the Guatemalan border, rendering approximately 175 miles of rail line inoperable.

On June 25, 2007, FCCM formally notified the SCT of its intent to exercise its right to resign its 30-year concession from the Mexican government and to cease its rail operations. The decision to cease FCCM’s operations was made on June 22, 2007, and was due to the failure of the Mexican government to fulfill their obligation to fund the Chiapas reconstruction. Without reconstruction of the hurricane-damaged line, FCCM was not a viable business. During the third quarter of 2007, FCCM ceased its operations and initiated formal liquidation proceedings. There were no remaining employees of FCCM as of September 30, 2007. The SCT contested the resignation of the concession and seized substantially all of FCCM’s operating assets in response to the resignation.

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The Company believes the SCT’s actions were unlawful and is pursuing appropriate legal remedies to recover its operating assets. See Note 7 for additional information regarding these actions and legal remedies. As of June 30, 2008, there was a net liability of $1.7 million remaining on the Company’s balance sheet associated with its Mexican operations.

The Company’s Mexican business is presented as discontinued operations and its operations are, therefore, excluded from continuing operations in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (SFAS 144). The operations and cash flows of FCCM are being eliminated from the ongoing operations of the Company and the Company will not have any significant continuing involvement in the operations of FCCM.

The results of the discontinued Mexican business for the three and six months ended June 30, 2008 and 2007 were as follows (dollars in thousands):

	Three Months Ended						Six Months Ended
	June 30, 2008			June 30, 2007			June 30, 2008			June 30, 2007
Operating Revenues	$	—		$	6,856		$	—		$	12,575
Loss from discontinued operations before income taxes		(837	)		(4,684	)		(1,688	)		(6,319	)
Tax (benefit) provision		(102	)		174			(114	)		302
Loss from discontinued operations, net of tax	$	(735	)	$	(4,858	)	$	(1,574	)	$	(6,621	)

Having met the criteria outlined in SFAS 144, the assets and liabilities of FCCM and the Company’s Mexican subsidiary, GW Servicios S.A. (Servicios), were classified as discontinued operations in the Company’s consolidated balance sheet as of June 30, 2008 and December 31, 2007. The major classes of assets (at estimated fair value less cost to sell) and liabilities classified as discontinued operations in the consolidated balance sheets were as follows (dollars in thousands):

	June 30, 2008		December 31, 2007
Cash and cash equivalents	$	223	$	217
Accounts receivable, net		—		815
Prepaid expenses and other		1,073		1,053
Property and equipment, net		55		128
Current assets of discontinued operations	$	1,351	$	2,213
Accounts payable	$	410	$	651
Accrued expenses		2,639		3,223
Other liabilities		—		45
Current liabilities of discontinued operations	$	3,049	$	3,919

10. RECENTLY ISSUED ACCOUNTING STANDARDS:

In September 2006, the Financial Accounting Standards Board (FASB) issued SFAS No. 157, “Fair Value Measurements” (SFAS 157), which is effective for fiscal years beginning after November 15, 2007, and for interim periods within those years. On February 12, 2008, the FASB issued FASB Staff Position (FSP) FAS 157-2 which delayed the effective date of SFAS 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). This FSP partially defers the effective date of SFAS 157 to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years. SFAS 157 defines fair value,

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establishes a framework for measuring fair value and expands the related disclosure requirements. The Company adopted SFAS 157 on January 1, 2008, and it did not have a material impact on its consolidated financial statements. However, the Company has not applied the provisions of the standard to its property and equipment, goodwill and certain other assets, which are measured at fair value for impairment assessment, nor to any business combinations. The Company will apply the provisions of the standard to these assets and liabilities beginning January 1, 2009, as required by FSP FAS 157-2.

In December 2007, the FASB issued SFAS No. 141R, “Business Combinations” (SFAS 141R). SFAS 141R retains the fundamental requirements of the original pronouncement requiring that the acquisition method be used for all business combinations. SFAS 141R defines the acquirer, establishes the acquisition date and requires the acquirer to recognize the assets acquired, liabilities assumed and any noncontrolling interest at their fair values as of the acquisition date. SFAS 141R also requires acquisition-related costs to be expensed as incurred. SFAS 141R is effective for fiscal years beginning after December 15, 2008, and interim periods within those years. Early adoption of SFAS 141R is prohibited. The Company is currently evaluating the provisions of SFAS 141R.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements (an amendment of ARB No. 51)” (SFAS 160). SFAS 160 requires that noncontrolling (minority) interests are reported as a component of equity, that net income attributable to the parent and to the noncontrolling interest is separately identified in the income statement, that changes in a parent’s ownership interest while the parent retains its controlling interest are accounted for as equity transactions, and that any retained noncontrolling equity investment upon the deconsolidation of a subsidiary is initially measured at fair value. SFAS 160 is effective for fiscal years beginning after December 15, 2008, and shall be applied prospectively. However, the presentation and disclosure requirements of SFAS 160 shall be applied retrospectively for all periods presented. The Company is currently evaluating the provisions of SFAS 160.

In March 2008, the FASB issued SFAS No. 161, “Disclosures About Derivative Instruments and Hedging Activities – an amendment to FASB Statement No. 133” (SFAS 161). SFAS 161 expands disclosure about an entity’s derivative instruments and hedging activities, but does not change the scope of SFAS 133. SFAS 161 requires increased qualitative disclosures about objectives and strategies of using derivatives, quantitative disclosures about fair value amounts and gains and losses on derivative instruments, and disclosures about credit-risk related contingent features in derivative agreements. SFAS 161 is effective for fiscal years and interim periods beginning after November 15, 2008, with early adoption permitted. Entities are encouraged, but not required, to provide comparative disclosures for earlier periods. The Company is currently evaluating the provisions of SFAS 161.

In April 2008, the FASB issued FASB Staff Position (FSP) SFAS No. 142-3, “Determination of the Useful Life of Intangible Assets” (FSP SFAS 142-3). FSP SFAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS 142. FSP SFAS 142-3 is effective for fiscal years beginning after December 15, 2008. The Company is currently evaluating the provisions of FSP SFAS 142-3.

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles” (SFAS 162), which has been established by the FASB as a framework for entities to identify the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with United States GAAP. SFAS 162 is not expected to result in a change in current practices. SFAS 162 is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board’s (PCAOB) amendments to AU Section 411, “The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles.” Accordingly, the Company will adopt SFAS 162 within the required period. The Company does not expect the adoption of SFAS 162 to impact the Company’s consolidated financial statements.

In June 2008, the FASB issued FSP EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities” (FSP EITF 03-6-1), which addresses whether unvested instruments granted in share-based payment transactions that contain nonforfeitable rights to dividends or dividend equivalents are participating securities subject to the two-class method of computing earnings per share under SFAS No. 128, “Earnings Per Share.” FSP EITF 03-6-1 is effective for financial statements issued for fiscal years beginning after December 15, 2008 and interim periods within those years. The Company is currently evaluating the provisions of FSP EITF 03-6-1.

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11. SUBSEQUENT EVENTS:

On July 4, 2008, the Company entered into an agreement to sell 100% of the share capital of FCCM to Viablis, S.A. de C.V. (Viablis) for a sale price of approximately $2.4 million. Completion of the sale transaction is subject to customary closing conditions, as well as the final negotiation with Viablis and the SCT of a mutually acceptable transfer of the concession granted by the Mexican government to Viablis and related undertakings. It is not yet possible to determine when or if these closing conditions will be satisfied.

On August 4, 2008, the Company announced that it had signed an agreement to acquire nine short line railroads known as the Ohio Central Railroad System (OCR), for $219.0 million in cash. In addition, the Company has agreed to pay contingent consideration of approximately $25 million upon satisfaction of certain conditions. The final purchase price will be adjusted for working capital at the time of closing. The acquisition is subject to customary closing conditions and is also contingent upon approval from the State of Ohio for the transfer of an operating agreement for one of the railroads. The Company expects to close the acquisition and commence operations in the fourth quarter of 2008.

The Company expects to finance the $219.0 million cash purchase price by amending and expanding the size of its senior credit facility from $256.0 million to $570 million. The amended credit facility will be comprised of a $300 million revolving loan, a $240 million term loan and a Canadian dollar equivalent of a $30 million Canadian term loan, all of which will be due in 2013. Initial borrowings will be priced at LIBOR plus 2.0%. The Company anticipates closing the amended facility concurrent with the closing of the OCR acquisition.

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

The following discussion should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q, and with the consolidated financial statements, related notes and other financial information included in our 2007 Annual Report on Form 10-K.

Forward-Looking Statements

This report and other documents referred to in this report may contain forward-looking statements based on current expectations, estimates and projections about our industry, management’s beliefs, and assumptions made by management. Words such as “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions, including the following risks applicable to all of our operations: risks related to the acquisition and integration of railroads; difficulties associated with customers, competition, connecting carriers, employees and partners; derailments; adverse weather conditions; unpredictability of fuel costs; changes in environmental and other laws and regulations to which we are subject; general economic and business conditions; and additional risks associated with our foreign operations. Therefore, actual results may differ materially from those expressed or forecasted in any such forward-looking statements. Such risks and uncertainties include, in addition to those set forth in this Item 2 and Part II, Item 1A, those noted in our 2007 Annual Report on Form 10-K under “Risk Factors.” We undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

Overview

We own and operate short line and regional freight railroads and provide railcar switching services in the United States, Canada, Australia and the Netherlands and own a minority interest in a railroad in Bolivia. Operations currently include 52 railroads organized in nine regions, with more than 6,000 miles of owned and leased track and approximately 3,000 additional miles under track access arrangements. In addition, we provide rail service at 16 ports in North America and Europe and perform contract coal loading and railcar switching for industrial customers.

Net income in the three months ended June 30, 2008, was $15.4 million, compared with net income of $10.7 million in the three months ended June 30, 2007. Our effective income tax rate increased from 27.0% in the three months ended June 30, 2007, to 39.6% in the three months ended June 30, 2008, primarily due to the expiration of the United States track maintenance credit on December 31, 2007. Our diluted earnings per share (EPS) in the three months ended June 30, 2008, were $0.42 with 36.4 million weighted average shares outstanding, compared with diluted EPS of $0.27 with 40.4 million weighted average shares outstanding in the three months ended June 30, 2007. Our Mexican operations are included in discontinued operations.

Income from continuing operations in the three months ended June 30, 2008, was $16.1 million, compared with income from continuing operations of $15.6 million in the three months ended June 30, 2007. Our diluted EPS from continuing operations in the three months ended June 30, 2008, was $0.44 with 36.4 million weighted average shares outstanding, compared with diluted EPS from continuing operations of $0.39 with 40.4 million weighted average shares outstanding in the three months ended June 30, 2007. Our operating income in the three months ended June 30, 2008, was $29.7 million, compared with $21.3 million in the three months ended June 30, 2007.

Operating revenues in the three months ended June 30, 2008, were $152.7 million, compared with $125.3 million in the three months ended June 30, 2007. The increase in our revenues was due to an increase of $19.3 million, or 15.4%, in same railroad revenues and $8.1 million from recent acquisitions, the Maryland Midland Railway, Inc. (Maryland Midland), Rotterdam Rail Feeding B.V. (RRF) and CAGY Industries, Inc. (CAGY). Revenues from recent acquisitions in the three months ended June 30, 2008, included three months from the Maryland Midland, two and a half months from RRF, and one month from CAGY.

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When we discuss same railroad revenues, we are referring to the change in our revenues period-over-period associated with our existing operations (i.e., excluding the impact of acquisitions). Same railroad freight revenues increased $8.0 million, or 10.0%, in the three months ended June 30, 2008, compared with the three months ended June 30, 2007, primarily due to an increase in average freight revenues per carload of 13.6%. Of this pricing increase, 2.6% was due to the appreciation of the Australian and Canadian dollars relative to the United States dollar. Same railroad non-freight revenues increased $11.3 million, or 25.1%, in the three months ended June 30, 2008, compared with the three months ended June 30, 2007, primarily due to higher third-party fuel sales in Australia, increased crewing and iron ore services in Australia, as well as higher revenues at our industrial switching and port railroads.

The operating ratio was 80.6% in the three months ended June 30, 2008, compared with an operating ratio of 83.0% in the three months ended June 30, 2007. In addition to the increase in operating revenues, operating income in the three months ended June 30, 2008, benefitted from gains on the sale of assets of $2.5 million, including an insurance recovery of $0.4 million, compared with gains of $0.4 million in the 2007 period. Our operating income in the three months ended June 30, 2008 was negatively impacted by two factors. First, the 25.2% increase in the average price of diesel fuel from $3.14 per gallon to $3.93 per gallon between the first and second quarters of 2008 reduced income due to lags in our typical fuel cost recovery mechanisms. Second, coal shipments to several power plants in the Midwestern United States were delayed by severe flooding which temporarily closed rail lines of two connecting Class I railroads. We expect to regain these coal shipments in the remainder of 2008.

Net income in the six months ended June 30, 2008, was $25.8 million, compared with net income of $25.1 million in the six months ended June 30, 2007. Our effective income tax rate increased from 28.9% in the six months ended June 30, 2007 to 38.9% in the six months ended June 30, 2008. Our diluted EPS in the six months ended June 30, 2008, were $0.71 with 36.2 million weighted average shares outstanding, compared with diluted EPS of $0.61 with 41.1 million weighted average shares outstanding in the six months ended June 30, 2007. Income from continuing operations in the six months ended June 30, 2008, was $27.4 million, compared with income from continuing operations of $31.7 million in the six months ended June 30, 2007. Our diluted EPS from continuing operations in the six months ended June 30, 2008, was $0.76 with 36.2 million weighted average shares outstanding, compared with diluted EPS from continuing operations of $0.77 with 41.1 million weighted average shares outstanding in the six months ended June 30, 2007.

During the six months ended June 30, 2008, we experienced a $6.5 million net decrease in cash and cash equivalents. We generated $35.3 million in cash from operating activities from continuing operations, which included the use of $14.7 million in working capital. The primary driver of this use of working capital was a decrease in accounts payable of $12.5 million. We purchased $40.9 million of property and equipment, received $8.5 million from government grants for capital spending completed in 2008 and $8.3 million in cash from government grants for capital spending completed in prior years. We paid $97.6 million for the acquisitions of CAGY and RRF and the final working capital adjustment related to the December 2007 acquisition of Maryland Midland. We received $4.6 million in cash proceeds from the disposition of property and equipment.

Discontinued Operations

During the third quarter of 2007, we ceased our Mexican rail operations and initiated formal liquidation proceedings of Ferrocarriles Chiapas-Mayab, S.A. de C.V. (FCCM). The Secretaria de Comunicaciones y Transportes (SCT) has contested our resignation of the concession and has seized substantially all of FCCM’s operating assets in response to the resignation. We believe the SCT’s actions were unlawful and we are pursuing appropriate legal remedies to recover FCCM’s operating assets.

Loss from discontinued operations, net of tax, was $0.7 million in the three months ended June 30, 2008, compared with a loss from discontinued operations, net of tax, of $4.9 million in the three months ended June 30, 2007. The loss from discontinued operations reduced diluted EPS by $0.02 in the three months ended June 30, 2008, compared with a $0.12 negative impact on diluted EPS in the three months ended June 30, 2007. The loss from discontinued operations in the three months ended June 30, 2008, resulted from the continued wind-down of our Mexican operations.

Loss from discontinued operations, net of tax, was $1.6 million in the six months ended June 30, 2008, compared with a loss from discontinued operations, net of tax, of $6.6 million in the six months ended June 30, 2007. The loss from

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discontinued operations reduced diluted EPS by $0.04 in the six months ended June 30, 2008, compared with a $0.16 negative impact on diluted EPS in the six months ended June 30, 2007. The loss from discontinued operations in the six months ended June 30, 2008, resulted from the continued wind-down of our Mexican operations.

Recent Developments

On July 4, 2008, we entered into an agreement to sell 100% of the share capital of FCCM to Viablis, S.A. de C.V. (Viablis) for a sale price of approximately $2.4 million. Completion of the sale transaction is subject to customary closing conditions, as well as the final negotiation with Viablis and the SCT of a mutually acceptable transfer of the concession granted by the Mexican government to Viablis and related undertakings. It is not yet possible to determine when or if these closing conditions will be satisfied.

On August 4, 2008, we announced that we had signed an agreement to acquire nine short line railroads known as the Ohio Central Railroad System (OCR), for $219.0 million in cash. In addition, we agreed to pay contingent consideration of approximately $25 million upon satisfaction of certain conditions. The final purchase price will be adjusted for working capital at the time of closing. The acquisition is subject to customary closing conditions and is also contingent upon approval from the State of Ohio for the transfer of an operating agreement for one of the railroads. We expect to close the acquisition and commence operations in the fourth quarter of 2008.

We expect to finance the $219.0 million cash purchase price by amending and expanding the size of our senior credit facility from $256.0 million to $570 million. The amended credit facility will be comprised of a $300 million revolving loan, a $240 million term loan and a Canadian dollar equivalent of a $30 million Canadian term loan, all of which will be due in 2013. Initial borrowings will be priced at LIBOR plus 2.0%. We anticipate closing the amended facility concurrent with the closing of the OCR acquisition.

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Changes in Operations

United States

CAGY Industries, Inc.: On May 30, 2008, we acquired 100% of CAGY for cash consideration of approximately $71.5 million (net of $17.2 million cash acquired). An additional $2.9 million was recorded in the second quarter of 2008 to reflect estimated adjustments for working capital. In addition, we have agreed to pay contingent consideration of up to $18.6 million upon satisfaction of certain conditions over the next two years, which will be recorded as additional cost of the acquisition when the contingencies are resolved. The results of operations for CAGY are included in the Company’s consolidated statements of operations as of the date of acquisition.

CAGY is the parent company of three short line railroads, Columbus & Greenville Railway in Mississippi; Chattooga & Chickamauga Railway in Georgia and Tennessee; and Luxapalila Valley Railroad in Mississippi and Alabama. CAGY’s three railroads employ 48 people, own and operate a fleet of 22 locomotives, own and lease more than 280 miles of track and are expected to haul more than 26,000 carloads of freight traffic over the next 12 months. We have included 100% of the value of CAGY’s net assets ($91.6 million) in our consolidated balance sheet since May 31, 2008.

While we expect to complete our allocation of the value of CAGY among the respective assets and liabilities during 2008, the following table sets forth our preliminary allocation as of June 30, 2008 (dollars in thousands):

Cash	$	17,242
Other current assets		5,237
Property and equipment		66,343
Intangible assets		55,677
Other assets		99
Total assets		144,598
Current liabilities		7,158
Long-term debt, including current portion		1,361
Deferred tax liability, net		44,107
Other long-term liabilities		363
Total liabilities		52,989
Net assets	$	91,609

Maryland Midland Railway, Inc.: On December 31, 2007, we acquired 87.4% of Maryland Midland for cash consideration of approximately $19.4 million (net of $7.5 million cash acquired). An additional $3.6 million was paid in the first quarter of 2008 to reflect adjustments for final working capital. The purchase price was preliminarily allocated as follows: current assets ($9.2 million, including cash acquired), property and equipment ($47.0 million), less current liabilities ($5.4 million), debt assumed ($1.5 million), deferred income tax liabilities ($17.9 million) and minority interest ($0.8 million). The 12.6% minority shareholder of Maryland Midland has the option to sell its interest to us for $4.4 million at its discretion until December 31, 2012. Headquartered 50 miles northwest of Baltimore, the Maryland Midland operates over 63 miles of track between Glyndon and Highfield, Maryland (near the Pennsylvania border), and between Walkersville and Taneytown, Maryland. Maryland Midland has 30 employees, 10 locomotives and is an interline carrier with CSX Corporation (CSX).

Netherlands

Rotterdam Rail Feeding: On April 8, 2008, we acquired 100% of RRF for cash consideration of approximately $22.5 million. The purchase price was preliminarily allocated as follows: current assets ($2.7 million), property and equipment ($0.8 million), goodwill ($20.8 million), less current liabilities ($1.8 million). In addition, we have agreed to pay contingent consideration of up to €1.5 million (or $2.4 million at the June 30, 2008 exchange rate) payable over the next three years. Headquartered in the Port of Rotterdam in the Netherlands, RRF is an independent provider of short-haul rail and switching services. RRF’s principal business is “last mile” rail services within

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the Port of Rotterdam for long-haul railroads and industrial customers. In addition, RRF provides locomotives, railroad operating personnel and rail-related services throughout the Netherlands to track construction and maintenance companies as well as government-owned operators. RRF’s operations include 12 locomotives (leased and owned) and 35 employees.

