Carrier income reports, 2nd quarter 2003

Burlington Northern Santa Fe

Burlington Northern Santa Fe said quarterly profit rose only slightly amid weak increases in volume as fuel costs edged higher. The company reported net income of $200 million. In the same quarter a year earlier, it reported net income of $194 million.

BNSF's operating ratio was 81.8 percent, higher than the 80.7 percent posted in same quarter of 2002 (the lower the operating ratio, the better).

A pickup in consumer product revenue and in coal revenue helped total operating revenue.

Consumer Products revenue rose 7.4 percent to $911 million on growth in international, truckload and perishable sectors. Coal revenue rose 3.3 percent to $504 million largely on rate increases, the company said. A pickup in consumer product revenue and in coal revenue, a key category for North America's largest railroads, helped total operating revenue rise to $2.29 billion in the quarter from $2.21 billion a year earlier.

Fuel expense rose 27 percent in the quarter from a year earlier.

Canadian National Railway

Canadian National Railway's second-quarter profit dropped 12.8 per cent as a surging Canadian dollar, fuel costs and lower grain volumes hit its bottom line. CN reported profit of $244 million compared with $280 million for the same quarter of 2002 (all figures in Canadian dollars).

The railroads's operating ratio for the latest quarter was 70.1 per cent, compared with 68.4 per cent for the same quarter last year. Carloadings declined one per cent.

CN's operating income for the second quarter of 2003 declined 11 per cent to $437 million. Revenue fell 6 per cent to $1.46 billion from $1.55 billion a year ago, while operating expenses dropped 3 per cent to $1 billion.

The stronger Canadian dollar reduced CN's second-quarter 2003 operating income by about $25 million and net income by about $11 million. It also hurt the railway's revenues in a big way.

"The stronger Canadian dollar reduced second-quarter revenues by approximately $90 million," Hunter Harrison, president and chief executive officer, said in a statement.

Canadian Pacific Railway

Canadian Pacific Railway saw its second-quarter earnings drop on a restructuring charge of $150 million, high fuel prices and a stronger Canadian dollar.

Net income declined to $29 million in the quarter, from $169 million in the second quarter of 2002 (all figures in Canadian dollars).

CPR pointed to a special charge of $150 million, announced in June, that was largely responsible for the drop on profit. The charge is for a program to eliminate 820 job positions by the end of 2005 and for a restructuring of CPR's Northeastern U.S. network to improve its economic performance.

Excluding the special charge, CPR's operating ratio for the second quarter this year was 79.1 per cent, compared with 76.3 per cent in the second quarter of 2002.

Second-quarter 2003 operating income, excluding the special charge, was $191 million, compared with $219 million in the same period last year. The decline was due to the effect of persistently high fuel prices, a reduction in other revenues, and the net result of the stronger Canadian dollar.

CSX Transportation

CSX reported a drop in earnings for the second-straight quarter. The railroad reported quarterly earnings of $127 million compared to $135 million a year ago. Revenue was $1.94 billion vs. $2.07 billion a year ago. Operating ratio was 86.3 percent, up from 84.0 percent in the same quarter of 2002.

The company's surface transportation division, which includes the railroad and the intermodal unit, reported revenue of $1.89 billion, up from $1.83 billion for the same period last year. But operating income slumped to $259 million compared to $293 million in 2002.

The company has eliminated 451 jobs so far this year, and it's accelerating the job-cutting pace to reach 900 total before the end of the year. The railroad has said the jobs are being eliminated through layoffs and attrition.

"It's painful to admit, but we didn't run the railroad real well in the second quarter," Chairman and Chief Executive Officer Michael Ward told the Florida Times-Union newspaper. "We're not real pleased with these results, and we're taking steps to resolve some issues. Failure to resolve these issues is not an option."

Kansas City Southern

Kansas City Southern reported a quarterly loss amid sluggish cargo volumes and disappointing results from a Mexican railway. KCS said losses were $500,000 in the second quarter. In 2002's second quarter, the company earned $14.5 million.

The railroad's second-quarter 2003 operating ratio was 86.9% compared with 86.7% for second quarter 2002, and was improved from the 93.3% operating ratio in first quarter 2003. KCS said its quarterly results had been hurt by a $2.3 million loss associated with its stake in Grupo Transportacion Ferroviaria Mexicana, S.A. de C.V., or Grupo TFM.

Quarterly revenues at KCS were $146.3 million, 5 percent more than the $139.2 million posted for the year-ago quarter.

Second-quarter 2003 KCS expenses increased $6.4 million compared with second quarter 2002 due primarily to higher expenses for depreciation ($2.2 million), fuel ($2.0 million), purchased services ($1.5 million), and casualties and insurance ($0.6 million). The railroad's fuel costs rose from first quarter to second quarter due to a 24% increase in the average price per gallon.

Norfolk Southern

Norfolk Southern Corp. reported second-quarter net income of $137 million, an increase of 15 percent compared with net income of $119 million in the second quarter of 2002.

However, operating ratio for the quarter (the percentage of revenues required to operate the railroad) was 81.8 percent compared with 79.8 percent in the same period of 2002.

Second-quarter railway operating revenues of $1.63 billion were the highest of any quarter in Norfolk Southern's history and improved 3 percent compared with $1.59 billion in the second quarter of 2002. Railway operating revenues for the first half of 2003 also set a six-month record rising 3 percent to $3.19 billion compared with $3.09 billion for the same period a year earlier.

Intermodal revenues set records, rising 2 percent to $300 million in the second quarter and 4 percent to $589 million for the first six months, compared with the same periods of 2002.

Operating expenses increased 5 percent for both the second quarter and the first six months of 2003 compared with the same periods last year.

Union Pacific Corp.

Union Pacific Corp. reported second quarter net income of $288 million, down from net income of $304 million in the second quarter of 2002. Operating income was $605 million, compared to $602 million in 2002.

Revenue of $3.3 billion for the period ended June 30 was the best quarter ever for the company and marked a 3 percent increase over the same period last year.

UP's operating ratio was up 0.5 percent to 79.8 percent over the same quarter in 2002. UP's year-to-date operating ratio is 83.1, up 2.7 percent from 80.4 percent at the same point in 2002.

In its corporate earnings release, UP cited employee productivity (gross ton-miles/employee) as one of the highlights, boasting that employee productivity increased four percent to a second quarter record level. UP noted other highlights, including a 3 percent increase in operating revenue.

For its first six months, Union Pacific had net income of $717 million on $6.3 billion in revenue, compared with $526 million on $6.1 billion in revenue in the first half of last year.

Compared to the second quarter of 2002, agriculture revenues were up 6 percent in the 2003 second quarter; Energy revenues were up 6 percent; Revenues from industrial products were up 5 percent; Intermodal revenue was flat; Automotive revenue was down 2 percent; and revenue from chemical shipments fell down 2 percent.

Overnite Corp., a subsidiary of UP, reported a 15 percent increase in second quarter operating income of $21.0 million, compared to $18.2 million in 2002. Operating revenue was up 10 percent to $372.0 million from $337.1 million last year. Overnite's operating ratio was 94.4 percent compared to 94.6 percent. On August 4, UP annouced it would sell the trucking company in hopes of capitalizing on the impressive second-quarter number.

"We are cautiously upbeat about the second half of the year," said UP Chairman and CEO Dick Davidson in a statement. "One cloud on the horizon, however, continues to be energy prices. Diesel fuel and natural gas prices have remained stubbornly high... creating a drag on the overall economy. We remain focused on running a quality, profitable company."



© 2003 Brotherhood of Locomotive Engineers