Carrier income reports, first quarter 2003
Burlington Northern Santa Fe
The Burlington Northern Santa Fe Corp. said its first-quarter profit rose 8.7 percent. The nation's second largest freight railroad earned $187 million for the January-March period, up from $172 million a year ago.
Revenues rose to $2.23 billion from $2.16 billion in the first quarter of 2002. Operating income was $346 million for the 2003 first quarter compared with $380 million for the same 2002 period. . The operating ratio (operating expenses, including depreciation, as a percentage of revenues) was 84.3% for the quarter compared with 82.2% in the first quarter of 2002. Excluding the effect of higher fuel prices, the operating ratio would have been 3% lower this quarter.
Operating expenses of $1.89 billion were $103 million higher than the same 2002 period. Fuel expense was up $90 million, or 49 percent, to $274 million compared with the same 2002 period primarily as a result of an average increase of $0.29 per gallon in the cost of diesel fuel to $0.94 per gallon.
Freight revenues for the first quarter increased 3 percent to $2.20 billion compared with 2002 first quarter revenues of $2.14 billion.
Canadian National Railway
CN announced first-quarter 2003 net income of $204 million compared with net income of $230 million for the same period of 2002. Canada's largest railway said that an accounting change worth $48 million after taxes increased net income to $252 million, which was ain increase from $230 millionfor the first three months of 2002.
The $48 million after-tax bookkeeping benefit came from a change in accounting for track removal costs.
Operating income was $374 million. Revenue slipped to $1.5 billion and expenses grew to $1.12 billion. CN's operating ratio -- costs as a proportion of revenue -- rose to 75 per cent from 73.1 per cent.
Intermodal revenues rose by 13%, while petroleum and chemicals revenues increased by 6%, and metals and minerals revenues rose 3%. Four business segments registered revenue decreases: grain and fertilizers (13%); automotive (5%); coal (4%); and forest products (2%). The increase in CN's operating expenses was mainly attributable to higher fuel costs, increased casualty and other expenses, and higher expenses resulting from the severe winter conditions that prevailed during the quarter.
Canadian Pacific Railway
CPR reported a slight increase in first quarter sales but profit tumbled 25 per cent on soaring fuel costs and severe winter weather. CPR said it posted a profit of $102 million, down from a year-earlier $136 million. Sales for the quarter rose slightly to $879 million from $875 million. In reaction to the difficult first quarter, CPR announced that it will eliminate 300 positions in 2003 and initiate other cost-reduction initiatives.
CPR's operating ratio for the first quarter this year was 86.5 percent, compared with 79.9 percent in the first quarter last year.
Operating expenses were $761 million in the first quarter of 2003, compared with $700 million in the same period of 2002. Purchased services expense was up $34 million, or 27 per cent, reflecting the benefit of a $15 million insurance settlement in first-quarter 2002, as well as sharply higher insurance premiums and a rise in derailment costs in the first quarter of 2003. Automotive revenues were up $5 million; revenues from sulphur and fertilizers grew $5 million; and grain revenues were down $25 million compared to the 2002 quarter.
CSX reported first quarter net earnings of $99 million versus $25 million a year ago. Both quarters include the cumulative effect of a non-cash accounting change. In the 2003 quarter, earnings increased by an after-tax credit of $57 million, 26 cents per share, because of the adoption of Statement of Financial Accounting Standard (SFAS) No. 143, "Accounting for Asset Retirement Obligations." In the previous year's first quarter, earnings were reduced by an after-tax charge of $43 million, 20 cents per share, due to the adoption of SFAS 142, "Goodwill and Other Intangible Assets."
Before the cumulative effects of these accounting changes, 2003 first quarter earnings were 20 cents per share compared to 32 cents per share in the 2002 first quarter. The 2002 results included a significant real estate transaction that was worth 11 cents per share. Operating income at Surface Transportation, which includes CSX's rail and intermodal units, was $169 million compared to $194 million in the first quarter of 2002 despite strong revenue growth. This was due primarily to increased costs associated with sharp spikes in fuel prices and operating expenses from extraordinarily harsh winter weather.
Kansas City Southern
Kansas City Southern reported a $1.9 million increase in net income to $13.6 million for the first quarter of 2003 compared to $11.7 million for the first quarter of 2002. Net income for the quarter included a one-time favorable benefit of $8.9 million (net of income taxes) relating to the cumulative effect arising from a required change in the method of accounting for removal costs of certain track structure assets.
First-quarter results also included a $5.2 million decline in income tax expense and a $2.1 million increase in equity in net earnings from the Company's investment in Grupo Transportacion Ferroviaria Mexicana, S.A. de C.V. (Grupo TFM) compared to the first quarter of 2002. These positive factors were offset by a $6.6 million decline in operating income, a $3.1 million decrease in other income and a $0.2 million increase in interest expense quarter to quarter.
These positives were offset by a $6.6 million decline in operating income, a $3.1 million decrease in other income and a $0.2 million increase in interest expense quarter to quarter. KCS's operating ratio was 95.1% for the quarter, compared to 90.7% for the same period last year.
Norfolk Southern Corp.
NS reported first quarter income from continuing operations, before required accounting changes, of $85 million, compared to $86 million for the same period a year earlier. First-quarter net income was $209 million and included a $114 million gain largely due to a required change in accounting for the cost of removing railroad crossties, and a $10 million gain from discontinued operations resulting from the 1998 sale of a former motor carrier subsidiary.
For the quarter, the operating ratio, the percentage of revenues required to operate the railroad, was 85.2 percent compared to 84.2 percent a year earlier.
Operating revenues during the quarter were $1.56 billion, 4 percent higher than first-quarter 2002, while carloads rose 3 percent, compared to the same period in 2002. General merchandise revenues of $918 million also set a first quarter record, climbing 6 percent compared to the same period a year earlier. All general merchandise commodity groups exceeded first quarter 2002 results.
Intermodal revenues increased 7 percent to $289 million, compared to the same period of 2002, primarily as a result of strong international business.
Union Pacific Corp., North America's biggest railroad, said quarterly profits dropped as higher fuel costs and harsh winter weather dragged on results.
UP reported $.60 per diluted share in first quarter 2003 income before the cumulative effect of a change in accounting principle related to the adoption of FAS No. 143, "Accounting for Asset Retirement Obligations." Net income was $1.67 per diluted share, or $429 million, including the $274 million after-tax cumulative effect adjustment. This compares to net income of $.86 per diluted share, or $222 million, in 2002. Excluding Overnite Corporation, UP reported operating income of $368 million compared to $489 million for the same period in 2002.
UP's operating revenue was $2.7 billion, a first quarter record. Average Commodity Revenue Per Car was at an all-time best of $1,188 per car. Also, employee productivity (gross ton-miles/employee) increased 3 percent for a first quarter record.
The railroad's operating ratio for the quarter was 86.5%, compared to 81.6% in the same quarter last year.
"The high cost of fuel was the main driver behind our shortfall in earnings this quarter," said Dick Davidson, chairman and chief executive officer, in a press release. "Diesel fuel was up more than $.39 a gallon versus year-ago levels, costing us nearly $.30 per share. We also incurred a one-time expense for severance payments and March storms reduced coal revenues. Moving beyond fuel and weather, our operations are running smoothly and we are well positioned for future growth."
Overnite reported operating income in the first quarter of $12.6 million, compared with $10.5 million in 2002. Operating revenue increased to an all-time best $341.2 million from $308.8 million last year. Overnite's operating ratio decreased 0.3 percentage points to 96.3 percent compared to 2002's ratio of 96.6 percent.
© 2003 Brotherhood of Locomotive Engineers