Results from Continuing Operations

When comparing our results from continuing operations from one reporting period to another, you should consider, in addition to the acquisitions discussed above, that we have historically experienced fluctuations in revenues and expenses due to one-time freight moves, hurricanes, droughts, heavy snowfall, freezing and flooding, customer plant expansions and shut-downs, sales of land and equipment and derailments. In periods when these events occur, results of operations are not easily comparable to other periods. Also, we have completed and entered into a number of transactions recently which have changed and will change our results of operations. Because of variations in the structure, timing and size of these transactions, our operating results in any reporting period may not be directly comparable to our operating results in other reporting periods.

Certain of our railroads have commodity shipments which are sensitive to general economic conditions in the countries in which we operate, including paper products in Canada and lumber and forest products in the United States. However, shipments of other commodities are less affected by economic conditions and are more closely affected by other factors, such as inventory levels maintained at a customer power plant (coal), winter weather (salt) and seasonal rainfall (South Australian grain).

Three Months Ended June 30, 2008 Compared with Three Months Ended June 30, 2007

Operating Revenues

Overview

Operating revenues were $152.7 million in the three months ended June 30, 2008, compared with $125.3 million in the three months ended June 30, 2007, an increase of $27.4 million, or 21.9%. The $27.4 million increase in operating revenues consisted of a $19.3 million, or 15.4%, increase in revenues from existing operations and $8.1 million in revenues from new operations. New operations are those that did not exist in our consolidated financial results for a comparable period in the prior year. The $19.3 million increase in revenues from existing operations included increases of $11.3 million in non-freight revenues and $8.0 million in freight revenues. The appreciation of the Australian dollar and Canadian dollar relative to the United States dollar resulted in a $3.8 million increase in operating revenues from existing operations. The following table breaks down our operating revenues into new operations and existing operations for the three months ended June 30, 2008 and 2007 (dollars in thousands):

	2008						2007		2008-2007 Variance Information
	Total Operations		New Operations		Existing Operations		Total Operations		Increase in Total Operations				Increase in Existing Operations
Freight revenues	$	91,419	$	3,324	$	88,095	$	80,120	$	11,299	14.1	%	$	7,975	10.0	%
Non-freight revenues		61,296		4,785		56,511		45,174		16,122	35.7	%		11,337	25.1	%
Total operating revenues	$	152,715	$	8,109	$	144,606	$	125,294	$	27,421	21.9	%	$	19,312	15.4	%

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Freight Revenues

The following table compares freight revenues, carloads and average freight revenues per carload for the three months ended June 30, 2008 and 2007 (in thousands, except average freight revenues per carload):

Freight Revenues and Carloads Comparison by Commodity Group

Three Months Ended June 30, 2008 and 2007

	Freight Revenues								Carloads						Average Freight Revenues Per Carload
Commodity Group	2008		% of Total		2007		% of Total		2008	% of Total		2007	% of Total		2008		2007
Pulp & Paper	$	18,798	20.6	%	$	17,032	21.3	%	30,994	15.8	%	30,900	15.8	%	$	607	$	551
Coal, Coke & Ores		15,488	16.9	%		12,889	16.1	%	41,474	21.1	%	42,453	21.6	%		373		304
Minerals and Stone		11,743	12.8	%		8,074	10.1	%	37,041	18.8	%	32,399	16.5	%		317		249
Metals		10,675	11.7	%		9,812	12.2	%	21,154	10.8	%	21,376	10.9	%		505		459
Farm & Food Products		10,157	11.1	%		7,742	9.7	%	18,436	9.4	%	14,461	7.4	%		551		535
Lumber & Forest Products		8,667	9.5	%		9,848	12.3	%	19,503	9.9	%	23,103	11.8	%		444		426
Chemicals-Plastics		8,049	8.8	%		6,679	8.3	%	12,147	6.2	%	11,027	5.6	%		663		606
Petroleum Products		4,241	4.6	%		3,752	4.7	%	6,336	3.2	%	6,242	3.2	%		669		601
Autos & Auto Parts		2,148	2.4	%		2,082	2.6	%	3,433	1.7	%	4,052	2.1	%		626		514
Intermodal		145	0.2	%		279	0.3	%	362	0.2	%	563	0.3	%		401		496
Other		1,308	1.4	%		1,931	2.4	%	5,676	2.9	%	9,501	4.8	%		230		203
Total freight revenues	$	91,419	100.0	%	$	80,120	100.0	%	196,556	100.0	%	196,077	100.0	%		465		409

Total carloads increased by 479 carloads, or 0.2%, in the three months ended June 30, 2008, compared with the same period in 2007. The increase consisted of 6,805 carloads from new operations, partially offset by a decrease of 6,326 carloads, or 3.2%, from existing operations.

The overall average revenues per carload increased 13.7% to $465, in the three months ended June 30, 2008, compared with the same period in 2007. Average freight revenues per carload from existing operations increased 13.6% to $464. The average freight revenues per carload from existing operations in the three months ended June 30, 2008, benefited 2.6% from the appreciation of the Australian dollar and Canadian dollar relative to the United States dollar.

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The following table sets forth freight revenues by new operations and existing operations for the three months ended June 30, 2008 and 2007 (dollars in thousands):

Freight Revenues by Commodity Group From Existing and New Operations

Three Months Ended June 30, 2008 and 2007

	2008						2007		2008-2007 Variance Information
Freight revenues	Total Operations		New Operations		Existing Operations		Total Operations		Increase (Decrease) in Total Operations					Increase (Decrease) in Existing Operations
Pulp & Paper	$	18,798	$	5	$	18,793	$	17,032	$	1,766		10.4	%	$	1,761		10.3	%
Coal, Coke & Ores		15,488		—		15,488		12,889		2,599		20.2	%		2,599		20.2	%
Minerals and Stone		11,743		2,140		9,603		8,074		3,669		45.4	%		1,529		18.9	%
Metals		10,675		494		10,181		9,812		863		8.8	%		369		3.8	%
Farm & Food Products		10,157		411		9,746		7,742		2,415		31.2	%		2,004		25.9	%
Lumber & Forest Products		8,667		104		8,563		9,848		(1,181	)	-12.0	%		(1,285	)	-13.0	%
Chemicals-Plastics		8,049		158		7,891		6,679		1,370		20.5	%		1,212		18.1	%
Petroleum Products		4,241		—		4,241		3,752		489		13.0	%		489		13.0	%
Autos & Auto Parts		2,148		—		2,148		2,082		66		3.2	%		66		3.2	%
Intermodal		145		—		145		279		(134	)	-48.0	%		(134	)	-48.0	%
Other		1,308		12		1,296		1,931		(623	)	-32.3	%		(635	)	-32.9	%
Total freight revenues	$	91,419	$	3,324	$	88,095	$	80,120	$	11,299		14.1	%	$	7,975		10.0	%

The following information discusses the significant changes in freight revenues by commodity group from existing operations.

Pulp and paper revenues increased $1.8 million, or 10.3%, driven by a 10.0% increase in average revenues per carload as a result of changes in the mix of business.

Coal, coke and ores revenues increased by $2.6 million, or 20.2%. The increase consisted of $3.0 million due to a 23.0% increase in average revenues per carload primarily due to changes in the mix of business. The increase was partially offset by $0.4 million due to a carload decrease of 979, or 2.3%. The carload decrease was primarily due to flooding in the Midwestern United States and a shutdown of a coal mine in Utah, partially offset by increased carloads as a result of scheduled maintenance outages at two electricity generating facilities served by us during the three months ended June 30, 2007 that did not occur during the 2008 period.

Minerals and stone revenues increased by $1.5 million, or 18.9%. The increase consisted of $1.4 million due to a 17.4% increase in average revenues per carload primarily due to changes in the mix of business. The mix of business was improved by gypsum shipments in Australia, which benefited in part from the strengthening of the Australian dollar versus the United States dollar, and shipments of rock salt in the Northeastern United States to replenish stockpiles following icy winter weather conditions.

Farm and food products revenues increased by $2.0 million, or 25.9%. The increase consisted of $1.8 million due to a carload increase of 3,189, or 22.1%, and $0.2 million due to a 3.1% increase in average revenues per carload. The carload increase was primarily due to increased grain shipments in Australia. Volume and revenues associated with grain shipments in Australia may decline in the third and fourth quarters of 2008 pending the renegotiation of a new grain haulage agreement.

Lumber and forest products revenues decreased by $1.3 million, or 13.0%. The decrease consisted of $1.7 million due to a carload decrease of 3,790, or 16.4%, partially offset by $0.4 million due to a 4.0% increase in average revenues per carload. The carload decrease was primarily due to weaker product demand attributable to the decline in the housing market in the United States.

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Chemicals and plastics revenues increased $1.2 million, or 18.1%. The increase consisted of $0.6 million due to a 9.3% increase in average revenues per carload and $0.6 million due to a carload increase of 891, or 8.1%. The carload increase was primarily due to increased ethanol shipments.

Other freight revenues decreased by $0.6 million, or 32.9%. The decrease consisted of $0.9 million due to a carload decrease of 3,862, or 40.6%, partially offset by $0.3 million due to an increase of 13.0% in average revenues per carload. The decrease in carloads was primarily due to a reduction in haulage traffic following a trestle failure at one of our railroads in 2007.

All remaining commodities combined increased by a net $0.8 million, or 5.0%.

Non-Freight Revenues

Non-freight revenues were $61.3 million in the three months ended June 30, 2008, compared with $45.2 million in the three months ended June 30, 2007, an increase of $16.1 million, or 35.7%. The $16.1 million increase in non-freight revenues consisted of $11.3 million in non-freight revenues from existing operations and $4.8 million in non-freight revenues from new operations.

The following table compares non-freight revenues for the three months ended June 30, 2008 and 2007 (dollars in thousands):

Non-Freight Revenues Comparison

Three Months Ended June 30, 2008 and 2007

	2008		% of Total		2007		% of Total
Railcar switching	$	25,571	41.7	%	$	18,728	41.5	%
Car hire and rental income		7,731	12.6	%		6,780	15.0	%
Fuel sales to third parties		10,968	17.9	%		6,057	13.4	%
Demurrage and storage		4,643	7.6	%		4,207	9.3	%
Car repair services		1,921	3.1	%		1,730	3.8	%
Other operating income		10,462	17.1	%		7,672	17.0	%
Total non-freight revenues	$	61,296	100.0	%	$	45,174	100.0	%

The following table sets forth non-freight revenues by new operations and existing operations for the three months ended June 30, 2008 and 2007 (dollars in thousands):

Non-Freight Revenues by New Operations and Existing Operations

Three Months Ended June 30, 2008 and 2007

	2008						2007		2008-2007 Variance Information
Non-freight revenues	Total Operations		New Operations		Existing Operations		Total Operations		Increase in Total Operations				Increase in Existing Operations
Railcar switching	$	25,571	$	3,803	$	21,768	$	18,728	$	6,843	36.5	%	$	3,040	16.2	%
Car hire and rental income		7,731		734		6,997		6,780		951	14.0	%		217	3.2	%
Fuel sales to third parties		10,968		—		10,968		6,057		4,911	81.1	%		4,911	81.1	%
Demurrage and storage		4,643		176		4,467		4,207		436	10.4	%		260	6.2	%
Car repair services		1,921		44		1,877		1,730		191	11.0	%		147	8.5	%
Other operating income		10,462		28		10,434		7,672		2,790	36.4	%		2,762	36.0	%
Total non-freight revenues	$	61,296	$	4,785	$	56,511	$	45,174	$	16,122	35.7	%	$	11,337	25.1	%

The following information discusses the significant changes in non-freight revenues from existing operations.

Railcar switching revenues increased $3.0 million, or 16.2%, of which $2.2 million was due to an increase from industrial switching due to expanded iron ore services in Australia and new industrial switching contracts in the United States, and $0.8 million was due to an increase in port switching revenues principally as a result of increased grain exports in the United States.

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Fuel sales to third parties increased $4.9 million, or 81.1%, primarily due to a $3.0 million increase resulting from a 49.4% increase in revenue per gallon and a $1.9 million increase resulting from a 21.2% increase in gallons sold.

Other operating income increased $2.8 million, or 36.0%, primarily in Australia, due to a $1.7 million increase from crewing and a $1.1 million increase from equipment leasing.

All other non-freight revenues increased $0.6 million, or 4.9%.

Operating Expenses

Overview

Operating expenses were $123.0 million in the three months ended June 30, 2008, compared with $104.0 million in the three months ended June 30, 2007, an increase of $19.1 million, or 18.3%. The increase was attributable to an increase of $13.1 million from existing operations and $6.0 million from new operations.

Operating Ratios

Our operating ratio, defined as total operating expenses divided by total operating revenues, decreased to 80.6% in the three months ended June 30, 2008, from 83.0% in the three months ended June 30, 2007. In addition to the increase in operating revenues, operating income in the three months ended June 30, 2008, benefitted from gains on the sale of assets of $2.5 million, including an insurance recovery of $0.4 million, compared with a gain of $0.4 million in the 2007 period. Our operating income in the three months ended June 30, 2008 was negatively impacted by two factors. First, the 25.2% increase in the average price of diesel fuel from $3.14 per gallon to $3.93 per gallon between the first and second quarters of 2008 reduced income due to lags in our typical fuel cost recovery mechanisms. Second, coal shipments to several power plants in the Midwestern United States were delayed by severe flooding which temporarily closed rail lines of two connecting Class I railroads. We expect to regain these coal shipments in the remainder of 2008.

The following table sets forth a comparison of our operating expenses for the three months ended June 30, 2008 and 2007 (dollars in thousands):

Operating Expense Comparison

Three Months Ended June 30, 2008 and 2007

	2008					2007
	$			Percentage of Operating Revenues		$			Percentage of Operating Revenues
Labor and benefits	$	46,294		30.3	%	$	41,183		32.9	%
Equipment rents		8,762		5.7	%		9,535		7.6	%
Purchased services		12,790		8.4	%		10,064		8.0	%
Depreciation and amortization		9,453		6.2	%		7,840		6.3	%
Diesel fuel used in operations		17,578		11.5	%		10,654		8.5	%
Diesel fuel sold to third parties		10,379		6.8	%		5,750		4.6	%
Casualties and insurance		3,804		2.5	%		3,425		2.7	%
Materials		6,492		4.3	%		6,252		5.0	%
Net gain on sale of assets		(2,481	)	-1.6	%		(432	)	-0.3	%
Other expenses		9,969		6.5	%		9,709		7.7	%
Total operating expenses	$	123,040		80.6	%	$	103,980		83.0	%

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Labor and benefits expense was $46.3 million in the three months ended June 30, 2008, compared with $41.2 million in the three months ended June 30, 2007, an increase of $5.1 million, or 12.4%. The increase was attributable to an increase of $3.6 million from existing operations and $1.5 million from new operations. The increase from existing operations consisted primarily of an increase of $2.6 million attributable to annual wage increases and an average increase of approximately 70 employees. The increase in employees was primarily due to new crewing contracts in Australia and new switching contracts in the United States. In addition, labor and benefits from existing operations increased $1.0 million due to the strengthening of the Australian dollar and Canadian dollar relative to the United States dollar.

Equipment rents were $8.8 million in the three months ended June 30, 2008, compared with $9.5 million in the three months ended June 30, 2007, a decrease of $0.8 million, or 8.1%. The decrease was attributable to a decrease of $2.0 million from existing operations, partially offset by $1.2 million from new operations. The decrease from existing operations was primarily due to the purchase of rail cars previously leased and the expiration of two rail car leases.

Purchased services expense was $12.8 million in the three months ended June 30, 2008, compared with $10.1 million in the three months ended June 30, 2007, an increase of $2.7 million, or 27.1%. The increase was attributable to a $1.6 million increase from existing operations and $1.1 million from new operations. The increase in existing operations was primarily due to equipment maintenance in Australia.

Depreciation and amortization expense was $9.5 million in the three months ended June 30, 2008, compared with $7.8 million in the three months ended June 30, 2007, an increase of $1.6 million, or 20.6%. The increase was attributable to an increase of $1.0 million in existing operations and $0.6 million from new operations. The increase in existing operations was primarily attributable to capital expenditures in 2008 and 2007.

Diesel fuel expense was $17.6 million in the three months ended June 30, 2008, compared with $10.7 million in the three months ended June 30, 2007, an increase of $6.9 million, or 65.0%. The increase was attributable to an increase of $6.1 million from existing operations and $0.8 million from new operations. The increase from existing operations was due to a 68.3% increase in fuel cost per gallon, partially offset by a decrease of 6.5% in diesel fuel consumption.

Diesel fuel sold to third parties was $10.4 million in the three months ended June 30, 2008, compared with $5.8 million in the three months ended June 30, 2007, an increase of $4.6 million, or 80.5%. Of this increase, $2.8 million resulted from a 48.9% increase in diesel fuel cost per gallon and $1.8 million resulted from an increase of 21.2% in diesel fuel gallons sold.

Other Income (Expense) Items

Interest Income

Interest income was $0.6 million in the three months ended June 30, 2008, compared with $2.6 million in the three months ended June 30, 2007, a decrease of $2.0 million, or 78.1%. The decrease in interest income was driven by a reduction in our cash balances in 2007 primarily due to the June 2007 payment of $95.6 million for Australian taxes related to the sale of the Western Australia operations and certain other assets of Australian Railroad Group Pty Ltd (ARG) to Queensland Rail and Babcock & Brown Limited (ARG Sale). In addition, cash balances were lower in the three months ended June 30, 2008, due the share repurchase program that was completed in October 2007 and the Maryland Midland, CAGY and RRF acquisitions.

Interest Expense

Interest expense was $4.0 million in the three months ended June 30, 2008, compared with $3.5 million in the three months ended June 30, 2008, an increase of $0.5 million, or 14.9%, primarily due to the increase in debt resulting from the acquisition of Maryland Midland, CAGY and RRF and the share repurchase program which was completed in 2007.

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Other Income, Net

Other income, net in the three months ended June 30, 2008, was $0.6 million compared with $1.0 million in the three months ended June 30, 2007.

Provision for Income Taxes

Our effective income tax rate in the three months ended June 30, 2008, was 39.6% compared with 27.0% in the three months ended June 30, 2007. The increase in 2008 was primarily attributable to the expiration of the United States railroad track maintenance credit on December 31, 2007.

Income and Earnings Per Share from Continuing Operations

Income from continuing operations in the three months ended June 30, 2008, was $16.1 million, compared with income from continuing operations of $15.6 million in the three months ended June 30, 2007. Our diluted EPS from continuing operations in the three months ended June 30, 2008, were $0.44 with 36.4 million weighted average shares outstanding, compared with diluted EPS from continuing operations of $0.39 with 40.4 million weighted average shares outstanding in the three months ended June 30, 2007. Diluted EPS from continuing operations for the three months ended June 30, 2008, included negative effects on operating income from the severe flooding in the Midwestern United States, increased average diesel fuel prices, decreased interest income from our reduced cash balances, as well as a higher tax rate resulting primarily from the expiration of the United States railroad track maintenance credit. Basic EPS from continuing operations were $0.51 with 31.8 million weighted average shares outstanding in the three months ended June 30, 2008, compared with basic EPS from continuing operations of $0.44 with 35.8 million weighted average shares outstanding in the three months ended June 30, 2007.

Results from Discontinued Operations

Loss from discontinued operations related to our Mexican business in the three months ended June 30, 2008, was $0.7 million, compared with a loss from discontinued operations of $4.9 million in the three months ended June 30, 2007. Our diluted loss per share from discontinued operations in the three months ended June 30, 2008, was $0.02 with 36.4 million weighted average shares outstanding, compared with diluted loss per share from discontinued operations of $0.12 with 40.4 million weighted average shares outstanding in the three months ended June 30, 2007. Basic loss per share from discontinued operations was $0.02 with 31.8 million weighted average shares outstanding in the three months ended June 30, 2008, compared with basic loss per share from discontinued operations of $0.14 with 35.8 million weighted average shares outstanding in the three months ended June 30, 2007.

