Genesee & Wyoming Inc. reported that net income in the first quarter of 2006 increased 28.6 percent to $14.0 million, compared to net income of $10.9 million in the first quarter of 2005.

Net income from GWI's North American operations increased 47.8 percent to $12.6 million in the first quarter of 2006 compared with $8.5 million in the first quarter of 2005. GWI's diluted earnings per share in the first quarter of 2006 increased 26.9 percent to $0.33 with 42.4 million shares outstanding, compared to diluted earnings per share of $0.26 with 41.5 million shares outstanding in the first quarter of 2005.

On February 13, 2006, GWI and its 50-percent joint venture partner, Wesfarmers Limited, entered into a definitive agreement to sell the Western Australia operations and certain other assets of the Australian Railroad Group (ARG) to Queensland Rail and Babcock & Brown Limited for approximately $956.0 million, plus certain closing adjustments (ARG Sale). The ARG Sale is subject to closing conditions, including certain Australian government approvals, and is targeted to close in the second quarter of 2006. Simultaneous with the ARG Sale, GWI entered into an agreement to purchase Wesfarmers' 50-percent ownership of the remaining ARG operations, which are principally located in South Australia and the Northern Territory for approximately $15.0 million. In the first quarter of 2006, ARG contributed US$1.4 million to GWI's net income, or 10 percent of the total net income.

GWI's results for the first quarter of 2006 included: (i) $1.0 million of after-tax expense (or $0.02 per share) from transaction costs associated with the ARG Sale (of which approximately 60 percent was incurred by GWI and reflected in North American net income and 40 percent was incurred by ARG and reflected in equity income), (ii) $0.8 million of after-tax expense (or $0.02 per share) from track washouts due to Cyclone Clare in Western Australia and (iii) $0.7 million of after-tax expense (or $0.02 per share) for the cost of stock options due to the adoption of FAS123R.

In the first quarter of 2006, GWI's North American revenue increased 34.4 percent to $113.0 million, compared to $84.1 million in the first quarter of 2005. Of this $28.9 million increase in revenue, $8.9 million was same- railroad revenue growth in the U.S. and Canada, $20.0 million was from the acquisition of rail lines from Rail Management Corporation and $0.9 million was from a rail property acquired from CSX. These gains were partially offset by a $0.9 million decrease in revenue in Mexico, where a portion of track has remained inoperable since Hurricane Stan in October 2005. The 11.8 percent growth in same-railroad revenue in the U.S. and Canada was primarily due to freight revenue increases of $4.1 million in coal, $1.5 million in metals and $0.9 million in pulp and paper.

GWI's North American operating income in the first quarter of 2006 increased 54.7 percent to $22.1 million, compared with $14.3 million in the first quarter of 2005. The North American operating ratio improved by 2.5 percent to 80.5 percent in the first quarter of 2006, compared to an operating ratio of 83.0 percent in the first quarter of 2005.

GWI's Mexico operations had an operating loss of $0.3 million in the first quarter of 2006 compared to operating income of $0.6 million in the first quarter of 2005. Excluding Mexico, GWI's North American operating ratio improved from 82.0 percent in the first quarter of 2005 to 78.8 percent in the first quarter of 2006.

Revenue at GWI's 50 percent-owned subsidiary, ARG, decreased 0.8 percent to US$83.7 million in the first quarter of 2006, compared to US$84.4 million in the first quarter of 2005. This US$0.7 million decrease in revenue was primarily due to a 4.8 percent weakening of the Australian dollar. In Australian dollars, ARG's revenue increased 4.4 percent in the first quarter of 2006 compared to the first quarter of 2005 due to higher average revenue per carload, particularly from grain and iron ore, and the addition of the intermodal business between Adelaide and Melbourne. This increase was partially offset by a temporary weakness in iron ore traffic due to two mine shutdowns in Western Australia in the first quarter of 2006.

ARG's operating income in the first quarter of 2006 was US$10.5 million, compared to operating income of US$13.8 million in the first quarter of 2005. ARG's operating ratio was 87.4 percent in the first quarter of 2006, compared to 83.6 percent in the first quarter of 2005. Operating income from ARG in the first quarter included US$1.1 million of transaction expenses related to the ARG Sale and US$2.2 million of expenses related to Cyclone Clare, which caused track washouts in Western Australia in January. ARG's operating results in the first quarter of 2005 were adversely impacted by two derailments by a third party operator on ARG's track in Western Australia, which cost approximately US$1.8 million.

Equity income from ARG in the first quarter of 2006 was US$1.4 million, compared to US$2.3 million in the first quarter of 2005.

For the quarter ended March 31, 2006, GWI's North American operations generated Free Cash Flow of $21.2 million (defined as Cash from Operations of $27.5 million less Cash used in Investing of $6.3 million, excluding Cash used for Acquisitions of $0) compared with $15.9 million (defined as Cash from Operations of $19.7 million less Cash used in Investing of $3.8 million, excluding Cash used for Acquisitions of $0) in the same period of 2005.

Mortimer B. Fuller III, Chairman and Chief Executive Officer of GWI, commented, "Our U.S. and Canada operations performed well ahead of our expectations for the first quarter, continuing to benefit from favorable industry conditions and good acquisition results. In contrast, our Mexico operations continue to struggle as we reconfigure traffic flows and maintain our dialogue with the Mexican authorities regarding rebuilding the washed out segment of the line. Overall, we are pleased with our North American results as earnings increased 47.8 percent in the first quarter."

Mr. Fuller continued, "In Australia, ARG's operating performance was negatively impacted by expense related to the impact of Cyclone Clare, which struck Western Australia earlier this year. Additionally, ARG's first quarter results include transaction expenses related to the ARG Sale. We continue to expect that the sale of the Western Australia business and related assets, as well as our purchase of the remaining portion of the South Australia business, will close in the second quarter of 2006."