Genesee & Wyoming (GWR)

Net Income

Net income increased $106.4 million to $117.7 million in the three months ended June 30, 2006, compared to $11.4 million in the three months ended June 30, 2005. The $106.4 million increase was primarily due to an after-tax gain of $123.0 million on the ARG Sale and an increase in net income from operations of $1.7 million, or approximately 15.0%. These increases were offset by an impairment write down of $11.3 million, representing our 50-percent share of the impairment loss recorded by ARG, an investment write down of $5.9 million on our equity investment in Bolivia, and a $1.0 million income tax expense to reserve against net operating loss carry-forwards in Mexico.

Net Income

North American net income increased $4.1 million, or 47.8%, to $12.6 million in the three months ended March 31, 2006 compared to $8.5 million in the three months ended March 31, 2005. The $4.1 million increase was primarily due to an increase in pre-tax profit, with the remainder due to a slight reduction in the effective tax rate in North America from 30.4% to 28.4%.

Equity income from international affiliates decreased $1.0 million, or 40.5%, to $1.4 million in the three months ended March 31, 2005 compared to $2.4 million in the three months ended March 31, 2005, primarily due to a $950,000 decrease in net income from ARG. ARG’s operating results were negatively impacted in the three months ended March 31, 2006 by $2.2 million of expenses related to Cyclone Clare, $1.1 million of transaction costs related to the pending sale of ARG, and higher cost for diesel fuel used in operations.

Net Income

North American net income increased 76.4% to $40.1 million in 2005 compared to $22.7 million in 2004. Of this $17.4 million increase, $12.1 million came from an increase in pre-tax profit, with the remainder due to a reduction in the effective tax rate in North America from 41.4% to 28.2%. The reduction in effective tax rate was primarily associated with U.S. tax legislation that created a track maintenance tax credit for short line railroads.

Equity income from international affiliates decreased $4.8 million to $10.1 million in 2005 compared to $14.9 million in 2004, primarily due to a $4.8 million decrease in net income from ARG. ARG revenues were most significantly impacted by lower freight revenues from grain traffic in 2005 compared to 2004, partially offset by strong growth in freight revenues from iron ore traffic. Higher fuel expense, as well as the cost of hiring and training new locomotive drivers also impacted results.