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Six Months Ended June 30, 2008 Compared with Six Months Ended June 30, 2007

Operating Revenues

Overview

Operating revenues were $293.4 million in the six months ended June 30, 2008, compared with $250.4 million in the six months ended June 30, 2007, an increase of $43.0 million, or 17.2%. The $43.0 million increase in operating revenues consisted of a $32.7 million, or 13.1%, increase in revenues from existing operations and $10.3 million in revenues from new operations. New operations are those that did not exist in our consolidated financial results for a comparable period in the prior year. The $32.7 million increase in revenues from existing operations included increases of $22.3 million in non-freight revenues and $10.4 million in freight revenues. The appreciation of the Australian dollar and Canadian dollar relative to the United States dollar resulted in an $8.7 million increase in operating revenues from existing operations. The following table breaks down our operating revenues into new operations and existing operations for the six months ended June 30, 2008 and 2007 (dollars in thousands):

	2008						2007		2008-2007 Variance Information
	Total Operations		New Operations		Existing Operations		Total Operations		Increase in Total Operations				Increase in Existing Operations
Freight revenues	$	179,147	$	4,872	$	174,275	$	163,874	$	15,273	9.3	%	$	10,401	6.3	%
Non-freight revenues		114,249		5,428		108,821		86,527		27,722	32.0	%		22,294	25.8	%
Total operating revenues	$	293,396	$	10,300	$	283,096	$	250,401	$	42,995	17.2	%	$	32,695	13.1	%

Freight Revenues

The following table compares freight revenues, carloads and average freight revenues per carload for the six months ended June 30, 2008 and 2007 (in thousands, except average freight revenues per carload):

Freight Revenues and Carloads Comparison by Commodity Group

Six Months Ended June 30, 2008 and 2007

	Freight Revenues								Carloads						Average Freight Revenues Per Carload
Commodity Group	2008		% of Total		2007		% of Total		2008	% of Total		2007	% of Total		2008		2007
Pulp & Paper	$	36,811	20.5	%	$	34,505	21.1	%	60,920	15.8	%	62,892	15.5	%	$	604	$	549
Coal, Coke & Ores		32,234	18.0	%		28,752	17.5	%	86,954	22.5	%	91,543	22.6	%		371		314
Farm & Food Products		21,044	11.7	%		17,494	10.7	%	36,368	9.4	%	36,129	8.9	%		579		484
Minerals and Stone		20,957	11.7	%		14,843	9.1	%	68,694	17.8	%	59,679	14.8	%		305		249
Metals		20,194	11.3	%		18,735	11.4	%	40,281	10.4	%	41,061	10.2	%		501		456
Lumber & Forest Products		16,638	9.3	%		18,553	11.3	%	37,640	9.7	%	43,835	10.8	%		442		423
Chemicals-Plastics		15,471	8.6	%		13,151	8.0	%	23,524	6.1	%	22,281	5.5	%		658		590
Petroleum Products		9,248	5.2	%		8,293	5.1	%	13,787	3.6	%	13,671	3.4	%		671		607
Autos & Auto Parts		3,903	2.2	%		3,765	2.3	%	6,778	1.8	%	7,562	1.9	%		576		498
Intermodal		269	0.2	%		560	0.3	%	621	0.2	%	1,100	0.3	%		433		509
Other		2,377	1.3	%		5,223	3.2	%	10,416	2.7	%	24,797	6.1	%		228		211
Total freight revenues	$	179,146	100.0	%	$	163,874	100.0	%	385,983	100.0	%	404,550	100.0	%		464		405

Total carloads decreased by 18,567 carloads, or 4.6%, in the six months ended June 30, 2008 compared with the same period in 2007. The decrease consisted of 28,282 carloads, or 7.0%, from existing operations, partially offset by 9,715 carloads from new operations.

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The overall average revenues per carload increased 14.6% to $464, in the six months ended June 30, 2008 compared with the same period in 2007. Average freight revenues per carload from existing operations increased 14.3% to $463. The average freight revenues per carload in the six months ended June 30, 2008, benefited 3.3% from the appreciation of the Australian dollar and Canadian dollar relative to the United States dollar.

The following table sets forth freight revenues by new operations and existing operations for the six months ended June 30, 2008 and 2007 (dollars in thousands):

Freight Revenues by Commodity Group From Existing and New Operations

Six Months Ended June 30, 2008 and 2007

	2008						2007		2008-2007 Variance Information
Freight revenues	Total Operations		New Operations		Existing Operations		Total Operations		Increase (Decrease) in Total Operations					Increase (Decrease) in Existing Operations
Pulp & Paper	$	36,811	$	8	$	36,803	$	34,505	$	2,306		6.7	%	$	2,298		6.7	%
Coal, Coke & Ores		32,234		—		32,234		28,752		3,482		12.1	%		3,482		12.1	%
Farm & Food Products		21,044		429		20,615		17,494		3,550		20.3	%		3,121		17.8	%
Minerals and Stone		20,957		3,537		17,420		14,843		6,114		41.2	%		2,577		17.4	%
Metals		20,194		493		19,701		18,735		1,459		7.8	%		966		5.2	%
Lumber & Forest Products		16,638		171		16,467		18,553		(1,915	)	-10.3	%		(2,086	)	-11.2	%
Chemicals-Plastics		15,471		198		15,273		13,151		2,320		17.6	%		2,122		16.1	%
Petroleum Products		9,248		21		9,227		8,293		955		11.5	%		934		11.3	%
Autos & Auto Parts		3,903		—		3,903		3,765		138		3.7	%		138		3.7	%
Intermodal		269		—		269		560		(291	)	-52.0	%		(291	)	-52.0	%
Other		2,378		15		2,363		5,223		(2,845	)	-54.5	%		(2,860	)	-54.8	%
Total freight revenues	$	179,147	$	4,872	$	174,275	$	163,874	$	15,273		9.3	%	$	10,401		6.3	%

The following information discusses the significant changes in freight revenues by commodity group from existing operations.

Pulp and paper revenues increased $2.3 million, or 6.7%. The increase consisted of $3.5 million due to a 10.1% increase in average revenues per carload as a result of changes in the mix of business, partially offset by $1.2 million due to a carload decrease of 1,984, or 3.2%. The carload decrease was primarily due to decreased demand resulting in production cutbacks at customer locations, including the June 2007 closing of a paper mill served by us, and our customers using other modes of transportation.

Coal, coke and ores revenues increased by $3.5 million, or 12.1%. The increase consisted of $5.2 million due to an 18.0% increase in average revenues per carload primarily due to changes in the mix of business, partially offset by $1.7 million due to a carload decrease of 4,589, or 5.0%. The carload decrease was primarily due to a shutdown of a coal mine in Utah, partially offset by scheduled maintenance outages at two electricity generating facilities served by us during the six months ended June 30, 2007 that did not occur during 2008.

Farm and food products revenues increased by $3.1 million, or 17.8%. The increase consisted of $3.5 million due to a 19.8% increase in average revenues per carload as a result of changes in the mix of business. The mix of business was improved by grain shipments in Australia, which benefited in part by the strengthening of the Australian dollar versus the United States dollar. Volume and revenues associated with grain shipments in Australia may decline in the third and fourth quarters of 2008 pending the renegotiation of a new grain haulage agreement.

Minerals and stone revenues increased by $2.6 million, or 17.4%. The increase consisted of $2.0 million due to a 13.3% increase in average revenues per carload and $0.6 million due to a carload increase of 2,155, or 3.6%. The carload increase was primarily due to increased gypsum shipments in Australia and increased shipments of rock salt in the Northeastern United States to replenish stockpiles following icy winter weather conditions.

Metals revenues increased by $1.0 million, or 5.2%. The increase consisted of $2.0 million due to a 10.9% increase in average revenues per carload, partially offset by $1.0 million due to a carload decrease of 2,117, or 5.2%. The carload decrease was primarily due to a downturn in the steel market as a result of reduced auto production.

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Lumber and forest products revenues decreased by $2.1 million, or 11.2%. The decrease consisted of $2.9 million due to a carload decrease of 6,506, or 14.8%, partially offset by $0.8 million due to a 4.2% increase in average revenues per carload. The carload decrease was primarily due to weaker product demand attributable to the decline in the housing market in the United States and the closure of a mill in Quebec.

Chemicals and plastics revenues increased by $2.1 million, or 16.1%. The increase consisted of $1.5 million due to an 11.5% increase in average revenues per carload and $0.6 million due to a carload increase of 936, or 4.2%. The carload increase was primarily due to increased ethanol shipments.

Petroleum products revenues increased by $0.9 million, or 11.3%, driven by a 10.5% increase in average revenues per carload.

Other freight revenues decreased by $2.9 million, or 54.8%. The decrease consisted of $3.3 million due to a carload decrease of 14,419, or 58.1%, partially offset by $0.4 million due to an increase of 8.2% in average revenues per carload. The decrease in carloads was primarily due to a reduction in haulage traffic following a trestle failure at one of our railroads in 2007.

All remaining commodities combined decreased by a net $0.2 million, or 3.5%.

Non-Freight Revenues

Non-freight revenues were $114.2 million in the six months ended June 30, 2008, compared with $86.5 million in the six months ended June 30, 2007, an increase of $27.7 million, or 32.0%. The $27.7 million increase in non-freight revenues consisted of an increase of $22.3 million in non-freight revenues from existing operations and $5.4 million in non-freight revenues from new operations.

The following table compares non-freight revenues for the six months ended June 30, 2008 and 2007 (dollars in thousands):

Non-Freight Revenues Comparison

Six Months Ended June 30, 2008 and 2007

	2008		% of Total		2007		% of Total
Railcar switching	$	46,679	40.9	%	$	36,113	41.7	%
Car hire and rental income		14,887	13.0	%		12,952	15.0	%
Fuel sales to third parties		20,062	17.6	%		11,672	13.5	%
Demurrage and storage		9,312	8.2	%		8,209	9.5	%
Car repair services		3,808	3.3	%		3,177	3.7	%
Other operating income		19,501	17.0	%		14,404	16.6	%
Total non-freight revenues	$	114,249	100.0	%	$	86,527	100.0	%

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The following table sets forth non-freight revenues by new operations and existing operations for the six months ended June 30, 2008 and 2007 (dollars in thousands):

Non-Freight Revenues by New Operations and Existing Operations

Six Months Ended June 30, 2008 and 2007

	2008						2007		2008-2007 Variance Information
Non-freight revenues	Total Operations		New Operations		Existing Operations		Total Operations		Increase in Total Operations				Increase in Existing Operations
Railcar switching	$	46,679	$	3,803	$	42,876	$	36,113	$	10,566	29.3	%	$	6,763	18.7	%
Car hire and rental income		14,887		1,278		13,609		12,952		1,935	14.9	%		657	5.1	%
Fuel sales to third parties		20,062		—		20,062		11,672		8,390	71.9	%		8,390	71.9	%
Demurrage and storage		9,312		201		9,111		8,209		1,103	13.4	%		902	11.0	%
Car repair services		3,808		81		3,727		3,177		631	19.9	%		550	17.3	%
Other operating income		19,501		65		19,436		14,404		5,097	35.4	%		5,032	34.9	%
Total non-freight revenues	$	114,249	$	5,428	$	108,821	$	86,527	$	27,722	32.0	%	$	22,294	25.8	%

The following information discusses the significant changes in non-freight revenues from existing operations.

Railcar switching revenues increased $6.8 million, or 18.7%, of which $4.3 million was due to an increase from industrial switching due to expanded iron ore services in Australia and new industrial switching contracts in the United States, and $2.5 million was due to an increase in port switching revenues principally as a result of increased grain exports in the United States.

Fuel sales to third parties increased $8.4 million, or 71.9%, primarily due to a $5.2 million increase resulting from a 44.5% increase in revenue per gallon and a $3.2 million increase resulting from an 18.9% increase in gallons sold.

Demurrage and storage income increased $0.9 million, or 11.0%, primarily due to storage rate increases and an increase in quantity of railcars being stored.

Other operating income increased $5.0 million, or 34.9%, primarily in Australia, due to a $3.3 million increase from crewing and a $2.4 million increase from equipment leasing.

All other non-freight revenues increased $1.2 million, or 7.5%.

Operating Expenses

Overview

Operating expenses were $242.4 million in the six months ended June 30, 2008, compared with $205.7 million in the six months ended June 30, 2007, an increase of $36.7 million, or 17.9%. The increase was attributable to an increase of $29.0 million from existing operations and $7.7 million from new operations.

Operating Ratios

Our operating ratio, defined as total operating expenses divided by total operating revenues, increased to 82.6% in the six months ended June 30, 2008, from 82.1% in the six months ended June 30, 2007.

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The following table sets forth a comparison of our operating expenses for the six months ended June 30, 2008 and 2007 (dollars in thousands):

Operating Expense Comparison

Six Months Ended June 30, 2008 and 2007

	2008					2007
	$			Percentage of Operating Revenues		$			Percentage of Operating Revenues
Labor and benefits	$	92,411		31.5	%	$	82,147		32.8	%
Equipment rents		17,143		5.8	%		18,976		7.6	%
Purchased services		23,627		8.0	%		19,146		7.6	%
Depreciation and amortization		18,652		6.4	%		15,546		6.2	%
Diesel fuel used in operations		33,363		11.4	%		21,102		8.4	%
Diesel fuel sold to third parties		18,946		6.5	%		11,071		4.4	%
Casualties and insurance		8,038		2.7	%		7,896		3.2	%
Materials		12,597		4.3	%		11,434		4.6	%
Net gain on sale of assets		(3,031	)	-1.0	%		(463	)	-0.2	%
Other expenses		20,669		7.0	%		18,846		7.5	%
Total operating expenses	$	242,415		82.6	%	$	205,701		82.1	%

Labor and benefits expense was $92.4 million in the six months ended June 30, 2008, compared with $82.1 million in the six months ended June 30, 2007, an increase of $10.3 million, or 12.5%. The increase was attributable to an increase of $8.2 million from existing operations and $2.1 million from new operations. The increase from existing operations consisted primarily of an increase of $5.5 million attributable to annual wage increases and an average increase of approximately 55 employees. The increase in employees was primarily due to new crewing contracts in Australia and new switching contracts in the United States. In addition, labor and benefits increased $2.7 million due to the strengthening of the Australian dollar and Canadian dollar relative to the United States dollar.

Equipment rents were $17.1 million in the six months ended June 30, 2008, compared with $19.0 million in the six months ended June 30, 2007, a decrease of $1.8 million, or 9.7%. The decrease was attributable to a decrease of $3.4 million from existing operations, partially offset by $1.6 million from new operations. The decrease from existing operations was due to the purchase of rail cars previously leased and the expiration of two rail car leases.

Purchased services expense was $23.6 million in the six months ended June 30, 2008, compared with $19.1 million in the six months ended June 30, 2007, an increase of $4.5 million, or 23.4%. The increase was attributable to an increase of $3.4 million from existing operations and $1.1 million from new operations. The increase in existing operations was primarily due to equipment maintenance in Australia.

Depreciation and amortization expense was $18.7 million in the six months ended June 30, 2008, compared with $15.5 million in the six months ended June 30, 2007, an increase of $3.1 million, or 20.0%. The increase was attributable to an increase of $2.2 million in existing operations and $0.9 million from new operations. The increase in existing operations was primarily attributable to capital expenditures in 2008 and 2007.

Diesel fuel expense was $33.4 million in the six months ended June 30, 2008, compared with $21.1 million in the six months ended June 30, 2007, an increase of $12.3 million, or 58.1%. The increase was attributable to an increase of $11.3 million from existing operations and $1.0 million from new operations. The increase from existing operations was due to a $13.0 million increase resulting from a 61.4% increase in fuel cost per gallon, partially offset by $1.7 million due to a decrease of 4.9% in diesel fuel consumption.

Diesel fuel sold to third parties was $18.9 million in the six months ended June 30, 2008, compared with $11.1 million in the six months ended June 30, 2007, an increase of $7.9 million, or 71.1%. Of this increase, $4.9 million resulted from a 43.9% increase in diesel fuel cost per gallon and $3.0 million resulted from an increase of 18.9% in diesel fuel gallons sold.

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Materials expense was $12.6 million in the six months ended June 30, 2008, compared with $11.4 million in the six months ended June 30, 2007, an increase of $1.2 million, or 10.2%. The increase was attributable to existing operations, primarily due to increased track maintenance in the United States.

Other expenses were $20.7 million in the six months ended June 30, 2008, compared with $18.8 million in the six months ended June 30, 2007, an increase of $1.8 million, or 9.7%. The increase was attributable to an increase of $1.2 million from existing operations and $0.6 million from new operations. The increase in existing operations was primarily due to acquisition-related expenses and a legal settlement associated with a liability claim from the late 1990s.

Other Income (Expense) Items

Interest Income

Interest income was $1.2 million in the six months ended June 30, 2008, compared with $6.0 million in the six months ended June 30, 2007, a decrease of $4.8 million. The decrease in interest income was driven by a reduction in our cash balances in 2007 primarily due to the June 2007 payment of $95.6 million for Australian taxes related to the ARG Sale. In addition, cash balances were lower in the six months ended June 30, 2008 due to the share repurchase program completed in October 2007 and the Maryland Midland, RRF and CAGY acquisitions.

Interest Expense

Interest expense was $8.0 million in the six months ended June 30, 2008, compared with $7.0 million in the six months ended June 30, 2007, an increase of $1.0 million or 13.4%, primarily due to the increase in debt resulting from the purchase of Maryland Midland, RRF and CAGY and the share repurchase program which was completed in 2007.

Provision for Income Taxes

Our effective income tax rate in the six months ended June 30, 2008, was 38.9% compared with 28.9% in the six months ended June 30, 2007. The increase in 2008 was primarily attributable to the expiration of the United States railroad track maintenance credit on December 31, 2007.

Income and Earnings Per Share from Continuing Operations

Income from continuing operations in the six months ended June 30, 2008, was $27.4 million, compared with income from continuing operations of $31.7 million in the six months ended June 30, 2007. Our diluted EPS from continuing operations in the six months ended June 30, 2008, were $0.76 with 36.2 million weighted average shares outstanding, compared with diluted EPS from continuing operations of $0.77 with 41.1 million weighted average shares outstanding in the six months ended June 30, 2007. Diluted EPS from continuing operations for the six months ended June 30, 2008, included negative effects on operating income from the severe weather conditions in Canada and Illinois during the first quarter of 2008, severe flooding in the Midwestern United States, decreased interest income from our reduced cash balances, as well as a higher tax rate resulting primarily from the expiration of the United States railroad track maintenance credit. Basic EPS from continuing operations were $0.87 with 31.6 million weighted average shares outstanding in the six months ended June 30, 2008, compared with basic EPS from continuing operations of $0.87 with 36.6 million weighted average shares outstanding in the six months ended June 30, 2007.

Results from Discontinued Operations

Loss from discontinued operations related to our Mexican business in the six months ended June 30, 2008, was $1.6 million, compared with a loss from discontinued operations of $6.6 million in the six months ended June 30, 2007. Our diluted loss per share from discontinued operations in the six months ended June 30, 2008, was $0.04 with 36.2 million weighted average shares outstanding, compared with diluted loss per share from discontinued operations of $0.16 with 41.1

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million weighted average shares outstanding in the six months ended June 30, 2007. Basic loss per share from discontinued operations was $0.05 with 31.6 million weighted average shares outstanding in the six months ended June 30, 2008, compared with basic loss per share from discontinued operations of $0.18 with 36.6 million weighted average shares outstanding in the six months ended June 30, 2007.

Liquidity and Capital Resources

During the six months ended June 30, 2008, we generated $35.3 million of cash from continuing operations, compared with the use of $42.0 million of cash from continuing operations during the six months ended June 30, 2007. The increase in 2008 from 2007 was primarily due to the June 2007 payment of $95.6 million for Australia taxes related to the ARG Sale, which closed in 2006. In addition, in the six months of 2008, net cash provided by operating activities was reduced by $14.7 million as a result of cash used for working capital purposes, primarily payments of accounts payable and accrued liabilities. Other than the $95.6 million tax payment related to the ARG Sale, working capital provided $1.1 million to net cash flow from operations in the 2007 period.

