2004 First Quarter: Carrier Income Reports
Burlington Northern Santa Fe
The Burlington Northern Santa Fe Corporation reported first-quarter 2004 earnings of $0.52 per share, a 30-percent increase over first-quarter 2003 earnings of $0.40 per share, before the favorable effect of an accounting change of $0.10 per share.
Freight revenues increased $246 million, or 11 percent, to $2.45 billion from the 2003 first quarter, primarily driven by an eight-percent increase in units handled. Operating income increased $64 million, or 19 percent, to $410 million compared with first-quarter 2003.
Consumer Products experienced its best first quarter on record with revenues increasing $79 million, or 9 percent, to $927 million reflecting increased volumes in the international, truckload and perishables sectors as well as an overall increase in revenue per unit. Agricultural Products revenues were up $80 million, or 22 percent, to a record $438 million, as a result of strong U.S. corn and wheat harvests coupled with increased export demand for grain.
BNSF's operating ratio decreased to 83.3 percent compared with 84.3 percent for the same period in the prior year.
Canadian National Railway
CN, afflicted by a strike, the strong Canadian dollar and high fuel costs, reported a 17 percent decline in first-quarter profit to $210 million.
CN reported its financial results for the first quarter ended March 31, 2004, and highlights include: Net income of $210 million, or 73 cents per diluted share; Excluding the cumulative effect of change in accounting policy in the year-earlier period, diluted earnings per share for the first three months of 2004 increased by six per cent; Operating income of $395 million, up six per cent from the year-earlier quarter; Operating ratio of 72.5 per cent, 2.5 points better than the prior year's quarterly performance; and Free cash flow of $272 million, compared with $181 million for the same three-month period of 2003.
"The Canadian Auto Workers (CAW) strike negatively affected first-quarter net income by an estimated $24 million, while the significant appreciation of the Canadian dollar relative to the United States dollar reduced CN's revenues, operating income and net income by approximately $120 million, $40 million and $20 million, respectively," said CN President and CEO E. Hunter Harrison.
All figures reported in Canadian dollars.
Canadian Pacific Railway
Profit at the Canadian Pacific Railway slumped to $24 million, from $102 million a year earlier, as bad weather and a weak U.S. dollar ate into earnings. The railway cited a net loss of $14 million in foreign exchange on long-term debt in the first quarter of 2004, compared with a net gain of $64 million in the same period a year earlier. With a stronger Canadian dollar reducing U.S. dollar-denominated income, revenue was cut by about $59 million, operating expenses by $46 million and operating income by about $13 million.
Total revenue was $887 million, compared with $879 million in the same period a year earlier. Operating income was $116 million, down from $118 million.
"The worst avalanche in eight years and severe weather early in the quarter hit us hard in our western corridors over a two-week period," CEO Rob Ritchie said in a release. "With heavy freight volumes fully consuming available capacity, there was no opportunity to recover the lost volumes in the quarter."
Its operating ratio was 86.9 percent, compared with 86.6 percent.
All figures reported in Canadian dollars.
CSX Corp.'s first-quarter earnings dropped 70 percent from a year ago. Factoring out one-time charges, however, earnings would have increased 55 percent on a per share basis.
CSX had net earnings of $30 million, or 14 cents per share, down from $99 million, or 46 cents per share, in the first quarter of 2003. Last year's figures include an additional $57 million, or 26 cents per share, from a change in accounting rules.
This year's first-quarter earnings were lowered by $37 million, or 17 cents per share, because of the cost of reducing the managerial workforce. Excluding the charge, first-quarter earnings were $67 million, or 31 cents per share. The railroad's operating ratio was 92.1 percent, compared with 90.8 percent in 2003.
Revenues were $1.96 billion for the first quarter, compared with $2.02 billion a year ago. The company pointed to strong growth in CSX's core surface transportation markets, including a 10 percent increase in coal, coke and iron ore.
Data released by CSX showed that several key operating statistics - including average train speed and on-time originations - worsened from the first quarter last year.
