Carrier Income Reports-4th quarter 2002

Burlington Northern Santa Fe

BNSF reported net income of $202 million for the quarter ended December 31 compared to $177 million (including an adjustment for work force reduction costs) for the same period in 2001. Total operating revenue remained the same at $2.3 billion. The company's year-end net income was $760 million, compared to $731 million in 2001. Year-end revenue was $8.98 billion, compared to $9.21 billion in 2001.

Operating income was $436 million for the 2002 fourth quarter compared with operating income in the same 2001 period of $401 million, or $467 million adjusted. BNSF's operating ratio was 80.8 percent for the 2002 fourth quarter compared with 82.4 percent in 2001.

Freight revenues for the year were $8.87 billion compared with 2001 revenues of $9.09 billion. Operating expenses of $7.32 billion decreased by $135 million. Operating income fell to $1.66 billion from $1.75 billion as compared with the prior period. 2001 earnings include unusual items comprised of an automotive contract settlement gain, losses on non-rail investments, work force reduction related costs and an expense associated with the early extinguishment of debt.

Canadian National Railway

Profits at Canadian National Railway fell 23 per cent last year, partly due to $252 million in fourth-quarter charges to cover asbestos claims in the United States and the cost of 1,146 job cuts announced in December. As well, the poor Canadian grain harvest cut $220 million from yearly revenues, and the hurt will carry on into 2003.

CN earned $800 million in 2002 compared with $1.04 billion in 2001. Excluding unusual items in both years, the 2002 profit was $1.05 billion, up 8 per cent. Revenue rose 8 per cent to $6.1 billion, reflecting the acquisition of Wisconsin Central and a strong performance by most units. The operating ratio - an efficiency measure of expenses as a proportion of revenue - worsened to 69.4 per cent, compared with 68.5 per cent in 2001. Despite its lower net profit, CN said free cash flow rose 16 per cent to $513 million, and it raised its quarterly dividend by 16 per cent, or 3.5 cents per share, to 25 cents. CN also is continuing a share buyback and is putting some cash aside for acquisitions.

For the fourth quarter, net earnings plunged to $22 million from $296 million in the year-ago period, as a result of the one-time charges. Quarterly revenues increased one per cent to $1.55 billion.

Canadian Pacific Railway

Canadian Pacific Railway's fourth-quarter profit rose 29 percent as the railroad had a foreign exchange gain and weathered the impact of the drought-stricken western grain crop.

But operating income at CP Rail, which just wrapped up its first full year as a stand-alone firm after its spinoff from defunct Canadian Pacific Ltd., slipped a bit as expenses nudged up 3 percent. It earned C$126 million ($83 million) in the fourth quarter, up from year-earlier C$98 million. Net income included a C$6.1 million gain from the impact of a strong Canadian dollar on its long-term debt. Without one-time items, profit was C$120 million, down from C$124 million. Revenues were C$950 million, about flat with the fourth quarter of 2001. For the full year, net income jumped 33 percent to a company record of C$496 million from C$373 million.

CPR's operating ratio, or expenses as a percentage of revenues, weakened to 75 percent from 72.5 percent in the fourth quarter of 2001. But it improved to a company record of 76.6 percent for the year. The railroad it was on track to achieve its target of 73 percent in 2004.

CSX Corp.

CSX Corp., the parent company of CSX Transportation, reported strong fourth-quarter earnings for 2002, which improved on the previous year's earnings for the same period. The report marked eight of the last nine quarters with improved earnings over the year before.

CSX reported $137 million in net income, compared with $65 million for the same period the previous year. CSX paid off the $60 million settlement, in fourth-quarter 2001, of a lawsuit prompted by a 1987 chemical fire in New Orleans.

A strong performance by the company's main rail and intermodal business was responsible for much of the increase. Lower expenses for materials and supplies and in the Conrail division also helped boost profit.

The CSXT railroad is CSX's core business, and coal handling generates about 25 percent of CSX's revenue. While coal shipping business was down, the sale of its Charlotte, N.C.,-based CSX Lines LLC. for $300 million in cash and securities offset the decline in coal, CSX said.