During the six months ended June 30, 2008 and 2007, our cash flows used in investing activities from continuing operations were $116.7 million and $18.0 million, respectively. For the six months ended June 30, 2008, primary drivers of cash used in investing activities were $97.6 million of cash paid for acquisitions (net of cash acquired), $40.9 million of cash used for capital expenditures, partially offset by $8.5 million in cash received from government grants for capital spending completed in 2008, $8.3 million in cash received from government grants for capital spending completed in prior years, $4.6 million in cash proceeds from the disposition of property and equipment and $0.4 of insurance proceeds for the replacement of assets. For the six months ended June 30, 2007, primary drivers of cash used in investing activities were $27.5 million of capital expenditures, partially offset by $3.3 million received from government grants for capital spending in 2007, $3.9 million received from government grants and insurance proceeds for capital spending completed in 2006 and $0.5 million in cash proceeds from the disposition of property and equipment.

During the six months ended June 30, 2008, our cash flows provided by financing activities from continuing operations were $74.1 million, compared with cash used in financing activities from continuing operations of $62.9 million during the six months ended June 30, 2007. For the six months ended June 30, 2008, primary drivers of cash provided by financing activities from continuing operations were a net increase in outstanding debt of $64.5 million and net cash inflows of $9.6 million from exercises of stock-based awards. For the six months ended June 30, 2007, primary drivers of cash used in financing activities from continuing operations were purchases of stock under publicly announced repurchase plans of $64.9 million, a net decrease in outstanding debt of $1.0 million and net cash inflows of $3.0 million from exercises of stock-based awards.

At June 30, 2008, we had long-term debt, including current portion, totaling $337.6 million, which comprised 41.6% of our total capitalization and $121.9 million unused borrowing capacity. At December 31, 2007, we had long-term debt, including current portion, totaling $272.8 million, which comprised 38.8% of our total capitalization.

2008 Budgeted Capital Expenditures

We have budgeted $61.0 million, net of government grants, in capital expenditures in 2008, which consist of track and equipment improvements of $48.0 million, business expansion projects of $12.0 million and equipment lease buyouts of $1.0 million. As of June 30, 2008, we have incurred $32.4 million of gross capital expenditures in 2008 and received $8.5 million under related government grants for 2008. We have also paid $8.5 million related to capital expenditures accrued on the consolidated balance sheet in 2007 and received $8.3 million from government grants related to our capital expenditures from prior years. We have 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

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finance acquisitions and investments in unconsolidated affiliates. We believe that our cash flow from operations together with amounts available under our credit facilities will enable us to meet our liquidity and capital expenditure requirements relating to ongoing operations for at least the duration of the credit facilities.

United States and Canadian Credit Facilities

As of June 30, 2008, our $225.0 million revolving loan, which matures in 2010, consisted of $103.0 million in outstanding debt, letter of credit guarantees of $0.1 million and $121.9 million of unused borrowing capacity. The $121.9 million unused borrowing capacity is available for general corporate purposes including acquisitions. Our credit facilities require us to comply with certain financial covenants all of which we were in compliance with as of June 30, 2008. See Note 8 of our Annual Report on Form 10-K for the year ended December 31, 2007, for additional information regarding our credit facilities.

As discussed under Recent Developments, we expect to finance the recently announced agreement to acquire the OCR by amending and expanding the size of our senior credit facility from $256.0 million to $570 million. We anticipate closing the amended facility concurrent with the closing of the OCR acquisition, which is expected to close in the fourth quarter of 2008.

Impact of Foreign Currencies on Operating Revenues

When comparing the effects on revenues for average foreign currency exchange rates in effect during the six months ended June 30, 2008, versus the six months ended June 30, 2007, foreign currency translation had a positive impact on our consolidated revenues due to the strengthening of the Australian and Canadian dollars relative to the United States dollar in the six months ended June 30, 2008. However, since the world’s major crude oil and refined product market is traded in United States dollars, we believe there was little, if any, impact of foreign currency translation on our fuel sales to third parties in Australia. The following table sets forth the estimated impact of foreign currency translation on reported operating revenues (dollars in thousands):

	Six Months Ended June 30, 2008
	As Reported		Currency Translation Impact			Revenues Excluding Currency Impact
United States Operating Revenues	$	197,724	$	—		$	197,724
Australia Operating Revenues		62,187		(5,281	)		56,906
Canada Operating Revenues		29,895		(3,455	)		26,440
Netherlands Operating Revenues		3,590		—			3,590
Total Operating Revenues	$	293,396	$	(8,736	)	$	284,660

Off-Balance Sheet Arrangements

An off-balance sheet arrangement includes any contractual obligation, agreement or transaction involving an unconsolidated entity under which we 1) have made guarantees, 2) have a retained or contingent interest in transferred assets, or a similar arrangement, that serves as credit, liquidity or market risk support to that entity for such assets, 3) have an obligation under certain derivative instruments or 4) have any obligation arising out of a material variable interest in such an entity that provides financing, liquidity, market risk or credit risk support to us, or that engages in leasing or hedging services with us. There were no material changes in our off-balance sheet arrangements between December 31, 2007 and June 30, 2008.

Recently Issued Accounting Standards

In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 157, “Fair Value Measurements” (SFAS 157), which is effective for fiscal years beginning after November 15, 2007, and for interim periods within those years. On February 12, 2008, the FASB issued FASB Staff Position (FSP) FAS 157-2 which delayed the effective date of SFAS 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). This FSP partially defers the effective date of SFAS 157 to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years. SFAS 157 defines fair value, establishes a framework for measuring fair value

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and expands the related disclosure requirements. We adopted SFAS 157 on January 1, 2008, and it did not have a material impact on our consolidated financial statements. However, we have not applied the provisions of the standard to our property and equipment, goodwill and certain other assets, which are measured at fair value for impairment assessment, nor to any business combinations. We will apply the provisions of the standard to these assets and liabilities beginning January 1, 2009, as required by FSP FAS 157-2.

In December 2007, the FASB issued SFAS No. 141R, “Business Combinations” (SFAS 141R). SFAS 141R retains the fundamental requirements of the original pronouncement requiring that the acquisition method be used for all business combinations. SFAS 141R defines the acquirer, establishes the acquisition date and requires the acquirer to recognize the assets acquired, liabilities assumed and any noncontrolling interest at their fair values as of the acquisition date. SFAS 141R also requires acquisition-related costs to be expensed as incurred. SFAS 141R is effective for fiscal years beginning after December 15, 2008, and interim periods within those years. Early adoption of SFAS 141R is prohibited. We are currently evaluating the provisions of SFAS 141R.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements (an amendment of ARB No. 51)” (SFAS 160). SFAS 160 requires that noncontrolling (minority) interests be reported as a component of equity, that net income attributable to the parent and to the noncontrolling interest be separately identified in the income statement, that changes in a parent’s ownership interest while the parent retains its controlling interest be accounted for as equity transactions, and that any retained noncontrolling equity investment upon the deconsolidation of a subsidiary be initially measured at fair value. SFAS 160 is effective for fiscal years beginning after December 15, 2008, and shall be applied prospectively. However, the presentation and disclosure requirements of SFAS 160 shall be applied retrospectively for all periods presented. We are currently evaluating the provisions of SFAS 160.

In March 2008, the FASB issued SFAS No. 161, “Disclosures About Derivative Instruments and Hedging Activities – an amendment to FASB Statement No. 133” (SFAS 161). SFAS 161 expands disclosure about an entity’s derivative instruments and hedging activities, but does not change the scope of SFAS 133. SFAS 161 requires increased qualitative disclosures about objectives and strategies of using derivatives, quantitative disclosures about fair value amounts and gains and losses on derivative instruments, and disclosures about credit-risk related contingent features in derivative agreements. SFAS 161 is effective for fiscal years and interim periods beginning after November 15, 2008, with early adoption permitted. Entities are encouraged, but not required, to provide comparative disclosures for earlier periods. We are currently evaluating the provisions of SFAS 161.

In April 2008, the FASB issued FSP SFAS No. 142-3, “Determination of the Useful Life of Intangible Assets” (FSP SFAS 142-3). FSP SFAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, “Goodwill and Other Intangible Assets” (SFAS 142). FSP SFAS 142-3 is effective for fiscal years beginning after December 15, 2008. We are currently evaluating the provisions of FSP SFAS 142-3.

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles” (SFAS 162), which has been established by the FASB as a framework for entities to identify the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with United States GAAP. SFAS 162 is not expected to result in a change in current practices. SFAS 162 is effective 60 days following the Securities and Exchange Commission’s (SEC) approval of the Public Company Accounting Oversight Board’s (PCAOB) amendments to AU Section 411, “The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles.” Accordingly, we will adopt SFAS 162 within the required period. We do not expect the adoption of SFAS 162 to impact our consolidated financial statements.

In June 2008, the FASB issued FSP EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities” (FSP EITF 03-6-1), which addresses whether unvested instruments granted in share-based payment transactions that contain nonforfeitable rights to dividends or dividend equivalents are participating securities subject to the two-class method of computing earnings per share under SFAS No. 128, “Earnings Per Share.” FSP EITF 03-6-1 is effective for financial statements issued for fiscal years beginning after December 15, 2008 and interim periods within those years. We are currently evaluating the provisions of FSP EITF 03-6-1.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

During the three months ended June 30, 2008, there were no material changes to the Quantitative and Qualitative Disclosures About Market Risk previously disclosed in our 2007 Annual Report on Form 10-K.

ITEM 4. CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures — We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports 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 our management, including our 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. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2008. Based upon that evaluation and subject to the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2008, the design and operation of our disclosure controls and procedures provided reasonable assurance that the disclosure controls and procedures are effective.

Internal Control Over Financial Reporting — During the three months ended June 30, 2008, there have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Mexico

As previously disclosed, on June 25, 2007, FCCM formally notified the SCT of its intent to exercise its right to resign its 30-year concession from the Mexican government and to cease its rail operations. In response to this notification, on July 24, 2007, the SCT issued an official letter informing FCCM that the SCT did not accept the resignation of the concession. On August 8, 2007, the SCT issued another official letter to initiate a proceeding to impose sanctions on FCCM. The amount of the sanctions has not been specified. The proposed sanctions are based, in part, on allegations that FCCM has violated the Railroad Service Law in Mexico and the terms of its concession. On August 30, 2007, FCCM filed a brief with the SCT that challenged the proposed sanctions and introduced evidence supporting FCCM’s right to resign its concession. On September 21, 2007, FCCM also filed a proceeding in the Tax and Administrative Federal Court in Mexico seeking an annulment of the SCT’s July 24, 2007, official letter and recognition of FCCM’s right to resign its concession. The SCT has also seized substantially all of FCCM’s operating assets in response to FCCM’s resignation of the concession. On September 19, 2007, FCCM filed a proceeding in the Second District Court in Merida (District Court) challenging the SCT’s seizure of its operating assets as unconstitutional. The District Court admitted the proceeding on October 11, 2007, and a hearing on the constitutional grounds for the seizure and the legality of the SCT’s actions took place on February 1, 2008. The District Court has not yet issued a decision. In addition to the allegations made by the SCT, FCCM is subject to claims and lawsuits from aggrieved customers as a result of its cessation of rail operations and the initiation of formal liquidation proceedings. We believe the SCT and customer actions are without merit and unlawful and we will continue to pursue appropriate legal remedies to support FCCM’s resignation of the concession and to recover FCCM’s operating assets. As of June 30, 2008, there was a net liability of $1.7 million remaining on our balance sheet associated with our Mexican operations.

M&B Arbitration

As previously disclosed, Meridian & Bigbee Railroad LLC (M&B), our subsidiary, CSX and Kansas City Southern (KCS) were parties to a Haulage Agreement governing the movement of traffic between Meridian, Mississippi, and Burkeville, Alabama. On November 17, 2007, M&B initiated arbitration with the American Arbitration Association against CSX in an effort to collect on outstanding claims under the Haulage Agreement and on March 26, 2008, M&B filed an amended demand for arbitration to add KCS. To date, our total claims against CSX and KCS under the Haulage Agreement are $7.1 million, which amount could increase pending receipt of additional information and resolution of pending legal actions. On March 21, 2008, CSX filed an amended arbitration response, answering statement and counterclaim. On July 30, 2008, CSX filed a complaint-bill of summary in Superior Court in Connecticut seeking information from us related to the ongoing arbitration. CSX alleges it has suffered damages in an amount exceeding $3.0 million, but yet to be finally determined. We plan to vigorously defend ourself against CSX’s claims, which we believe to be without merit, and will pursue insurance recovery as appropriate. Although we believe we are entitled to payment for our claims, and that we have meritorious defenses against CSX’s claims, arbitration is inherently uncertain, and it is possible that an unfavorable ruling could have a material adverse impact on our results of operations, financial position or liquidity as of and for the period in which the determination occurs.

Sheperdsville, Kentucky Litigation

As previously disclosed, on January 16, 2007, CSX’s freight train Q502-15 derailed in Sheperdsville, Kentucky. The derailment involved approximately 13 railcars carrying a variety of chemicals. As a consequence of this derailment, we were named as a defendant in two personal injury lawsuits and one class action lawsuit. On May 16, 2008, the United States District Court for the Western District of Kentucky at Louisville entered an order dismissing with prejudice the remaining claim against us associated with the aforementioned derailment.

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Other

In addition to the lawsuits set forth above, from time to time we are a defendant in certain lawsuits resulting from our operations. Management believes there are adequate provisions in the financial statements for any expected liabilities that may result from disposition of pending lawsuits. Nevertheless, litigation is subject to inherent uncertainties, and unfavorable rulings could occur. Were an unfavorable ruling to occur, there would exist the possibility of a material adverse impact on our results of operations, financial position or liquidity as of and for the period in which the ruling occurs.

ITEM 1A. RISK FACTORS

NONE

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

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

Issuer Purchases of Equity Securities

2008	(a) Total Number of Shares (or Units) Purchased	(b) Average Price Paid per Share (or Unit) (1)		(c) Total Number of Shares (or Units) Purchased as Part of Publicly announced Plans or Programs	(d) Maximum Number of Shares (or Units) that May Yet Be Purchased Under the Plans of Program
April 1 to April 30	—	$	—	—	—
May 1 to May 31	5,288	$	40.82	—	—
June 1 to June 30	52,794	$	40.52	—	—

(1) The 58,082 shares acquired in the three months June 30, 2008, represent common stock acquired by us from our employees who exchanged owned shares in lieu of cash to pay for equity award exercises and taxes on equity awards in conjunction with our Amended and Restated 2004 Omnibus Plan.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

NONE

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

On May 28, 2008 our stockholders voted on the following proposals at our Annual Stockholders Meeting:

Proposal 1: To elect three directors, Mortimer B. Fuller III, John C. Hellmann and Robert M. Melzer to serve for a three-year term expiring in 2011:

	Total Votes For	Total Votes Authority Held
Mortimer B. Fuller III	66,388,205	681,876
John C. Hellmann	66,596,706	474,375
Robert M. Melzer	66,574,903	495,178

Proposal 2: To ratify the selection of PricewaterHouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2008:

Total Votes For:	66,984,917
Total Votes Against:	61,876
Total Votes Abstained:	23,289

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ITEM 5. OTHER INFORMATION

NONE

ITEM 6. EXHIBITS

For a list of exhibits, see INDEX TO EXHIBITS following the signature page to this Quarterly Report on Form 10-Q.

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SIGNATURES

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.

	GENESEE & WYOMING INC.
Date: August 7, 2008	By:	/s/ Timothy J. Gallagher
	Name:	Timothy J. Gallagher
	Title:	Chief Financial Officer
Date: August 7, 2008	By:	/s/ Christopher F. Liucci
	Name:	Christopher F. Liucci
	Title:	Chief Accounting Officer and Global Controller

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INDEX TO EXHIBITS

Exhibit No.	Description of Exhibits
3	(i) Articles of Incorporation
	The Exhibit referenced under 4.1 of the Registrant’s Report on Form 10-K for the year ended December 31, 2007 is incorporated herein by reference
	(ii) By-Laws
	Amended By-laws, effective as of August 19, 2004, is incorporated herein by reference to Exhibit 2.1 to the Registrant’s Report on Form 10-Q for the quarter ended September 30, 2004
10.1	Amended and Restated 2004 Omnibus Incentive Plan, dated as of May 30, 2007 (as supplemented, May 28, 2008)
10.2	Form of Option Award Notice under the Amended and Restated 2004 Omnibus Incentive Plan (incorporated by reference from exhibit 10.1 above)
10.3	Form of Restricted Stock Award Notice under the Amended and Restated 2004 Omnibus Incentive Plan (incorporated by reference from exhibit 10.1 above)
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

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EX-10.1

Exhibit 10.1

As Supplemented, May 28, 2008

GENESEE & WYOMING INC.

AMENDED AND RESTATED

2004 OMNIBUS INCENTIVE PLAN

Original Plan Effective May 12, 2004

Amended and Restated Plan Effective May 30, 2007

ARTICLE 1

PURPOSE AND TERM OF PLAN

Section 1.1 Purpose. The purpose of the Plan is to provide motivation to selected Employees, Directors and Consultants to put forth their efforts toward the continued growth, profitability, and success of the Company by providing incentives to such Employees, Directors and Consultants through the ownership and performance of Common Stock.

Section 1.2 Term. The Plan was initially approved by the Board on April 2, 2004, and became effective on May 12, 2004, the date of the approval by G&W’s stockholders at the 2004 Annual Meeting of the Stockholders. The Plan was amended by the Board on March 30, 2007 to increase the maximum number of shares of Common Stock available for grant of Awards under the Plan by 2,000,000, from 1,687,500 shares to 3,687,500 shares. This amendment will become effective upon the date of the approval by G&W’s stockholders at the 2007 Annual Meeting of the Stockholders. If stockholder approval of the amendment is not obtained at the 2007 Annual Meeting of the Stockholders, the Plan as initially approved in May 2004 will remain in full force and effect.

Section 1.3 Successor Plan. This Plan shall serve as the successor to the Genesee & Wyoming Inc. 1996 Stock Option Plan, the Genesee & Wyoming Inc. Stock Option Plan for Outside Directors and the Genesee & Wyoming Deferred Stock Plan for Non-Employee Directors (the “Predecessor Plans”), and no further awards shall be made under the Predecessor Plans from and after the effective date of this Plan. All outstanding awards under the Predecessor Plans immediately prior to the effective date of this Plan are hereby incorporated into this Plan and shall accordingly be treated as outstanding awards under this Plan; provided, however, each such award shall continue to be governed solely by the terms and conditions of the instrument evidencing such award and interpreted under the terms of the respective Predecessor Plan, and, except as otherwise expressly provided herein, no provision of this Plan shall affect or otherwise modify the rights or obligations of holders of such incorporated awards with respect to their acquisition of shares of Common Stock, or otherwise modify the rights or the obligations of the holders of such awards. Any shares of Common Stock reserved for issuance under the Predecessor Plans in excess of the number of shares as to which awards have been awarded thereunder, plus any such shares as to which awards granted under the Predecessor Plans may lapse, expire, terminate or be cancelled, shall be deemed available for issuance or reissuance under Section 6.1 of the Plan.

ARTICLE 2

DEFINITIONS

In any necessary construction of a provision of this Plan, the masculine gender may include the feminine, and the singular may include the plural, and vice versa.

Section 2.1 “Award” means any form of stock option, stock appreciation right, Stock Award, Restricted Stock Unit, performance unit, Performance Award, or other incentive award granted under the Plan, whether singly, in combination, or in tandem, to a Participant by the Committee pursuant to such terms, conditions, restrictions and/or limitations, if any, as the Committee may establish by the Award Notice or otherwise.

Section 2.2 “Award Notice” means the document establishing the terms, conditions, restrictions, and/or limitations of an Award in addition to those established by this Plan and by the Committee’s exercise of its administrative powers. The Committee will establish the form of the document in the exercise of its sole and absolute discretion.

Section 2.3 “Board” means the Board of Directors of G&W.

Section 2.4 “CEO” means the Chief Executive Officer of G&W.