Kansas City Southern
Kansas City Southern Industries Inc.'s earnings plunged 75 percent in the first quarter, largely due to a drop in profits from its Mexican affiliate, Grupo TFM.
KCS reported income of $3.4 million, or 2 cents a share, during the January-March period, compared with earnings of $13.6 million, or 22 cents a share, during the first quarter of 2003. Revenue at KCS was $147.8 million, up from $140.2 million. The primary factor in reduced equity earnings for Grupo TFM this quarter was a $7.3 million deferred tax benefit (calculated under U.S. GAAP) compared to a $23 million benefit in the first quarter of 2003, a $15.7 million reduction.
KCS's operating ratio to 84 percent for the first quarter of 2004 compared with 93.3 percent in the first quarter of 2003. Agriculture & minerals commodity group revenues increased by 22.3% quarter to quarter led by solid growth in both domestic and export grain traffic. Paper & forest products revenues grew by 8.4%. Intermodal & automotive revenues increased by 8.2%. Chemical & petroleum products continued to rebound and posted a 2.6% increase.
For the first quarter of 2004, Norfolk Southern reported record revenues of $1.7 billion, up eight percent compared with the same period last year, and record first quarter income from railway operations of $346 million, up 50 percent, compared with the 2003 quarter.
First-quarter income from continuing operations before accounting changes was $158 million compared with last year's $85 million. Reported net income for first quarter 2003 was $209 million, which included a $114 million gain due to a required industry-wide accounting change, and a gain of $10 million from discontinued motor carrier operations. Excluding those items, net income in the first quarter increased by $73 million, or 86 percent, over the same period last year. Revenues increased $132 million, or eight percent, over the same quarter in 2003. Carloads rose seven percent for the same period.
NS reported its best operating ratio - the standard measure of railroad efficiency - since the integration of Conrail in 1999. For the quarter, the operating ratio was 79.6 percent compared with 85.2 percent a year earlier.
Union Pacific Corp.
Union Pacific reported a net income of $165 million on revenue of $2.89 billion for the quarter ended March 31. Net income in last year's first quarter came to $429 million on $2.73 billion in revenue.
The railroad blamed the decline in net income on widespread train crew shortages and a charge of $35.8 million to pay for a court judgment (the Arkansas Supreme Court issued a decision upholding a $35.8 million jury verdict, including interest, against UP for a 1998 grade-crossing accident). The railroad reported a first quarter record $2.9 billion in 2004 operating revenue compared to last year's $2.7 billion. Operating income in the first quarter of 2004 was $314 million compared to $369 million for the same period in 2003.
The railroad's operating ratio was 89.1 percent for the first quarter of 2004, compared to 86.5 percent in the first quarter of 2003.
Commodity revenue in the first quarter of 2004 was up 7 percent to $2.8 billion, compared to $2.6 billion in 2003. First quarter 2004 average revenue per car was at an all-time best of $1,214 per car, versus $1,188 last year. The operating margin decreased to 10.9 percent in the first quarter of 2004 from 13.5 percent in 2003 due to increased service costs and the Arkansas Supreme Court decision.
Compared to 2003, 2004 first quarter agricultural and industrial products were both up 10 percent; Intermodal was up 9 percent; chemicals and energy were both up 4 percent; and automotive was down 2 percent. According to the Associated Press, the railroad has been purchasing more locomotives and has been hiring more train crews to deal with increased demand. It expects to bring in 4,000 train crew workers through this year, with about half in new positions and half covering normal attrition.
In May, UP canceled three express train contracts with United Parcel Service and increased some shipping prices to handle growing demand in the midst of its train crew shortage. The UPS contract for express trains that ran once a week each way from Los Angeles to New York was canceled because it took up resources needed in other areas of the railroad. The service began in July as a partnership with CSX. UP suspended the service for April as it dealt with congestion on its 23-state system. Two other contracts with UPS for expedited service from Los Angeles to Dallas and Memphis also were suspended.
© 2004 Brotherhood of Locomotive Engineers and Trainmen