Carrier income reports, 2005 first quarter

BNSF Railway

Burlington Northern Santa Fe Corp. reported record first-quarter earnings of $321 million, or 83 cents per share, on strong shipment volumes of intermodal and agricultural products, coal and Asian imports through California ports. BNSF earned $193 million, or 52 cents per share, a year ago. Sales rose 20 percent to $2.98 billion.

Operating expenses for the first three months of 2005 of $2.35 billion were $268 million, or 13 percent, higher than the same period in 2004, primarily driven by a 9-percent increase in gross ton-miles and 31-percent higher fuel prices after hedge benefit.

First-quarter operating income increased $224 million, or 55 percent, to $634 million compared with the first quarter of 2004. BNSF's operating ratio decreased more than five percentage points to 78.1 percent from 83.3 percent in the same quarter of the prior year.

BNSF avoided the troubles of rival Union Pacific Railroad, which has struggled in recent quarters because of shortages of crews and locomotives as it has tried to cope with the same record traffic volumes.


CN reported a net income of $299 million for the first quarter ended March 31, 2005, an increase of 42 percent from year-earlier net income of $210 million. CN also reported revenues of $1,706 million, an increase of 19 percent; and an increased operating income of $526 million, up 33 percent over first quarter 2004.

Commodity groups that registered revenue gains during the quarter were metals and minerals (49 percent); forest products (26 percent); intermodal (26 percent); coal (18 percent); petroleum and chemicals (10 percent); and grain and fertilizers (eight percent). Automotive revenues declined by six percent.

CN's first-quarter 2005 performance benefited from $121 million in revenues from the rail and related holdings of Great Lakes Transportation LLC (GLT) and BC Rail, whose operations CN consolidated on May 10, 2004, and July 14, 2004, respectively. Operating expenses for first-quarter 2005 increased by 13 percent to $1,180 million, largely because of the inclusion of $96 million in GLT and BC Rail expenses, higher labor and fringe benefits, and increased fuel costs.

CN also posted a record first-quarter operating ratio of 69.2 percent, a 3.3-percentage point improvement over first-quarter 2004 performance.

Canadian Pacific Railway

Canadian Pacific Railway reported net income of $81 million in the first quarter of 2005, more than triple first-quarter 2004 net income of $24 million. Some of the highlights for CPR's first quarter 2005 include: Operating income up 54 percent to $179 million; revenue up 14 percent to $1,014 million, a first-quarter record; operating expenses up 8 percent; and operating expenses up just 4 percent excluding the impact of significantly higher fuel prices.

CPR expects to grow revenue in the range of 12 percent to 14 percent in 2005. Diluted earnings per share, excluding foreign exchange gains and losses on long-term debt and other specified items, are expected to be between $3.15 and $3.25, assuming oil prices averaging US$55 per barrel and an average exchange rate of $1.23 per U.S. dollar (US$0.81). Revenue growth was strong across CPR's entire bulk commodity sector, compared with first-quarter 2004, led by coal and grain, which increased 44 percent and 23 percent, respectively.

CPR also boasted an operating ratio of 82.4 percent, a 4.5-percentage-point improvement over the same quarter of 2004.

CSX Transportation

CSX Corp. posted a steep rise in first-quarter profit after logging a sizable gain from selling its International Terminals business. Quarterly income jumped to $579 million from $30 million in the 2004 period.

Earnings included an after-tax gain of $425 million from shedding the international business. Surface transportation revenue for the quarter was $2.1 billion versus $1.9 billion in the same quarter last year. Revenue gains in the quarter were led by strength in the Company's coal and merchandise markets, which produced 20 percent and 8 percent year-over-year revenue gains, respectively.

Surface transportation operating income was a record $351 million versus $151 million a year ago, which was reduced by a $53 million management restructuring charge in 2004. The Surface Transportation operating income, driven by a 10 percent increase in revenue and better cost discipline. On a comparable basis, adjusting for the 2004 management restructuring charge, Surface Transportation operating income for 2005 increased $147 million.