Section 2.5 “Code” means the Internal Revenue Code of 1986, as amended from time to time, including the regulations thereunder and any successor provisions and the regulations thereto.

Section 2.6 “Committee” means the Compensation Committee of the Board, or such other Board committee as may be designated by the Board to administer the Plan; provided that the Committee shall consist of two or more Directors, all of whom are both a “Non-Employee Director” within the meaning of Rule 16b-3 under the Exchange Act and an “outside director” within the meaning of the definition of such term as contained in Proposed Treasury Regulation Section 1.162-27(e)(3), or any successor definition adopted under Section 162(m) of the Code.

Section 2.7 “Common Stock” means the Class A Common Stock, par value $.01 per share, of G&W.

Section 2.8 “Company” means G&W and its Subsidiaries.

Section 2.9 “Consultants” means the consultants, advisors and independent contractors retained by the Company.

Section 2.10 “Covered Employee” means an Employee who is a “covered employee” within the meaning of Section 162(m) of the Code.

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Section 2.11 “Director” means a non-Employee member of the Board.

Section 2.12 “Effective Date” means the date an Award is determined to be effective by the Committee upon its grant of such Award, which date shall be set forth in the applicable Award Notice.

Section 2.13 “Employee” means any person employed by the Company on a full or part-time basis.

Section 2.14 “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, including the rules thereunder and any successor provisions and the rules thereto.

Section 2.15 “Fair Market Value” means the closing price of the Common Stock on the principal national securities exchange on which the Common Stock is then listed or admitted to trading, and the closing price shall be the last reported sale price regular way on such date (or, if no sale takes place on such date, the last reported sale price regular way on the next preceding date on which such sale took place), as reported by such exchange. If the Common Stock is not then so listed or admitted to trading on a national securities exchange, then Fair Market Value shall be the closing price (the last reported sale price regular way) of the Common Stock in the over-the-counter market as reported by the National Association of Securities Dealers Automated Quotation System (“NASDAQ”), if the closing price of the Common Stock is then reported by NASDAQ. If the Common Stock closing price is not then reported by NASDAQ, then Fair Market Value shall be the mean between the representative closing bid and closing asked prices of the Common Stock in the over-the-counter market as reported by NASDAQ. If the Common Stock bid and asked prices are not then reported by NASDAQ, then Fair Market Value shall be the quote furnished by any member of the National Association of Securities Dealers, Inc. selected from time to time by G&W for that purpose. If no member of the National Association of Securities Dealers, Inc. then furnishes quotes with respect to the Common Stock, then Fair Market Value shall be the value determined by the Committee in good faith.

Section 2.16 “G&W” means Genesee & Wyoming Inc.

Section 2.17 “Negative Discretion” means the discretion authorized by the Plan to be applied by the Committee in determining the size of a Performance Award for a Performance Period if, in the Committee’s sole judgment, such application is appropriate. Negative Discretion may only be used by the Committee to eliminate or reduce the size of a Performance Award. In no event shall any discretionary authority granted to the Committee by the Plan, including, but not limited to Negative Discretion, be used to: (a) grant Performance Awards for a Performance Period if the Performance Goals for such Performance Period have not been attained under the applicable Performance Formula; or (b) increase a Performance Award above the maximum amount payable under Section 6.3 of the Plan.

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Section 2.18 “Participant” means either an Employee, Director or Consultant to whom an Award has been granted under the Plan.

Section 2.19 “Performance Awards” means the Stock Awards and performance units granted pursuant to Article 7. Performance Awards are intended to qualify as “performance-based compensation” under Section 162(m) of the Code.

Section 2.20 “Performance Criteria” means the one or more criteria that the Committee shall select for purposes of establishing the Performance Goal(s) for a Performance Period. The Performance Criteria that will be used to establish such Performance Goal(s) shall be limited to the following: (a) economic value added models; (b) operating ratio, (c) cost reduction (or limits on cost increases), (d) debt to capitalization, (e) debt to equity, (f) earnings, (g) earnings before interest and taxes, (h) earnings before interest, taxes, depreciation and amortization, (i) earnings before interest, taxes, depreciation, amortization and operating leases, (j) earnings per share, (k) net income, (l) operating income, (m) increase in total revenue, (n) net sales, (o) return on assets, (p) return on capital employed, (q) return on equity, (r) return on stockholders’ equity, (s) gross margin, (t) net profit, (u) operating profits, (v) profits before tax, (w) ratio of operating earnings to capital spending, (x) free cash flow, (y) return on assets, (z) equity or stockholders’ equity, (aa) Common Stock price per share, (ab) the number of reported injuries, derailments or other accidents, as defined and required by the Federal Railroad Administration (or such successor entity thereto) in absolute numbers or in the ratio thereof to miles of track, employees, hours worked or other similar measurements, (ac) attainment of strategic or operational initiatives, or (ad) any combination of the foregoing, which, in each case, may be applied on an absolute basis and/or be relative to one or more peer group companies or indices, or any combination thereof.

Section 2.21 “Performance Formula” means, for a Performance Period, the one or more objective formulas (expressed as a percentage or otherwise) applied against the relevant Performance Goal(s) to determine, with regards to the Award of a particular Participant, whether all, some portion but less than all, or none of the Award has been earned for the Performance Period.

Section 2.22 “Performance Goals” means, for a Performance Period, the one or more goals established by the Committee for the Performance Period based upon the Performance Criteria. Any Performance Goal shall be established in a manner such that a third party having knowledge of the relevant performance results could calculate the amount to be paid to the Participant. For any Performance Period, the Committee is authorized at any time during the initial time period permitted by Section 162(m) of the Code, or at any time thereafter, in its sole and absolute discretion, to adjust or modify the calculation of a Performance Goal for such Performance Period in order to prevent the dilution or enlargement of the rights of Participants (a) in the event of, or in anticipation of, any unusual or extraordinary corporate item, transaction, event or development; (b) in recognition of, or in anticipation of, any other unusual or nonrecurring events affecting

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the Company, or the financial statements of the Company, or in response to, or in anticipation of, changes in applicable laws, regulations, accounting principles, or business conditions; and (c) in view of the Committee’s assessment of the business strategy of the Company, performance of comparable organizations, economic and business conditions, and any other circumstances deemed relevant.

Section 2.23 “Performance Period” means the one or more periods of time, which may be of varying and overlapping durations, as the Committee may select, over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Participant’s right to and the payment of a Performance Award.

Section 2.24 “Plan” means this 2004 Omnibus Incentive Plan, as amended from time to time.

Section 2.25 “Restricted Stock Unit Award” means an Award granted pursuant to Article 11 in the form of a right to receive shares of Common Stock on a future date.

Section 2.26 “Stock Award” means an award granted pursuant to Article 10 in the form of shares of Common Stock, restricted shares of Common Stock, and/or units of Common Stock.

Section 2.27 “Subsidiary” means a corporation or other business entity in which G&W directly or indirectly has an ownership interest of 20 percent or more, except that with respect to incentive stock options, “Subsidiary” shall mean “subsidiary corporation” as defined in Section 424(f) of the Code.

ARTICLE 3

ELIGIBILITY

Section 3.1 In General. Subject to Section 3.2 and Article 4, all Employees, Directors and Consultants are eligible to participate in the Plan. The Committee may select, from time to time, Participants from those Employees, Directors and Consultants.

Section 3.2 Incentive Stock Options. Only Employees shall be eligible to receive “incentive stock options” (within the meaning of Section 422 of the Code).

ARTICLE 4

PLAN ADMINISTRATION

Section 4.1 Responsibility. The Committee shall have total and exclusive responsibility to control, operate, manage and administer the Plan in accordance with its terms.

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Section 4.2 Authority of the Committee. The Committee shall have all the authority that may be necessary or helpful to enable it to discharge its responsibilities with respect to the Plan. Without limiting the generality of the preceding sentence, the Committee shall have the exclusive right to:

(a) determine eligibility for participation in the Plan;

(b) select the Participants and determine the type of Awards to be made to Participants, the number of shares subject to Awards and the terms, conditions, restrictions and limitations of the Awards, including, but not by way of limitation, restrictions on the transferability of Awards and conditions with respect to continued employment, performance criteria, confidentiality and non-competition;

(c) interpret the Plan;

(d) construe any ambiguous provision, correct any default, supply any omission, and reconcile any inconsistency of the Plan;

(e) issue administrative guidelines as an aid to administer the Plan and make changes in such guidelines as it from time to time deems proper;

(f) make regulations for carrying out the Plan and make changes in such regulations as it from time to time deems proper;

(g) to the extent permitted under the Plan, grant waivers of Plan terms, conditions, restrictions, and limitations;

(h) promulgate rules and regulations regarding treatment of Awards of a Participant under the Plan in the event of such Participant’s death, Disability, Retirement, termination from the Company or breach of agreement by the Participant, or in the event of a change of control of G&W;

(i) accelerate the vesting, exercise, or payment of an Award or the Performance Period of an Award when such action or actions would be in the best interest of the Company;

(j) establish such other types of Awards, besides those specifically enumerated in Article 5 hereof, which the Committee determines are consistent with the Plan’s purpose;

(k) subject to Section 4.3, grant Awards in replacement of Awards previously granted under this Plan or any other executive compensation plan of the Company;

(l) establish and administer the Performance Goals and certify whether, and to what extent, they have been attained;

(m) determine the terms and provisions of any agreements entered into hereunder;

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(n) take any and all other action it deems necessary or advisable for the proper operation or administration of the Plan; and

(o) make all other determinations it deems necessary or advisable for the administration of the Plan, including factual determinations.

The decisions of the Committee and its actions with respect to the Plan shall be final, binding and conclusive upon all persons having or claiming to have any right or interest in or under the Plan.

Section 4.3 Option Repricing. Except for adjustments pursuant to Section 6.2, the Committee shall not reprice any stock options and/or stock appreciation rights unless such action is approved by the G&W’s stockholders. For purposes of the Plan, the term “reprice” shall mean the reduction, directly or indirectly, in the per-share exercise price of an outstanding stock option(s) and/or stock appreciation right(s) issued under the Plan by amendment, cancellation or substitution.

Section 4.4 Section 162(m) of the Code. With regards to Awards issued to Covered Employees that are intended to qualify as “performance-based compensation” for purposes of Section 162(m) of the Code, the Plan shall, for all purposes, be interpreted and construed with respect to such Awards in the manner that would result in such interpretation or construction satisfying the exemptions available under Section 162(m) of the Code.

Section 4.5 Action by the Committee. Except as otherwise provided by Section 4.6, the Committee may act only by a majority of its members. Any determination of the Committee may be made, without a meeting, by a writing or writings signed by all of the members of the Committee.

Section 4.6 Allocation and Delegation of Authority. The Committee may allocate all or any portion of its responsibilities and powers under the Plan to any one or more of its members, the CEO or other senior members of management as the Committee deems appropriate and may delegate all or any part of its responsibilities and powers to any such person or persons, provided that any such allocation or delegation be in writing; provided, however, that only the Committee, or other committee consisting of two or more Directors, all of whom are both a “Non-Employee Director” within the meaning of Rule 16b-3 under the Exchange Act and an “outside director” within the meaning of the definition of such term as contained in Proposed Treasury Regulation Section 1.162-27(e)(3), or any successor definition adopted under Section 162(m) of the Code, may select and grant Awards to Participants who are subject to Section 16 of the Exchange Act or are Covered Employees. The Committee may revoke any such allocation or delegation at any time for any reason with or without prior notice.

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ARTICLE 5

FORM OF AWARDS

Section 5.1 In General. Awards may, at the Committee’s sole discretion, be paid in the form of Performance Awards pursuant to Article 7, stock options pursuant to Article 8, stock appreciation rights pursuant to Article 9, Stock Awards pursuant to Article 10, Restricted Stock Unit Awards pursuant to Article 11, performance units pursuant to Article 12, any form established by the Committee pursuant to Section 4.2(j), or a combination thereof. Each Award shall be subject to the terms, conditions, restrictions and limitations of the Plan and the Award Notice for such Award. Awards under a particular Article of the Plan need not be uniform and Awards under two or more Articles may be combined into a single Award Notice. Any combination of Awards may be granted at one time and on more than one occasion to the same Participant.

Section 5.2 Foreign Jurisdictions.

(a) Special Terms. In order to facilitate the making of any Award to Participants who are employed or retained by the Company outside the United States as Employees, Directors or Consultants (or who are foreign nationals temporarily within the United States), the Committee may provide for such modifications and additional terms and conditions (“Special Terms”) in Awards as the Committee may consider necessary or appropriate to accommodate differences in local law, policy or custom or to facilitate administration of the Plan. The Special Terms may provide that the grant of an Award is subject to (1) applicable governmental or regulatory approval or other compliance with local legal requirements and/or (2) the execution by the Participant of a written instrument in the form specified by the Committee, and that in the event such conditions are not satisfied, the grant shall be void. The Special Terms may also provide that an Award shall become exercisable or redeemable, as the case may be, if an Employee’s employment or Director or Consultant’s relationship with the Company ends as a result of workforce reduction, realignment or similar measure and the Committee may designate a person or persons to make such determination for a location. The Committee may adopt or approve sub-plans, appendices or supplements to, or amendments, restatements, or alternative versions of, the Plan as it may consider necessary or appropriate for purposes of implementing any Special Terms, without thereby affecting the terms of the Plan as in effect for any other purpose; provided, however, no such sub-plans, appendices or supplements to, or amendments, restatements, or alternative versions of, the Plan shall: (a) increase the limitations contained in Section 6.3; (b) increase the number of available shares under Section 6.1; or (c) cause the Plan to cease to satisfy any conditions of Rule 16b-3 under the Exchange Act.

(b) Currency Effects. Unless otherwise specifically determined by the Committee, all Awards and payments pursuant to such Awards shall be determined in U.S. currency. The Committee shall determine, in its discretion, whether and to the extent any payments made pursuant to an Award shall be made in local currency, as opposed to U.S. dollars. In the event payments are made in local currency, the Committee may determine, in its discretion and without liability to any Participant, the method and rate of converting the payment into local currency.

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ARTICLE 6

SHARES SUBJECT TO PLAN

Section 6.1 Available Shares. The maximum number of shares of Common Stock which shall be available for grant of Awards under the Plan (including incentive stock options) during its term shall not exceed 3,687,500 (plus any shares of Common Stock which are or become available under Section 1.3, which shares shall also be available for grant of Awards under the Plan); provided, however, that no more than 843,750 shares of such maximum number of shares of Common Stock may be used for Awards other than stock options or stock appreciation rights. Such amount shall be subject to adjustment as provided in Section 6.2. Any shares of Common Stock related to Awards which terminate by expiration, forfeiture, cancellation or otherwise without the issuance of such shares, are settled in cash in lieu of Common Stock, or are exchanged with the Committee’s permission for Awards not involving Common Stock, shall be available again for grant under the Plan. Moreover, if the exercise price of any Award granted under the Plan or the tax withholding requirements with respect to any Award granted under the Plan are satisfied by tendering shares of Common Stock to G&W (by either actual delivery or by attestation), only the number of shares of Common Stock issued net of the shares of Common Stock tendered will be deemed delivered for purposes of determining the maximum number of shares of Common Stock available for delivery under the Plan. The shares of Common Stock available for issuance under the Plan may be authorized and unissued shares or treasury shares, including shares purchased in open market or private transactions. For the purpose of computing the total number of shares of Common Stock granted under the Plan, where one or more types of Awards, both of which are payable in shares of Common Stock, are granted in tandem with each other, such that the exercise of one type of Award with respect to a number of shares cancels an equal number of shares of the other, the number of shares granted under both Awards shall be deemed to be equivalent to the number of shares under one of the Awards.

Section 6.2 Adjustment Upon Certain Events. In the event that there is, with respect to G&W, a stock dividend or split, reorganization, recapitalization, merger, consolidation, spin-off, combination, combination or transaction or exchange of Common Stock or other corporate exchange, or any distribution to stockholders of Common Stock or other property or securities (other than regular cash dividends) or any transaction similar to the foregoing or other transaction that results in a change to G&W’s capital structure, then the Committee shall make substitutions and/or adjustments to the maximum number of shares available for issuance under the Plan, the maximum Award payable under Section 6.3, the number of shares to be issued pursuant outstanding Awards, the option prices, exercise prices or purchase prices of outstanding Awards and/or any other affected terms of an Award or the Plan as the Committee, in its sole discretion and without liability to any person, deems equitable or appropriate. Unless the Committee determines otherwise, in no event shall the Award of any Participant that is intended to qualify as “performance-based compensation” for purposes of Section 162(m) of the Code be adjusted pursuant to this Section 6.2 to the extent such adjustment would cause such Award to fail to qualify as “performance-based compensation” under Section 162(m) of the Code.

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Section 6.3 Maximum Award Payable. Subject to Section 6.2, and notwithstanding any provision contained in the Plan to the contrary, the maximum Award payable (or granted, if applicable) to any one Participant under the Plan for a calendar year is 1,012,500 shares of Common Stock or, in the event the Award is paid in cash, $2,000,000.

ARTICLE 7

PERFORMANCE AWARDS

Section 7.1 Purpose. For purposes of Performance Awards issued to Employees, Directors and Consultants which are intended to qualify as “performance-based compensation” for purposes of Section 162(m) of the Code, the provisions of this Article 7 shall apply in addition to and, where necessary, in lieu of the provisions of Article 10, Article 11 and Article 12. The purpose of this Article is to provide the Committee the ability to qualify the Stock Awards authorized under Article 10, the Restricted Stock Unit Awards authorized under Article 11 and the performance units under Article 12 as “performance-based compensation” under Section 162(m) of the Code. The provisions of this Article 7 shall control over any contrary provision contained in Article 10, Article 11 or Article 12.

Section 7.2 Eligibility. For each Performance Period, the Committee will, in its sole discretion, designate within the initial period allowed under Section 162(m) of the Code, which Employees, Directors and Consultants will be Participants for such period. However, designation of an Employee, Director or Consultant as a Participant for a Performance Period shall not in any manner entitle the Participant to receive an Award for the period. The determination as to whether or not such Participant becomes entitled to an Award for such Performance Period shall be decided solely in accordance with the provisions of this Article 7. Moreover, designation of an Employee, Director or Consultant as a Participant for a particular Performance Period shall not require designation of such Employee, Director or Consultant as a Participant in any subsequent Performance Period and designation of one Employee, Director or Consultant as a Participant shall not require designation of any other Employee, Director or Consultant as a Participant in such period or in any other period.

Section 7.3 Discretion of Committee with Respect to Performance Awards. The Committee shall have the authority to determine which Covered Employees or other Employees, Directors or Consultants shall be Participants of a Performance Award. With regards to a particular Performance Period, the Committee shall have full discretion to select the length of such Performance Period, the type(s) of Performance Awards to be issued, the Performance Criteria that will be used to establish the Performance Goal(s), the kind(s) and/or level(s) of the Performance Goal(s), whether the Performance Goal(s) is(are) to apply to the Company or any one or more subunits thereof and the Performance

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Formula. For each Performance Period, with regards to the Performance Awards to be issued for such period, the Committee will, within the initial period allowed under Section 162(m) of the Code, exercise its discretion with respect to each of the matters enumerated in the immediately preceding sentence of this Section 7.3 and record the same in writing.

Section 7.4 Payment of Performance Awards.

(a) Condition to Receipt of Performance Award. Unless otherwise provided in the relevant Award Notice, a Participant must be employed by the Company on the last day of a Performance Period to be eligible for a Performance Award for such Performance Period.

(b) Limitation. A Participant shall be eligible to receive a Performance Award for a Performance Period only to the extent that: (1) the Performance Goals for such period are achieved; and (2) and the Performance Formula as applied against such Performance Goals determines that all or some portion of such Participant’s Performance Award has been earned for the Performance Period.

(c) Certification. Following the completion of a Performance Period, the Committee shall meet to review and certify in writing whether, and to what extent, the Performance Goals for the Performance Period have been achieved and, if so, to also calculate and certify in writing the amount of the Performance Awards earned for the period based upon the Performance Formula. The Committee shall then determine the actual size of each Participant’s Performance Award for the Performance Period and, in so doing, shall apply Negative Discretion, if and when it deems appropriate.