For the full year, CSX said it earned $424 million versus $293 million in 2001. Revenue edged up to $8.15 billion from $8.11 billion in 2001.

Kansas City Southern

Fueled by its Mexican joint venture, Kansas City Southern posted sharply higher earnings in its fourth quarter.

For the three months that ended Dec. 31, Kansas City Southern earned $17.4 million on $144.2 million in revenues. Earnings were up 56 percent from the same quarter in 2001, when the railroad earned $11.1 million on $146.9 million in sales.

KCS posted a higher operating ratio of 88.6 percent in the fourth quarter of 2002 compared to 84.8 percent for the same period in 2001.

KCS's investment in the Mexican railroad Grupo TFM provided $15.2 million in earnings for the fourth quarter. Other positive factors were partially offset by an increase in operating expenses and a decline in revenue during the quarter.

Despite the revenue decline, KCS said it saw favorable trends in three commodity groups: chemical and petroleum products, paper and forest products, and agricultural and mineral products.

For the year, the company earned $54.2 million on $566.2 million in sales. In 2001, the railroad earned $30.7 million on $583.2 million in sales. For 2003, KCS expects last year's installation of a new operational computer system to create opportunities for improved efficiencies.

Norfolk Southern Corp.

Norfolk Southern Corp. reported fourth-quarter net income of $129 million, up 12 percent compared with net income of $115 million in the fourth quarter of 2001.

For the year, net income was $460 million, up 23 percent compared to $375 million in the same period a year earlier. For the quarter, the railway's operating ratio improved to 81.8 percent compared with 82.0 percent in the same period of 2001. For the year, the operating ratio improved to 81.5 percent, compared with 83.7 percent a year earlier.

Railway operating revenues set record highs for both the fourth quarter and the year. In the quarter, revenues reached $1.58 billion, up three percent compared with the fourth quarter of 2001, and for the year, revenues of $6.27 billion rose two percent compared with the same period in 2001.

Fourth-quarter general merchandise revenues of $914 million reflected a five percent improvement compared to the fourth quarter of 2001. All market groups showed revenue gains compared to the same period of 2001, led by a seven percent improvement in automotive. For the year, general merchandise revenues of $3.65 billion increased three percent compared with 2001 and set a record.

Union Pacific

Union Pacific Corp. announced plans to cut up to 1,000 jobs, or 2 percent of its work force, this year even as it reported its earnings rose 37.5 percent in the fourth quarter.

The nation's biggest railroad also forecast that its first quarter earnings will drop up to 20 cents a share from the 86 cents a share it earned a year earlier. That includes $40 million in severance costs and rising fuel costs, company officials said. For the full year, Union Pacific said it expects earnings to grow 5 percent to 10 percent from the $4.30 a share it had excluding one-time items in 2002.

The company plans to lay off up to 300 people by March and said 700 more positions will not be filled this year as people leave or retire. Union Pacific employs about 48,000 people. Union Pacific wants to cut costs by up to 20 percent in 2003, amid concern about higher wages, increased health care costs, higher fuel prices and soaring insurance costs since the Sept. 11 terrorist attacks.

Union Pacific attributed its strong fourth-quarter earnings performance to higher productivity and revenue boosts from hauling automobiles and farm goods. It earned $378 million for the quarter ended Dec. 31 compared with $275 million a year earlier.

For all of 2002, Union Pacific's net income rose by 39 percent to $1.3 billion, up from $966 million in 2001. Per-share earnings rose from $3.77 per share in 2001 to $5.05 per share last year.

The layoffs had been announced earlier, but the railroad hasn't specified where most of the job reductions could occur.

According to a report published in the January 23 edition of the Fort Worth Star-Telegram, UP President Ike Evans told investors and media that the railroad expects to cut some jobs as it employs more remote-controlled locomotives in its classification yards.


© 2003 Brotherhood of Locomotive Engineers