The railroad's operating ratio for the quarter was 83.3 percent, an improvement of more than 6 percentage points versus the first quarter of 2004.

Kansas City Southern

Kansas City Southern (KCS) reported first quarter 2005 financial results that show substantial quarter-over-quarter gains in revenues and operating profit.

Driven by record revenues from The Kansas City Southern Railway Company (KCSR), its principal U.S. subsidiary, and by the inclusion of the recently acquired Mexrail, Inc., KCS recorded consolidated revenues of $198.2 million. Total KCS operating expenses for the first quarter of 2005 were $173.4 million. Consolidated operating income was $24.8 million compared with $17.4 million in 2004. Revenues from KCS' domestic rail operations, which are comprised of KCSR and Mexrail, Inc., and its subsidiary, The Texas Mexican Railway (Tex Mex), totaled $196.6 million. Total operating expenses were $168.1 million. Operating income for the quarter ended March 31, 2005, was $28.5 million.

KCSR's first quarter 2005 operating income was $29.7 million, an increase of $6.2 million over 2004. KCSR's operating ratio for the quarter was 83.4 percent, a slight improvement over 84.0 percent for the first quarter of 2004.

Norfolk Southern

For the first quarter of 2005, Norfolk Southern Corporation reported net income of $194 million, up 23 percent compared with $158 million for first-quarter 2004. First-quarter results included approximately $35 million for expenses (pretax) related to the Jan. 6 train derailment in Graniteville, S.C. Total railway operating revenue grew 16 percent to $1.96 billion from $1.69 billion last year, and was the highest of any quarter in Norfolk Southern's history. Intermodal revenues set a first-quarter record of $408 million, up 24 percent, compared with first-quarter 2004.

Norfolk Southern said traffic volume was up about 106,000 units, or 6 percent during the quarter. General merchandise revenue reached $1.1 billion, an increase of 12 percent over the same period last year.

For the quarter, the railroad operating ratio improved to 79.4 (even including expenses for Graniteville, which added 1.7 points) compared with 79.6 a year earlier.

Union Pacific

Challenged by high diesel fuel prices and service slowed by a West Coast storm and high demand, Union Pacific Corp. on Thursday reported a 22 percent drop in its first quarter net income compared with the same quarter last year.

Net income dropped to $128 million, or 48 cents a share, in the three-month period, compared with $165 million or 63 cents a share in the same period last year. Union Pacific reported record operating revenue of $3.2 billion in the first quarter of 2005 compared to last year's $2.9 billion. Operating income in the first quarter of 2005 was $313 million compared to $314 million for the same period in 2004.

Commodity revenue was a first quarter record of $3.0 billion, up 8 percent, compared to $2.8 billion in 2004. Drivers of the increase were a 1 percent increase in volumes as well as higher fuel surcharge recoveries and improved yields.

First quarter 2005 average revenue per car was at an all-time best of $1,306 per car, versus $1,214 in the first quarter of 2004.

The operating margin decreased to 9.9 percent in the first quarter of 2005 from 10.9 percent in 2004, primarily due to the impact of the January storm and higher fuel prices.

The Railroad's average quarterly fuel price of $1.45 per gallon compares to $1.02 per gallon paid a year ago.

Although impacted by the January storm, quarterly average system speed, as reported to the Association of American Railroads, averaged 21.1 mph, 0.8 mph slower than the first quarter of 2004, but 0.6 mph higher than the prior quarter.

The railroad's operating ratio for the quarter was 90.1 percent in the first quarter of 2005, compared to 89.1 percent in the first quarter of 2004.

"Demand for our services remains strong and our task is to leverage that strength into better bottom-line results," said UP Chairman and Chief Executive Officer Dick Davidson. "As we continue to restore fluidity to our network, our customers, our employees and our shareholders will benefit."



© 2005 Brotherhood of Locomotive Engineers and Trainmen