(d) Negative Discretion. In determining the actual size of an individual Performance Award for a Performance Period, the Committee may reduce or eliminate the amount of the Performance Award earned under the Performance Formula for the Performance Period through the use of Negative Discretion, if in its sole judgment, such reduction or elimination is appropriate.

(e) Timing of Award Payments. The Awards granted for a Performance Period shall be paid to Participants as soon as administratively practicable following completion of the certifications required by Section 7.4(c).

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ARTICLE 8

STOCK OPTIONS

Section 8.1 In General. Awards may be granted in the form of stock options. These stock options may be incentive stock options within the meaning of Section 422 of the Code or non-qualified stock options (i.e., stock options which are not incentive stock options), or a combination of both. All Awards under the Plan issued to Covered Employees in the form of non-qualified stock options shall qualify as “performance-based compensation” under Section 162(m) of the Code.

Section 8.2 Terms and Conditions of Stock Options. An option shall be exercisable in accordance with such terms and conditions and at such times and during such periods as may be determined by the Committee. The price at which Common Stock may be purchased upon exercise of a stock option shall be not less than 100 percent of the Fair Market Value of the Common Stock, as determined by the Committee, on the Effective Date of the option’s grant. In addition, the term of a stock option may not exceed ten years.

Section 8.3 Restrictions Relating to Incentive Stock Options. Stock options issued in the form of incentive stock options shall, in addition to being subject to the terms and conditions of Section 8.2, comply with Section 422 of the Code. Accordingly, the aggregate Fair Market Value (determined at the time the option was granted) of the Common Stock with respect to which incentive stock options are exercisable for the first time by a Participant during any calendar year (under this Plan or any other plan of the Company) shall not exceed $100,000 (or such other limit as may be required by Section 422 of the Code).

Section 8.4 Exercise. Upon exercise, the option price of a stock option may be paid in cash, or, to the extent permitted by the Committee, by tendering, by either actual delivery of shares or by attestation, shares of Common Stock, a combination of the foregoing, or such other consideration as the Committee may deem appropriate. The Committee shall establish appropriate methods for accepting Common Stock, whether restricted or unrestricted, and may impose such conditions as it deems appropriate on the use of such Common Stock to exercise a stock option. Stock options awarded under the Plan may also be exercised by way of a broker-assisted stock option exercise program, if any, provided such program is available at the time of the option’s exercise. Notwithstanding the foregoing or the provision of any Award Notice, a Participant may not pay the exercise price of a stock option using shares of Common Stock if, in the opinion of counsel to the Company, (i) the Participant is, or within the six months preceding such exercise was, subject to reporting under Section 16(a) of the Exchange Act and (ii) there is a substantial likelihood that the use of such form of payment or the timing of such form of payment would subject the Participant to a substantial risk of liability under Section 16 of the Exchange Act, or (iii) there is a substantial likelihood that the use of such form of payment would result in accounting treatment to the Company under generally accepted accounting principles that the Committee reasonably determines is adverse to the Company.

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ARTICLE 9

STOCK APPRECIATION RIGHTS

Section 9.1 In General. Awards may be granted in the form of stock appreciation rights (“SARs”). SARs entitle the Participant to receive a payment equal to the appreciation in a stated number of shares of Common Stock from the exercise price to the Fair Market Value of the Common Stock on the date of exercise. The “exercise price” for a particular SAR shall be defined in the Award Notice for that SAR. An SAR may be granted in tandem with all or a portion of a related stock option under the Plan (“Tandem SARs”), or may be granted separately (“Freestanding SARs”). A Tandem SAR may be granted either at the time of the grant of the related stock option or at any time thereafter during the term of the stock option. All Awards under the Plan issued to Covered Employees in the form of a SAR shall qualify as “performance-based compensation” under Section 162(m) of the Code.

Section 9.2 Terms and Conditions of Tandem SARs. A Tandem SAR shall be exercisable to the extent, and only to the extent, that the related stock option is exercisable, and the “exercise price” of such a SAR (the base from which the value of the SAR is measured at its exercise) shall be the option price under the related stock option. However, at no time shall a Tandem SAR be issued if the option price of its related stock option is less than the Fair Market Value of the Common Stock, as determined by the Committee, on the Effective Date of the Tandem SAR’s grant. If a related stock option is exercised as to some or all of the shares covered by the Award, the related Tandem SAR, if any, shall be canceled automatically to the extent of the number of shares covered by the stock option exercise. Upon exercise of a Tandem SAR as to some or all of the shares covered by the Award, the related stock option shall be canceled automatically to the extent of the number of shares covered by such exercise. Moreover, all Tandem SARs shall expire not later than ten years from the Effective Date of the SAR’s grant.

Section 9.3 Terms and Conditions of Freestanding SARs. Freestanding SARs shall be exercisable or automatically mature in accordance with such terms and conditions and at such times and during such periods as may be determined by the Committee. The exercise price of a Freestanding SAR shall be not less than 100 percent of the Fair Market Value of the Common Stock on the Effective Date of the Freestanding SAR’s grant. Moreover, all Freestanding SARs shall expire not later than ten years from the Effective Date of the Freestanding SAR’s grant.

Section 9.4 Deemed Exercise. The Committee may provide that a SAR shall be deemed to be exercised at the close of business on the scheduled expiration date of such SAR if at such time the SAR by its terms remains exercisable and, if so exercised, would result in a payment to the holder of such SAR.

Section 9.5 Payment. Unless otherwise provided in an Award Notice, an SAR may be paid in cash, Common Stock or any combination thereof, as determined by the Committee, in its sole and absolute discretion, at the time that the SAR is exercised.

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ARTICLE 10

STOCK AWARDS

Section 10.1 Grants. Awards may be granted in the form of Stock Awards. Stock Awards shall be awarded in such numbers and at such times during the term of the Plan as the Committee shall determine.

Section 10.2 Performance Criteria. For Stock Awards conditioned, restricted and/or limited based on performance criteria, the length of the performance period, the performance objectives to be achieved during the performance period, and the measure of whether and to what degree such objectives have been attained shall be conclusively determined by the Committee in the exercise of its absolute discretion. Performance objectives may be revised by the Committee, at such times as it deems appropriate during the performance period, in order to take into consideration any unforeseen events or changes in circumstances.

Section 10.3 Rights as Stockholders. During the period in which any restricted shares of Common Stock are subject to any restrictions, the Committee may, in its sole discretion, deny a Participant to whom such restricted shares have been awarded all or any of the rights of a stockholder with respect to such shares, including, but not by way of limitation, limiting the right to vote such shares or the right to receive dividends on such shares.

Section 10.4 Evidence of Award. Any Stock Award granted under the Plan may be evidenced in such manner as the Committee deems appropriate, including, without limitation, book-entry registration or issuance of a stock certificate or certificates, with such restrictive legends and/or stop transfer instructions as the Committee deems appropriate.

ARTICLE 11

RESTRICTED STOCK UNIT AWARDS

Section 11.1 Grants. Awards may be granted in the form of Restricted Stock Unit Awards. Restricted Stock Unit Awards shall be awarded in such numbers and at such times during the term of the Plan as the Committee shall determine.

Section 11.2 Rights as Stockholders. Until the shares of Common Stock to be received upon the vesting of such Restricted Stock Unit Award are actually received by a Participant, the Participant shall have no rights as a stockholder with respect to such shares.

Section 11.3 Evidence of Award. A Restricted Stock Unit Award granted under the Plan may be recorded on the books and records of G&W in such manner as the Committee deems appropriate.

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ARTICLE 12

PERFORMANCE UNITS

Section 12.1 Grants. Awards may be granted in the form of performance units. Performance units, as that term is used in this Plan, shall refer to units valued by reference to designated criteria established by the Committee, other than Common Stock.

Section 12.2 Performance Criteria. Performance units shall be contingent on the attainment during a performance period of certain performance objectives. The length of the performance period, the performance objectives to be achieved during the performance period, and the measure of whether and to what degree such objectives have been attained shall be conclusively determined by the Committee in the exercise of its absolute discretion. Performance objectives may be revised by the Committee, at such times as it deems appropriate during the performance period, in order to take into consideration any unforeseen events or changes in circumstances.

ARTICLE 13

PAYMENT OF AWARDS

Section 13.1 Payment. Absent a Plan or Award Notice provision to the contrary, payment of Awards may, at the discretion of the Committee, be made in cash, Common Stock, a combination of cash and Common Stock, or any other form of property as the Committee shall determine. In addition, payment of Awards may include such terms, conditions, restrictions and/or limitations, if any, as the Committee deems appropriate, including, in the case of Awards paid in the form of Common Stock, restrictions on transfer and forfeiture provisions; provided, however, such terms, conditions, restrictions and/or limitations are not inconsistent with the Plan.

Section 13.2 Withholding Taxes. The Company shall be entitled to deduct from any payment under the Plan, regardless of the form of such payment, the amount of all applicable income and employment taxes required by law to be withheld with respect to such payment or may require the Participant to pay to it such tax prior to and as a condition of the making of such payment. In accordance with any applicable administrative guidelines it establishes, the Committee may allow a Participant to pay the amount of taxes required by law to be withheld from an Award by withholding from any payment of Common Stock due as a result of such Award, or by permitting the Participant to deliver to G&W, shares of Common Stock having a Fair Market Value equal to the minimum amount of such required withholding taxes. Notwithstanding the foregoing or the provision of any Award Notice, a Participant may not pay the amount of taxes required by law to be withheld using shares of Common Stock if, in the opinion of counsel to the Company, (i) the Participant is, or within the six months preceding such exercise was, subject to reporting under Section 16(a) of the Exchange Act and (ii) there is a substantial likelihood that the use of such form of payment or the timing of such form of payment would subject the Participant to a substantial risk of liability under Section 16 of the Exchange Act, or (iii) there is a substantial likelihood that the use of such form of payment would result in adverse accounting treatment to the Company under generally accepted accounting principles.

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ARTICLE 14

DIVIDEND AND DIVIDEND EQUIVALENTS

If an Award is granted in the form of a Stock Award or stock option, or in the form of any other stock-based grant, the Committee may choose, at the time of the grant of the Award or any time thereafter up to the time of the Award’s payment, to include as part of such Award an entitlement to receive dividends or dividend equivalents, subject to such terms, conditions, restrictions and/or limitations, if any, as the Committee may establish. Dividends and dividend equivalents shall be paid in such form and manner (i.e., lump sum or installments), and at such time(s) as the Committee shall determine. All dividends or dividend equivalents which are not paid currently may, at the Committee’s discretion, accrue interest, be reinvested into additional shares of Common Stock or, in the case of dividends or dividend equivalents credited in connection with Stock Awards, be credited as additional Stock Awards and paid to the Participant if and when, and to the extent that, payment is made pursuant to such Award.

ARTICLE 15

DEFERRAL OF AWARDS

At the discretion of the Committee, payment of any Award; salary or bonus compensation; or Company board compensation; dividend or dividend equivalent, or any portion thereof, may be deferred by a Participant until such time as the Committee may establish. All such deferrals shall be accomplished by the delivery of a written, irrevocable election by the Participant prior to the time established by the Committee for such purpose, on a form provided by the Company. Further, all deferrals shall be made in accordance with administrative guidelines established by the Committee to ensure that such deferrals comply with all applicable requirements of the Code. Deferred payments shall be paid in a lump sum or installments, as determined by the Committee. Deferred Awards may also be credited with interest, at such rates to be determined by the Committee, or invested by the Company, and, with respect to those deferred Awards denominated in the form of Common Stock, credited with dividends or dividend equivalents.

ARTICLE 16

MISCELLANEOUS

Section 16.1 Nonassignability. Except as otherwise provided in an Award Notice, no Awards or any other payment under the Plan shall be subject in any manner to alienation, anticipation, sale, transfer (except by will or the laws of descent and distribution), assignment or pledge, nor shall any Award be payable to or exercisable by anyone other than the Participant to whom it was granted.

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Section 16.2 Regulatory Approvals and Listings. Notwithstanding anything contained in this Plan to the contrary, G&W shall have no obligation to issue or deliver certificates of Common Stock evidencing Stock Awards or any other Award resulting in the payment of Common Stock prior to (i) the obtaining of any approval from any governmental agency which G&W shall, in its sole discretion, determine to be necessary or advisable, (ii) the admission of such shares to listing on the stock exchange on which the Common Stock may be listed, and (iii) the completion of any registration or other qualification of said shares under any state or federal law or ruling of any governmental body which G&W shall, in its sole discretion, determine to be necessary or advisable.

Section 16.3 No Right to Continued Employment or Grants. Participation in the Plan shall not give any Participant the right to remain in the employ or other service of the Company. The Company reserves the right to terminate the employment or other service of a Participant at any time. Further, the adoption of this Plan shall not be deemed to give any Employee, Director or any other individual any right to be selected as a Participant or to be granted an Award. In addition, no Employee, Director or any other individual having been selected for an Award, shall have at any time the right to receive any additional Awards.

Section 16.4 Amendment/Termination. The Committee may suspend or terminate the Plan at any time for any reason with or without prior notice. In addition, the Committee may, from time to time for any reason and with or without prior notice, amend the Plan in any manner, but may not without stockholder approval adopt any amendment which would require the vote of the stockholders of G&W if such approval is necessary or deemed advisable with respect to tax, securities, or other applicable laws or regulations, including, but not limited to, the listing requirements of the stock exchanges on which the securities of G&W are listed. Notwithstanding the foregoing, without the consent of a Participant (except as otherwise provided in Section 6.2), no amendment may materially and adversely affect any of the rights of such Participant under any Award theretofore granted to such Participant under the Plan.

Section 16.5 Governing Law. The Plan shall be governed by and construed in accordance with the laws of the State of New York, except as superseded by applicable federal law, without giving effect to its conflicts of law provisions.

Section 16.6 No Right, Title, or Interest in Company Assets. No Participant shall have any rights as a stockholder as a result of participation in the Plan until the date of issuance of a stock certificate in his or her name, and, in the case of restricted shares of Common Stock, such rights are granted to the Participant under the Plan. To the extent any person acquires a right to receive payments from the Company under the Plan, such rights shall be no greater than the rights of an unsecured creditor of the Company and the Participant shall not have any rights in or against any specific assets of the Company. All of the Awards granted under the Plan shall be unfunded.

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Section 16.7 No Guarantee of Tax Consequences. No person connected with the Plan in any capacity, including, but not limited to, the Company and its directors, officers, agents and employees, makes any representation, commitment, or guarantee that any tax treatment, including, but not limited to, federal, state and local income, estate and gift tax treatment, will be applicable with respect to the tax treatment of any Award, any amounts deferred under the Plan, or paid to or for the benefit of a Participant under the Plan, or that such tax treatment will apply to or be available to a Participant on account of participation in the Plan.

* * * * *

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EX-10.2

Exhibit 10.2

GENESEE & WYOMING INC.

AMENDED AND RESTATED 2004 OMNIBUS INCENTIVE PLAN

FORM OF OPTION AWARD NOTICE

Grantee:	[Name]
Type of Award:	[Type]
Number of Shares:	[Number]
Exercise Price Per Share:	[Price]
Date of Grant:	[Date]
Expiration Date:	[Date]

1. Grant of Option. This Award Notice serves to notify you that the Compensation Committee (the “Committee”) of the Board of Directors of Genesee & Wyoming Inc. (“G&W”) hereby grants to you, under G&W’s Amended and Restated 2004 Omnibus Incentive Plan (the “Plan”), an [Type] stock option (the “Option”) to purchase, on the terms and conditions set forth in this Award Notice and the Plan, up to the number of shares of G&W’s Class A Common Stock, par value $.01 per share (the “Common Stock”) at the price per share set forth above. The Plan is incorporated herein by reference and made a part of this Award Notice. A copy of the Plan is available on G&W’s Intranet under Corporate Policies then Human Resources or from G&W’s Human Resources Department upon request. You should review the terms of this Award Notice and the Plan carefully. The capitalized terms used in this Award Notice that are not defined herein have the meanings as defined in the Plan.

2. Term. Unless the Option is previously terminated pursuant to the terms of the Plan, the Option will expire at the close of business on the Expiration Date.

3. Vesting. Subject to the terms set forth in this Award Notice and the Plan, the Option will vest and become exercisable as follows:

(i) the Option shall first become exercisable with respect to [Number] Shares on [Date];

(ii) the Option shall first become exercisable with respect to an additional [Number] Shares on [Date];

(iii) the Option shall first become exercisable with respect to an additional [Number] Shares on [Date]; and

4. Exercise.

(a) Method of Exercise. To the extent exercisable under Section 3, the Option may be exercised in whole or in part, provided that the Option may not be exercised for less than one share of Common Stock in any single transaction. The Option shall be exercised by your giving written notice of such exercise to G&W specifying the number of shares of Common Stock that you elect to purchase and the Exercise Price to be paid. Upon determining that compliance with this Award Notice has occurred, including compliance with such reasonable requirements as G&W may impose pursuant to the Plan or Section 12 of this Award Notice and payment of the Exercise Price, G&W shall issue to you a certificate for the shares of Common Stock purchased on the earliest practicable date (as determined by G&W) thereafter.

(b) Payment of Exercise Price. To the extent permissible under the Plan, the Exercise Price may be paid using any one or any combination of the following methods:

(i) in cash or by check, with such payment accompanying your written exercise notice;

[(ii) by delivery of shares of Common Stock already owned by you, with such shares of Common Stock valued at their Fair Market Value on the date of the Option exercise;] [NOTE: not applicable in Australia or the Netherlands; insert “(ii) RESERVED” if not applicable]

(iii) subject to any and all limitations imposed by the Committee from time to time (which may not be uniform), a “cashless exercise,” whereby you would irrevocably instruct a broker or dealer to sell shares of Common Stock on your behalf and deliver cash sale proceeds to G&W in payment of the Exercise Price and direct G&W to deliver shares of Common Stock to be issued upon such exercise of this Option directly to such broker or dealer; or

(iv) any other method approved or accepted by the Committee in its sole discretion, subject to any and all limitations imposed by the Committee from time to time (which may not be uniform).

[(c) Withholdings. The exercise of the Option is conditioned upon your making arrangements satisfactory to G&W for the payment to G&W of the amount of all taxes required by any governmental authority to be withheld and paid over by G&W to the governmental authority on account of the exercise. The payment of such withholding taxes to G&W may be made by one or any combination of the following methods: (i) in cash or by check, (ii) by G&W withholding such taxes from any other compensation owed to you by G&W or any Subsidiary, (iii) pursuant to a cashless exercise program as contemplated in Section 4(b)(iii) above or (iv) any other method approved or accepted by the Committee in its sole discretion, subject, in the case of Section 4(c)(iii) and this Section 4(c)(iv), to any and all limitations imposed by the Committee from time to time (which may not be uniform) as contemplated in Section 4(b)(iii) and Section 4(b)(iv) above.] [NOTE: this version of 4(c) is applicable in U.S. and Canada only]

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[(c) Responsibility for Taxes. Regardless of any action G&W or your employer (the “Employer”) takes with respect to any or all income tax, social insurance, payroll tax, payment on account or other tax-related withholding (“Tax-Related Items”), you acknowledge that the ultimate liability for all Tax-Related Items legally due by you is and remains your responsibility and that G&W and/or the Employer (1) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Option grant, including the grant, vesting or exercise of the Option, the subsequent sale of shares of Common Stock acquired pursuant to such exercise and the receipt of any dividends; and (2) do not commit to structure the terms of the grant or any aspect of the Option to reduce or eliminate your liability for Tax-Related Items.

Prior to exercise of the Option, you shall pay or make adequate arrangements satisfactory to G&W and/or the Employer to satisfy all withholding and payment on account obligations of G&W and/or the Employer. In this regard, you authorize G&W and/or the Employer to withhold all applicable Tax-Related Items legally payable by you from your wages or other cash compensation paid to you by G&W and/or the Employer or from proceeds of the sale of shares of Common Stock. Alternatively, or in addition, if permissible under local law, G&W may (1) sell or arrange for the sale of shares of Common Stock that you acquire to meet the withholding obligation for Tax-Related Items, and/or (2) withhold in shares of Common Stock, provided that G&W only withholds the amount of shares of Common Stock necessary to satisfy the minimum withholding amount. Finally, you shall pay to G&W or the Employer any amount of Tax-Related Items that G&W or the Employer may be required to withhold as a result of your participation in the Plan or your purchase of shares of Common Stock that cannot be satisfied by the means previously described. G&W may refuse to honor the exercise and refuse to deliver the shares of Common Stock if you fail to comply with your obligations in connection with the Tax-Related Items as described in this section.

The payment of such withholding taxes to G&W may also be made pursuant to any method approved or accepted by the Committee in its sole discretion, subject to any and all limitations imposed by the Committee from time to time (which may not be uniform) as contemplated in Section 4(b)(iii) and 4(b)(iv).] [NOTE: this version of 4(c) is applicable in Australia and the Netherlands only]

5. Effect of Death. In the event of your death prior to the complete exercise of the Option, the remaining portion of the Option may be exercised in whole or in part, subject to all of the conditions on exercise imposed by the Plan and this Award Notice, within one year after the date of your death, but only: (i) by the beneficiary designated on your beneficiary designation form filed with G&W, or in the absence of same, by your estate or by or on behalf of the person or persons to whom the Option passes under your will or the laws of descent and distribution, (ii) to the extent that the Option was vested and exercisable on the date of your death, and (iii) prior to the close of business on the Expiration Date of the Option.

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6. Effect of Disability. In the event of your “Disability” prior to the complete exercise of the Option, the remaining portion of the Option may be exercised in whole or in part, subject to all of the conditions on exercise imposed by the Plan and this Award Notice, within one year after the date of your Disability, but only: (i) to the extent that the Option was vested and exercisable on the date of your Disability, and (ii) prior to the close of business on the Expiration Date of the Option. The term “Disability” means you are permanently and totally disabled within the meaning of Section 22(e)(3) of the Code.

7. Effect of Other Termination.

(a) With “Cause.” Upon your termination by G&W for Cause prior to the complete exercise of the Option, the remaining portion of the Option, whether or not then exercisable, shall be forfeited as of the date of such termination and no longer exercisable on or after such date of termination.

(b) Without “Cause.” Upon your termination for a reason other than death, Disability or Cause prior to the complete exercise of the Option, the remaining portion of the Option may be exercised in whole or in part, subject to all of the conditions on exercise imposed by the Plan and this Award Notice, within three months after the date of such termination, but only: (i) to the extent that the Option was vested and exercisable on the date such termination, and (ii) prior to the Expiration Date of the Option.

(c) The term “Cause” means (i) your willful and continued failure to substantially perform your duties with G&W or a Subsidiary after written warnings identifying the lack of substantial performance are delivered to you to specifically identify the manner in which G&W or a Subsidiary believes that you have not substantially performed your duties, (ii) your willful engaging in illegal conduct which is materially and demonstrably injurious to G&W or any Subsidiary, (iii) your commission of a felony, (iv) your material breach of a fiduciary duty owed by you to G&W or any Subsidiary, (v) your intentional unauthorized disclosure to any person of confidential information or trade secrets of a material nature relating to the business of G&W or any Subsidiary, or (vi) your engaging in any conduct that G&W’s or a Subsidiary’s written rules, regulations or policies specify as constituting grounds for discharge.

[(d) in the event of termination of your employment (whether or not in breach of local labor laws), your right to receive an Option and vest in an Option under the Plan, if any, will terminate effective as of the date that you are no longer actively employed and will not be extended by any notice period mandated under local law (e.g., active employment would not include a period of “garden leave” or similar period pursuant to local law); furthermore, in the event of termination of employment (whether or not in breach of local labor laws), your right to exercise the Option after termination of employment, if any, will be measured by the date of termination of your active

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employment and will not be extended by any notice period mandated under local law; the Committee shall have the exclusive discretion to determine when you are no longer actively employed for purposes of your Option grant.] [NOTE: this provision is applicable in Australia and the Netherlands only]

8. Notice of Disposition of Shares. You hereby agree that you shall promptly notify G&W of the disposition of any of the shares of Common Stock acquired upon exercise of the Option, including a disposition by sale, exchange, gift or transfer of legal title, if such disposition occurs within two years from the Date of Grant or within one year from the date that you exercise the Option and acquire such shares of Common Stock.

9. Nonassignability. The Option may not be alienated, transferred, assigned or pledged (except by will or the laws of descent and distribution). Except as otherwise provided by Section 5 of this Award Notice, the Option is only exercisable by you during your lifetime.

10. Limitation of Rights. You will not have any rights as a stockholder with respect to the shares of Common Stock covered by the Option until you become the holder of record of such shares by exercising the Option. Neither the Plan, the granting of the Option nor this Award Notice gives you any right to remain in the employment of G&W or any Subsidiary.

11. Rights of G&W and Subsidiaries. This Award Notice does not affect the right of G&W or any Subsidiary to take any corporate action whatsoever, including without limitation its right to recapitalize, reorganize or make other changes in its capital structure or business, merge or consolidate, issue bonds, notes, shares of Common Stock or other securities, including preferred stock, or options therefor, dissolve or liquidate, or sell or transfer any part of its assets or business.

12. Restrictions on Issuance of Shares. If at any time G&W determines that the listing, registration or qualification of the shares covered by the Option upon any securities exchange or under any federal, state or local law, or the approval of any governmental agency, is necessary or advisable as a condition to the exercise of the Option, the Option may not be exercised in whole or in part unless and until such listing, registration, qualification or approval shall have been effected or obtained free of any conditions not acceptable to G&W.

13. Plan Controls. The Option is subject to all of the provisions of the Plan, which is hereby incorporated by reference, and is further subject to all the interpretations, amendments, rules and regulations that may from time to time be promulgated and adopted by the Committee pursuant to the Plan. In the event of any conflict among the provisions of the Plan and this Award Notice, the provisions of the Plan will be controlling and determinative.

14. Amendment. Except as otherwise provided by the Plan, G&W may only alter, amend or terminate the Option with your consent.

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15. Governing Law. This Option grant and Award Notice shall be governed by and construed in accordance with the laws of the State of New York, except as superseded by applicable federal law, without giving effect to its conflicts of law provisions.

16. Notices. All notices and other communications to G&W required or permitted under this Award Notice shall be written, and shall be either delivered personally or sent by registered or certified first-class mail, postage prepaid and return receipt requested, by telex or telecopier, or electronically, addressed to G&W’s office at 1200-C Scottsville Road, Suite 200, Rochester, New York 14624, Attention: Equity Plan Administrator. Each such notice and other communication delivered personally shall be deemed to have been given when delivered. Each such notice and other communication delivered by mail shall be deemed to have been given when it is deposited in the United States mail in the manner specified herein, and each such notice and other communication delivered by telex, telecopier or electronically shall be deemed to have been given when it is so transmitted and the appropriate answerback is received.

17. Language. If you have received this Award Notice or any other document related to the Plan in a language other than English and if the translated version bears a meaning that is different from that of the English version, the English version will control, to the extent permitted by law.

18. Data Privacy. You hereby explicitly and unambiguously consent to the collection, use and transfer, in electronic or other form, of your personal data as described in this document by and among, as applicable, the Employer, and G&W and its Subsidiaries and affiliates for the exclusive purpose of implementing, administering and managing your participation in the Plan, to the extent permitted by law.

You understand that G&W and the Employer may hold certain personal information about you, including, but not limited to, your name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any shares of stock or directorships held in G&W, details of all options or any other entitlement to shares of stock awarded, canceled, exercised, vested, unvested or outstanding in your favor, for the purpose of implementing, administering and managing the Plan (“Data”). You understand that Data may be transferred to any third parties assisting in the implementation, administration and management of the Plan, that these recipients may be located in your country or elsewhere, and that the recipient’s country may have different data privacy laws and protections than your country. You understand that you may request a list with the names and addresses of any potential recipients of the Data by contacting your local human resources representative. You authorize the recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, for the sole purpose of implementing, administering and managing your participation in the Plan, including any requisite transfer of such Data as may be required to a broker or other third party with whom you may elect to deposit any shares of stock acquired upon exercise of the Option, to the extent permitted by law. You understand that Data will be held only as long as is necessary to implement, administer and manage your participation in the Plan. You

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understand that you may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing your local human resources representative. You understand, however, that refusing or withdrawing your consent may affect your ability to participate in the Plan. For more information on the consequences of your refusal to consent or withdrawal of consent, you understand that you may contact your local human resources representative.

19. Electronic Delivery. G&W may, in its sole discretion, decide to deliver any documents related to the Option granted under the Plan (or related to future options that may be granted under the Plan) by electronic means or to request your consent to participate in the Plan by electronic means. You hereby consent to receive such documents by electronic delivery and, if requested, hereby agree to participate in the Plan through an on-line or electronic system established and maintained by G&W or another third party designated by G&W.

20. Severability. The provisions of this Award Notice are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.

[xx. Nature of Grant. In accepting the grant, you acknowledge that:

(a) the Plan is established voluntarily by G&W, it is discretionary in nature and it may be modified, amended, suspended or terminated by G&W at any time, unless otherwise provided in the Plan and this Award Notice;

(b) the grant of the Option is voluntary and occasional and does not create any contractual or other right to receive future grants of options, or benefits in lieu of options, even if options have been granted repeatedly in the past;

(c) all decisions with respect to future option grants, if any, will be at the sole discretion of G&W;

(d) your participation in the Plan shall not create a right to further employment with the Employer and shall not interfere with the ability of the Employer to terminate your employment relationship at any time with or without cause;

(e) you are voluntarily participating in the Plan;

(f) the Option is an extraordinary item that does not constitute compensation of any kind for services of any kind rendered to G&W or the Employer, and which is outside the scope of your employment contract, if any;

(g) the Option is not part of normal or expected compensation or salary for any purposes, including, but not limited to, calculating any severance, resignation, termination, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments and in no event should be considered as compensation for, or relating in any way to, past services for G&W or the Employer;

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(h) in the event that you are not an employee of G&W, the Option grant will not be interpreted to form an employment contract or relationship with G&W; and furthermore, the Option grant will not be interpreted to form an employment contract with the Employer or any Subsidiary or affiliate of G&W;

(i) the future value of the underlying shares of Common Stock is unknown and cannot be predicted with certainty;

(j) if the underlying shares of Common Stock do not increase in value, the Option will have no value;

(k) if you exercise your Option and obtain shares of Common Stock, the value of those shares of Common Stock acquired upon exercise may increase or decrease in value, even below the exercise price; and

(l) in consideration of the grant of the Option, no claim or entitlement to compensation or damages shall arise from termination of the Option or diminution in value of the Option or shares of Common Stock purchased through exercise of the Option resulting from termination of your employment by G&W or the Employer (for any reason whatsoever and whether or not in breach of local labor laws) and you irrevocably release G&W and the Employer from any such claim that may arise; if, notwithstanding the foregoing, any such claim is found by a court of competent jurisdiction to have arisen, then, by signing this Award Notice, you shall be deemed irrevocably to have waived your entitlement to pursue such claim.] [NOTE: this section is only applicable in Australia and the Netherlands]

[xy. Effect of Breach of Certain Covenants.

(a) In General. If you engage in the conduct described in subsection (c) of this Section [xy], then, unless the Committee determines otherwise: (i) you immediately forfeit, effective as of the date you engage in such conduct, the unexercised portion of the Option; and (ii) you must pay to G&W the amount of any gain realized or payment received as a result of the exercise of the Option within the six-month period immediately preceding the date you engage in such conduct.

(b) Set-Off. By accepting the Option, you consent to a deduction from any amounts G&W or any Subsidiary owes you from time to time (including, but not limited to, amounts owed to you as wages or other compensation, fringe benefits, or vacation pay), to the extent of the amount that you owe G&W under subsection (a) of this Section [xy]. G&W may elect to make any set-off in whole or in part. If G&W does not recover by means of a set-off the full amount that you owe G&W, you shall immediately pay the unpaid balance to G&W.

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(c) Conduct. You hereby agree that you will not, without the written consent of G&W, either during your employment by or service to G&W or any Subsidiary or thereafter, disclose to anyone or make use of any confidential information which you acquired during your employment or service relating to any of the business of G&W or any Subsidiary, except as such disclosure or use may be required in connection with your work as an employee or consultant of G&W or any Subsidiary. During your employment by or service to G&W or any Subsidiary, and for a period of six months after the termination of such employment or service, you will not, either as principal, agent, consultant, employee, stockholder or otherwise, engage in any work or other activity in direct competition with G&W or any Subsidiary. (For purposes of this Section [xy], you shall not be deemed a stockholder of any company subject to the periodic and other reporting requirements of the Exchange Act, if your record and beneficial ownership of any such company amount to not more than five percent of the outstanding capital stock of any such company.) The non-competition covenant of this Section xy applies separately in the United States and in other countries. Your breach of the covenant of this subsection (c) shall result in the consequences described in this Section [xy].] [NOTE: this section is only applicable to some Grantees, including Executive Officers]

[xz. Effect of Change in Control.

(a) Upon the occurrence of a “Change in Control” of G&W, the unvested portion of the Award shall immediately vest as of the date of the occurrence of such event.

(b) The term “Change in Control” shall be deemed to have occurred when:

(i) Any “person” as defined in Section 3(a)(9) of the Exchange Act, and as used in Section 13(d) and 14(d) thereof, including a “group” as defined in Section 13(d) of the Exchange Act (but excluding G&W and any Subsidiary and any employee benefit plan sponsored or maintained by G&W or any Subsidiary (including any trustee of such plan acting as trustee)), directly or indirectly, becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), of securities of G&W representing 35% or more of the combined voting power of G&W’s then outstanding securities (other than indirectly as a result of G&W’s redemption of its securities); provided, however, that in no event shall a Change in Control be deemed to have occurred under this Section [xz](b)(i) so long as (x) the combined voting power of shares beneficially owned by (A) G&W’s executive officers (as defined in Rule 16a-1(f) under the Exchange Act) then in office (the “Executive Officer Shares”), (B) Mortimer B. Fuller and/or Sue Fuller and their lineal descendents (the “Founder Shares”), and (C) the shares beneficially owned by any other members of a “group” that includes the Founder Shares and/or a majority of the Executive Officer shares, exceeds 35% of the combined voting power of G&W’s current outstanding securities and remains the person or group with beneficial ownership of the largest percentage of combined voting power of G&W’s outstanding securities and (ii) G&W remains subject to the reporting requirements of the Exchange Act; or

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(ii) The consummation of any merger or other business combination of G&W, a sale of 51% or more of G&W’s assets, liquidation or dissolution of G&W or a combination of the foregoing transactions (the “Transactions”) other than a Transaction immediately following which either (x) the shareholders of G&W and any trustee or fiduciary of any G&W employee benefit plan immediately prior to the Transaction own at least 51% of the voting power, directly or indirectly, of (A) the surviving corporation in any such merger or other business combination; (B) the purchaser of or successor to G&W’s assets; (C) both the surviving corporation and the purchaser in the event of any combination of Transactions; or (D) the parent company owning 100% of such surviving corporation, purchaser or both the surviving corporation and the purchaser, as the case may be ((A), (B), (C) or (D), as applicable, the “Surviving Entity”) or (y) the Incumbent Directors, as defined below, shall continue to serve as a majority of the board of directors of the Surviving Entity without an agreement or understanding that such Incumbent Directors will later surrender such majority; or

(iii) Within any twelve-month period, the persons who were directors immediately before the beginning of such period (the “Incumbent Directors”) shall cease (for any reason other than death) to constitute at least a majority of the Board or the board of directors of any successor to G&W, including any Surviving Entity. For this purpose, any director who was not a director at the beginning of such period shall be deemed to be an Incumbent Director if such director was elected to the Board by, or on the recommendation of, or with the approval of, at least two-thirds of the directors who then qualified as Incumbent Directors (so long as such director was not nominated by a person who commenced or threatened to commence an election contest or proxy solicitation by or on behalf of a person (other than the Board) or who has entered into an agreement to effect a Change in Control or expressed an intention to cause such a Change in Control).] [NOTE: this section is only applicable to some Grantees, including Executive Officers]

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ACKNOWLEDGEMENT

The undersigned acknowledges receipt of, and understands and agrees to be bound by, this Award Notice and the Plan. The undersigned further acknowledges that this Award Notice and the Plan set forth the entire understanding between him and G&W regarding the [Type] stock options granted by this Award Notice and that this Award Notice and the Plan supersede all prior oral and written agreements on that subject.

Dated: ________________________

[Name]

Genesee & Wyoming Inc. By:

          Matthew C. Brush

Chief Human Resource Officer

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[NOTE: only applicable in the Netherlands]

ADDENDUM TO NON-QUALIFIED OPTIONS AWARD NOTICE

THE PARTIES

(1) GENESEE & WYOMING INC, a company incorporated under the laws of the State of Delaware, the United States, duly represented by Matthew C. Brush, hereafter referred to as G&W

And

(2) [Name], residing at [Address], hereafter referred to as the Beneficiary

The parties referred to under (1) and (2) above are hereafter together referred to as the Parties.

WHEREAS

(A) The Beneficiary is managing director of Rotterdam Rail Feeding B.V. (“RRF”) and RRF and Beneficiary has entered into an employment contract with RRF on [Date];

(B) G&W has acquired the entire share capital of RRF on [Date];

(C) G&W and the Beneficiary have agreed on an option grant as described in the letter dated [Date];

(D) In connection with the letter referred to under (C) above, the Parties enter into an Award Notice (the “Award Notice”); and

(E) For the purpose of compliance of the Award Notice with the provisions of Dutch law (if applicable), the terms and conditions of this Addendum shall apply in deviation of, or in addition to certain terms and conditions of the Award Notice.

HAVE AGREED ON THE FOLLOWING

1. DEFINITIONS

Except as provided otherwise in this Addendum, the definitions of the Award Notice shall apply to this Addendum.

2. DISABILITY

Clause 7 of the Award Notice shall, in addition to the meaning provided in that Clause, also apply in the circumstance that the Beneficiary is permanently ill and that, as a result thereof, the employment contract between the Beneficiary and RRF is terminated, in compliance with Dutch law.

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3. NON COMPETITION

Clause [xy](c) of the Award Notice provides for a non-competition covenant to which the Beneficiary shall be bound for a period of six months following the termination of the Beneficiary’s employment contract with RRF. In deviation of Clause [xy](c) of the Award Notice, the non-competition covenant is limited solely to the territory of Europe. [NOTE: this section 3 is only applicable to some Grantees; insert “3. RESERVED” if not applicable]

4. DATA PRIVACY

4.1 In deviation of Clause 18 of the Award Notice, the following shall apply. The Parties acknowledge that all personal data which are necessary for the performance of the contract provided in the Award Notice shall be collected, used and/or transferred to G&W. The personal data shall be processed for the exclusive purpose of implementing, administering and managing the Beneficiary’s participation in the Plan. Furthermore, Parties acknowledge that RRF shall be the controller in the meaning of the Dutch Data Protection Act. To the extent necessary, the Beneficiary explicitly agrees with the processing of his personal data as referred to in this Clause 4 of the Addendum, and specifically with the transfer of the Beneficiary’s personal data to G&W in the United States.

4.2 The personal data to be processed shall include: the Beneficiary’s name, home address, e-mail address, salary, job title, any shares of stock or directorships held in G&W, details of all options or any other entitlement to shares of stock awarded, cancelled, exercised, vested, unvested or outstanding in favour of the Beneficiary, necessary for the performance of the Award Notice. Upon the vesting of the options, additional information may be required regarding bank or brokerage account(s) held by the Beneficiary. In case of death of the Beneficiary, the personal data mentioned in this Clause 4.2 shall also be required from the Beneficiary’s inheritors.

5. AWARD NOTICE

Unless described otherwise in this Addendum, the terms and conditions of the Award Notice shall be fully valid and binding between the Parties.

6. GOVERNING LAW

6.1 This Addendum shall be governed by the laws of the Netherlands.

6.2 The competent court of Rotterdam has exclusive jurisdiction to settle any dispute arising out of or in connection with this Addendum.

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SIGNATORIES

Thus agreed upon and executed in duplicate in ________________________ on ________________.

[Name]

Genesee & Wyoming Inc. By:

          Matthew C. Brush

Chief Human Resource Officer

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EX-10.3

Exhibit 10.3

GENESEE & WYOMING INC.

AMENDED AND RESTATED 2004 OMNIBUS INCENTIVE PLAN

FORM OF RESTRICTED STOCK AWARD NOTICE

Grantee:	[Name]
Type of Award:	Restricted Stock Award
Number of Shares:	[Number]
Date of Grant:	[Date]

1. Grant of Restricted Stock. This Award Notice serves to notify you that the Compensation Committee (the “Committee”) of the Board of Directors of Genesee & Wyoming Inc. (“G&W”) hereby grants to you, under G&W’s Amended and Restated 2004 Omnibus Incentive Plan (the “Plan”), a restricted stock award (the “Award”), on the terms and conditions set forth in this Award Notice and the Plan, of the number of shares of G&W’s Class A Common Stock, par value $.01 per share (the “Common Stock”) set forth above. The Plan is incorporated herein by reference and made a part of this Award Notice. A copy of the Plan is available on G&W’s Intranet or from G&W’s Human Resources Department upon request. You should review the terms of this Award Notice and the Plan carefully. The capitalized terms used in this Award Notice are defined in the Plan.

[2. Restrictions and Vesting. Subject to the terms set forth in this Award Notice and the Plan, provided you are still in the employment or service of G&W or any Subsidiary at that time, the Common Stock represented by the Award will vest as follows: pro rata with respect to one-third of the shares subject to such Award on the first, second and third anniversaries of the Date of Grant, with any fractional share resulting from such proration vesting on the third anniversary. In the event of your death or the termination of your employment or service to G&W or any Subsidiary prior to the complete vesting of the Award, the unvested portion of the Award shall be forfeited as of the date of your death or such termination.] [NOTE: this version of section 2 is only applicable for awards to non-directors]

[2. Restrictions and Vesting. Subject to the terms set forth in this Award Notice and the Plan, provided you are still in the service of G&W or any Subsidiary at that time, the Common Stock represented by the Award will vest as follows: pro rata with respect to [percent] of the shares subject to such Award on the date of each of the next [number] annual meetings of shareholders. In the event of your death or the termination of your service to G&W or any Subsidiary prior to the complete vesting of the Award, the unvested portion of the Award shall be forfeited as of the date of your death or such termination.] [NOTE: this version of section 2 is only applicable for awards to directors]

[3. Effect of Breach of Certain Covenants.

(a) In General. If you engage in the conduct described in subsection (c) of this Section 3, then, unless the Committee determines otherwise: (i) you immediately forfeit, effective as of the date you engage in such conduct, the unvested portion of the Award; and (ii) you must return to G&W the shares of Common Stock that vested within the six-month period immediately preceding the date you engage in such conduct or, at the option of G&W, pay to G&W the Fair Market Value, as of the date you engage in such conduct, of the shares of Common Stock that vested within such six-month period.

(b) Set-Off. By accepting the Award, you consent to a deduction from any amounts G&W or any Subsidiary owes you from time to time (including, but not limited to, amounts owed to you as wages or other compensation, fringe benefits, or vacation pay), to the extent of the amount that you owe G&W under subsection (a) of this Section 3. G&W may elect to make any set-off in whole or in part. If G&W does not recover by means of a set-off the full amount that you owe G&W, you shall immediately pay the unpaid balance to G&W.

(c) Conduct. You hereby agree that you will not, without the written consent of G&W, either during your employment by or service to G&W or any Subsidiary or thereafter, disclose to anyone or make use of any confidential information which you acquired during your employment or service relating to any of the business of G&W or any Subsidiary, except as such disclosure or use may be required in connection with your work as an employee or consultant of G&W or any Subsidiary. During your employment by or service to G&W or any Subsidiary, and for a period of six months after the termination of such employment or service, you will not, either as principal, agent, consultant, employee, stockholder or otherwise, engage in any work or other activity in direct competition with G&W or any Subsidiary. (For purposes of this Section 3, you shall not be deemed a stockholder of any company subject to the periodic and other reporting requirements of the Exchange Act, if your record and beneficial ownership of any such company amount to not more than five percent of the outstanding capital stock of any such company.) The non-competition covenant of this Section 3 applies separately in the United States and in other countries. Your breach of the covenant of this subsection (c) shall result in the consequences described in this Section 3.] [NOTE: not applicable in director restricted stock award; insert “3. RESERVED” if not applicable] [NOTE: this section 3 is only applicable to some Grantees, including Executive Officers; insert “3. RESERVED” if not applicable]

[4. Effect of Change in Control.

(a) Upon the occurrence of a “Change in Control” of G&W, the unvested portion of the Award shall immediately vest as of the date of the occurrence of such event.

(b) The term “Change in Control” shall be deemed to have occurred when:

(i) Any “person” as defined in Section 3(a)(9) of the Exchange Act, and as used in Section 13(d) and 14(d) thereof, including a “group” as defined in Section 13(d) of the Exchange Act (but excluding G&W and any Subsidiary and any employee benefit plan sponsored or maintained by G&W or any Subsidiary (including any trustee of such plan acting as trustee)), directly or indirectly, becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), of securities of G&W representing 35% or more of the combined voting power of G&W’s then outstanding securities (other than indirectly as a result of G&W’s

2

redemption of its securities); provided, however, that in no event shall a Change in Control be deemed to have occurred under this Section 4(b)(i) so long as (x) the combined voting power of shares beneficially owned by (A) G&W’s executive officers (as defined in Rule 16a-1(f) under the Exchange Act) then in office (the “Executive Officer Shares”), (B) Mortimer B. Fuller and/or Sue Fuller and their lineal descendents (the “Founder Shares”), and (C) the shares beneficially owned by any other members of a “group” that includes the Founder Shares and/or a majority of the Executive Officer shares, exceeds 35% of the combined voting power of G&W’s current outstanding securities and remains the person or group with beneficial ownership of the largest percentage of combined voting power of G&W’s outstanding securities and (ii) G&W remains subject to the reporting requirements of the Exchange Act; or

(ii) The consummation of any merger or other business combination of G&W, a sale of 51% or more of G&W’s assets, liquidation or dissolution of G&W or a combination of the foregoing transactions (the “Transactions”) other than a Transaction immediately following which either (x) the shareholders of G&W and any trustee or fiduciary of any G&W employee benefit plan immediately prior to the Transaction own at least 51% of the voting power, directly or indirectly, of (A) the surviving corporation in any such merger or other business combination; (B) the purchaser of or successor to G&W’s assets; (C) both the surviving corporation and the purchaser in the event of any combination of Transactions; or (D) the parent company owning 100% of such surviving corporation, purchaser or both the surviving corporation and the purchaser, as the case may be ((A), (B), (C) or (D), as applicable, the “Surviving Entity”) or (y) the Incumbent Directors, as defined below, shall continue to serve as a majority of the board of directors of the Surviving Entity without an agreement or understanding that such Incumbent Directors will later surrender such majority; or

(iii) Within any twelve-month period, the persons who were directors immediately before the beginning of such period (the “Incumbent Directors”) shall cease (for any reason other than death) to constitute at least a majority of the Board or the board of directors of any successor to G&W, including any Surviving Entity. For this purpose, any director who was not a director at the beginning of such period shall be deemed to be an Incumbent Director if such director was elected to the Board by, or on the recommendation of, or with the approval of, at least two-thirds of the directors who then qualified as Incumbent Directors (so long as such director was not nominated by a person who commenced or threatened to commence an election contest or proxy solicitation by or on behalf of a person (other than the Board) or who has entered into an agreement to effect a Change in Control or expressed an intention to cause such a Change in Control).] [NOTE: not applicable in director restricted stock award; insert “4. RESERVED” if not applicable] [NOTE: this section 4 is only applicable to some Grantees, including Executive Officers; insert “4. RESERVED” if not applicable]

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5. Book-Entry Registration. The Award initially will be evidenced by book-entry registration only, without the issuance of a certificate representing the shares of Common Stock underlying the Award.

6. Issuance of Shares. Subject to Section 10 of this Award Notice, upon the vesting of any shares of this Award pursuant to this Award Notice, G&W shall issue a certificate representing such vested shares of Common Stock as promptly as practicable following the date of vesting. The shares of Common Stock may be issued during your lifetime only to you, or after your death to your designated beneficiary, or, in the absence of such beneficiary, to your duly qualified personal representative.

7. Nonassignability. The shares of Common Stock underlying the Award and the right to vote such shares and to receive dividends thereon, may not, except as otherwise provided in the Plan, be sold, assigned, transferred, pledged or encumbered in any way prior to the vesting of such shares, whether by operation of law or otherwise, except by will or the laws of descent and distribution. After vesting, the sale or other transfer of the shares of Common Stock shall be subject to applicable laws and regulations under the Exchange Act.

8. Rights as a Stockholder. Unless the Award is cancelled [as provided in Section 3 of this Award Notice] [NOTE: not applicable in director restricted stock award and only applicable to some Grantees, including Executive Officers], prior to the vesting of the shares of Common Stock awarded under this Award Notice, you will have all of the other rights of a stockholder with respect to the shares of Common Stock so awarded, including, but not limited to, the right to receive such cash dividends, if any, as may be declared on such shares from time to time and the right to vote (in person or by proxy) such shares at any meeting of stockholders of G&W.

9. Rights of G&W and Subsidiaries. This Award Notice does not affect the right of G&W or any Subsidiary to take any corporate action whatsoever, including without limitation its right to recapitalize, reorganize or make other changes in its capital structure or business, merge or consolidate, issue bonds, notes, shares of Common Stock or other securities, including preferred stock, or options therefor, dissolve or liquidate, or sell or transfer any part of its assets or business.

10. Restrictions on Issuance of Shares. If at any time G&W determines that the listing, registration or qualification of the shares of Common Stock underlying the Award upon any securities exchange or under any state or federal law, or the approval of any governmental agency, is necessary or advisable as a condition to the issuance of a certificate representing any vested shares of Common Stock under this Award Notice, such issuance may not be made in whole or in part unless and until such listing, registration, qualification or approval shall have been effected or obtained free of any conditions not acceptable to G&W.

11. Plan Controls. The Award is subject to all of the provisions of the Plan, which is hereby incorporated by reference, and is further subject to all the interpretations, amendments, rules and regulations that may from time to time be promulgated and adopted by the Committee pursuant to the Plan. In the event of any conflict among the provisions of the Plan and this Award Notice, the provisions of the Plan will be controlling and determinative.

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12. Amendment. Except as otherwise provided by the Plan, G&W may only alter, amend or terminate the Award with your consent.

13. Governing Law. This Award Notice shall be governed by and construed in accordance with the laws of the State of New York, except as superseded by applicable federal law, without giving effect to its conflicts of law provisions.

14. Language. If you have received this Award Notice or any other document related to the Plan in a language other than English and if the translated version bears a meaning that is different from that of the English version, the English version will control.

15. Notices. All notices and other communications to G&W required or permitted under this Award Notice shall be written, and shall be either delivered personally or sent by registered or certified first-class mail, postage prepaid and return receipt requested, or by telex, telecopier, or electronically, addressed to G&W’s office at 1200-C Scottsville Road, Suite 200, Rochester, New York 14624, Attention: Equity Plan Administrator. Each such notice and other communication delivered personally shall be deemed to have been given when delivered. Each such notice and other communication delivered by mail shall be deemed to have been given when it is deposited in the United States mail in the manner specified herein, and each such notice and other communication delivered by telex, telecopier, or electronically shall be deemed to have been given when it is so transmitted and the appropriate answerback is received.

16 Data Privacy. You hereby explicitly and unambiguously consent to the collection, use and transfer, in electronic or other form, of your personal data as described in this document by and among, as applicable, the Employer, and G&W and its Subsidiaries and affiliates for the exclusive purpose of implementing, administering and managing your participation in the Plan, to the extent permitted by law.

You understand that G&W and the Employer may hold certain personal information about you, including, but not limited to, your name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any shares of stock or directorships held in G&W, details of all options or any other entitlement to shares of stock awarded, canceled, exercised, vested, unvested or outstanding in your favor, for the purpose of implementing, administering and managing the Plan (“Data”). You understand that Data may be transferred to any third parties assisting in the implementation, administration and management of the Plan, that these recipients may be located in your country or elsewhere, and that the recipient’s country may have different data privacy laws and protections than your country. You understand that you may request a list with the names and addresses of any potential recipients of the Data by contacting your local human resources representative. You authorize the recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, for the sole purpose of implementing, administering and managing your participation in the Plan, including any requisite transfer of such Data as may be required to a broker or other third party with whom you may elect to deposit any shares of stock acquired upon exercise of the Option, to the extent permitted by law. You understand that Data will be held only as long as is

5

necessary to implement, administer and manage your participation in the Plan. You understand that you may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing your local human resources representative. You understand, however, that refusing or withdrawing your consent may affect your ability to participate in the Plan. For more information on the consequences of your refusal to consent or withdrawal of consent, you understand that you may contact your local human resources representative.

17. Electronic Delivery. G&W may, in its sole discretion, decide to deliver any documents related to the Option granted under the Plan (or related to future options that may be granted under the Plan) by electronic means or to request your consent to participate in the Plan by electronic means. You hereby consent to receive such documents by electronic delivery and, if requested, hereby agree to participate in the Plan through an on-line or electronic system established and maintained by G&W or another third party designated by G&W.

18. Severability. The provisions of this Award Notice are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.

ACKNOWLEDGEMENT

The undersigned acknowledges receipt of, and understands and agrees to be bound by, this Award Notice and the Plan. The undersigned further acknowledges that this Award Notice and the Plan set forth the entire understanding between him or her and G&W regarding the restricted stock granted by this Award Notice and that this Award Notice and the Plan supersede all prior oral and written agreements on that subject.

Dated: _____________________

[Name]

Genesee & Wyoming Inc. By:

            Matthew C. Brush

Chief Human Resource Officer

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[NOTE: only applicable in the Netherlands]

ADDENDUM TO RESTRICTED STOCK AWARD NOTICE

THE PARTIES

(1) GENESEE & WYOMING INC, a company incorporated under the laws of the State of Delaware, the United States, duly represented by Matthew C. Brush, hereafter referred to as G&W

And

(2) [Name], residing at [Address], hereafter referred to as the Beneficiary

The parties referred to under (1) and (2) above are hereafter together referred to as the Parties.

WHEREAS

(A) The Beneficiary is managing director of Rotterdam Rail Feeding B.V. (“RRF”) and RRF and Beneficiary has entered into an employment contract with RRF on [Date];

(B) G&W has acquired the entire share capital of RRF on [Date];

(C) G&W and the Beneficiary have agreed on an option grant as described in the letter dated [date];

(D) In connection with the letter referred to under (C) above, the Parties enter into an Award Notice (the “Award Notice”); and

(E) For the purpose of compliance of the Award Notice with the provisions of Dutch law (if applicable), the terms and conditions of this Addendum shall apply in deviation of, or in addition to certain terms and conditions of the Award Notice.

HAVE AGREED ON THE FOLLOWING

1. DEFINITIONS

Except as provided otherwise in this Addendum, the definitions of the Award Notice shall apply to this Addendum.

2. DISABILITY

Clause 7 of the Award Notice shall, in addition to the meaning provided in that Clause, also apply in the circumstance that the Beneficiary is permanently ill and that, as a result thereof, the employment contract between the Beneficiary and RRF is terminated, in compliance with Dutch law.

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3. NON COMPETITION

Clause 3(c) of the Award Notice provides for a non-competition covenant to which the Beneficiary shall be bound for a period of six months following the termination of the Beneficiary’s employment contract with RRF. In deviation of Clause 3(c) of the Award Notice, the non-competition covenant is limited solely to the territory of Europe. [NOTE: this section 3 is only applicable to some Grantees; insert “3. RESERVED” if not applicable]

4. DATA PRIVACY

4.1 In deviation of Clause 19 of the Award Notice, the following shall apply. The Parties acknowledge that all personal data which are necessary for the performance of the contract provided in the Award Notice shall be collected, used and/or transferred to G&W. The personal data shall be processed for the exclusive purpose of implementing, administering and managing the Beneficiary’s participation in the Plan. Furthermore, Parties acknowledge that RRF shall be the controller in the meaning of the Dutch Data Protection Act. To the extent necessary, the Beneficiary explicitly agrees with the processing of his personal data as referred to in this Clause 4 of the Addendum, and specifically with the transfer of the Beneficiary’s personal data to G&W in the United States.

4.2 The personal data to be processed shall include: the Beneficiary’s name, home address, e-mail address, salary, job title, any shares of stock or directorships held in G&W, details of all options or any other entitlement to shares of stock awarded, cancelled, exercised, vested, unvested or outstanding in favour of the Beneficiary, necessary for the performance of the Award Notice. Upon the vesting of the options, additional information may be required regarding bank or brokerage account(s) held by the Beneficiary. In case of death of the Beneficiary, the personal data mentioned in this Clause 4.2 shall also be required from the Beneficiary’s inheritors.

5. TAX

The restricted stock award is subject to tax at the moment it is granted or at the moment it vests. G&W and/or RRF will file a request with the appropriate tax authorities in order to receive advance certainty in this respect.

Regardless of any action G&W or RRF takes with respect to any or all income tax, social insurance, payroll tax, payment on account or other tax-related withholding (“Tax-Related Items”), you acknowledge that the ultimate liability for all Tax-Related Items legally due by you is and remains your responsibility and that G&W and/or RRF (1) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Award grant, including the grant or vesting of the Award, the subsequent sale of shares of Common Stock acquired pursuant to such grant or vesting and the receipt of any dividends; and (2) do not commit to structure the terms of the grant or any aspect of the Award to reduce or eliminate your liability for Tax-Related Items.

Prior to the grant or vesting of the Award, you shall pay or make adequate arrangements satisfactory to G&W and/or RRF to satisfy all withholding and payment on account obligations of G&W and/or RRF. In this regard, you authorize G&W and/or RRF to withhold all applicable Tax-Related Items legally payable by you from your wages or other cash compensation paid to you by G&W and/or RRF or from proceeds of the sale of shares of Common Stock. Alternatively,

8

or in addition, if permissible under local law, G&W may (1) sell or arrange for the sale of shares of Common Stock that you acquire to meet the withholding obligation for Tax?Related Items, and/or (2) withhold in shares of Common Stock, provided that G&W only withholds the amount of shares of Common Stock necessary to satisfy the minimum withholding amount. Finally, you shall pay to G&W or RRF any amount of Tax-Related Items that G&W or RRF may be required to withhold as a result of your participation in the Plan or your purchase of shares of Common Stock that cannot be satisfied by the means previously described.

G&W may refuse to honor the vesting and refuse to issue a certificate representing such vested shares of Common Stock if you fail to comply with your obligations in connection with the Tax Related Items as described in this section.

6. AWARD NOTICE

Unless described otherwise in this Addendum, the terms and conditions of the Award Notice shall be fully valid and binding between the Parties.

7. GOVERNING LAW

7.1 This Addendum shall be governed by the laws of the Netherlands.

7.2 The competent court of Rotterdam has exclusive jurisdiction to settle any dispute arising out of or in connection with this Addendum.

SIGNATORIES

Thus agreed upon and executed in duplicate in ________________________ on ________________.

[Name]

Genesee & Wyoming Inc. By:

          Matthew C. Brush

Chief Human Resource Officer

9

EX-31.1

Exhibit 31.1

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

I, John C. Hellmann, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the Quarterly period ended June 30, 2008 of Genesee & Wyoming Inc. (“the registrant”);

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 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) 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 evaluation; and

d) 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 7, 2008	/s/ John C. Hellmann
	John C. Hellmann,
	President and Chief Executive Officer

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EX-31.2

Exhibit 31.2

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

I, Timothy J. Gallagher, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the Quarterly period ended June 30, 2008 of Genesee & Wyoming Inc. (the “registrant”);

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 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) 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 evaluation; and

d) 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 7, 2008	/s/ Timothy J. Gallagher
	Timothy J. Gallagher,
	Chief Financial Officer

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EX-32.1

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”), John C. Hellmann and Timothy J. Gallagher, President 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 three months ended June 30, 2008, 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/ John C. Hellmann

John C. Hellmann

President and Chief Executive Officer

Date: August 7, 2008

/s/ Timothy J. Gallagher

Timothy J. Gallagher

Chief Financial Officer

Date: August 7, 2008

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