Carrier income reports, 2004 second quarter

Burlington Northern Santa Fe

Burlington Northern Santa Fe Corp. said profit rose nearly 25 percent in the April-June period on record shipments and higher prices. BNSF earned $249 million in the quarter, or 67 cents per share, compared to $200 million, or 54 cents per share, a year earlier. Revenue rose to $2.69 billion from $2.29 billion a year earlier, topping analysts' forecast of $2.61 billion in sales. Chairman and chief executive Matthew K. Rose told the Associated Press that the company was helped by record volumes and a 2 percent increase in average rates charged to shippers.

Operating costs, however, jumped 16 percent, to $2.18 billion. The company said the increase was due to a 13 percent rise in gross ton-miles, higher fuel prices, and $30 million on environmental improvements at two facilities.

For the first six months of the year, the company earned $442 million, or $1.18 per share, compared to $387 million, or $1.04 per share, a year ago. Revenue increased to $5.18 billion from $4.53 billion.

BNSF's operating ratio decreased to 80.7% compared with 81.8% for the same prior year period.

Canadian National Railway

E. Hunter Harrison called Canadian National Railway's second quarter "a knockout quarter," setting records or near-records in revenues, operating ratio and free cash flow. "It set records in almost any of the metrics you'd care to measure," said the president and CEO of the railway in a Montreal Gazette article. "It exceeded even my expectations."

CN record profits of $326 million for the three months ended June 30, or diluted earnings of $1.13 per share, up, respectively, 34 per cent and 35 per cent over last year. Revenues grew to $1.67 billion from $1.46 billion. The $587 million in free cash flow, another record, far exceeded the $350 million for the period last year. Operating income also jumped 32 per cent, to $575 million.

But the piece de resistance was the operating ratio, which dropped 4.6 per cent to 65.5 per cent. The operating ratio measures the percentage of revenues it takes to operate and maintain a railway - the lower the figure, the better.

Analysts said CN's practice of "precision scheduling" is what makes it "best in class."

Canadian Pacific Railway

Canadian Pacific Railway said strong growth in five of its seven business lines in the second quarter of 2004 pushed revenue past the $1-billion mark. The revenue increase helped drive net income up 146 per cent to $84 million in the quarter ended June 30.

This compares with second-quarter 2003 net income of $34 million, which included a special charge for job reductions, an asset write-down and network restructuring. Diluted earnings per share (EPS) in second-quarter 2004 were up 141 per cent to $0.53, from $0.22.

Excluding foreign exchange gains and losses on long-term debt and the 2003 special charge, income increased 23 per cent to $104 million in the second quarter of 2004, compared with $84 million in second-quarter 2003. On the same basis, diluted EPS were $0.65, compared with $0.53.

CPR's operating income in the second quarter increased 19 percent to $221 million, from $186 million in last year's second quarter, excluding the special charge. Its operating ratio for the three-month period was 78 per cent, a 1.7 percentage-point improvement.


CSX Corp. reported that second-quarter earnings fell 6 percent as the company completed a restructuring of its management staff. In the three months ended June 25, CSX reported net income of $119 million, or 55 cents per share, compared with $127 million, or 59 cents a share, a year ago.

Excluding an after-tax charge of $9 million related to the restructuring, earnings were $128 million, or 60 cents per share.

Revenues were $2.03 billion for the second quarter, compared with $1.94 billion a year ago. For the first six months of the year, CSX reported net income of $149 million, or 69 cents a share, compared to $226 million, or $1.05 a share, a year earlier. Revenue edged up to $3.996 billion from $3.958 billion.

In the quarter, merchandise revenue was up 7% and coal revenue was up 6%, on strong yield and volume. Its operating ratio was 85.2 percent.

Surface Transportation operating income was $280 million, up $21 million from the prior-year quarter. Surface Transportation revenue of $1.99 billion drove the increase in operating income. On a consolidated basis, operating revenue was $2.03 billion versus $1.94 billion a year ago.

Kansas City Southern

Improving operations and a stronger economy propelled Kansas City Southern to a profit and higher revenues for its second quarter.

For the three months that ended June 30, KCS earned $7 million, or 11 cents a share, on $153.9 million in revenues. Including preferred stock dividends, KCS's net income was $9.2 million. The company said $2.9 million in net earnings came from its interest in Grupo TFM.

During the same time last year, KCS lost $1.8 million for common-share holders, or 3 cents a share, on $146.3 million in revenues. The net loss was $500,000 when including preferred stock dividends.

For the first six months of 2004, Kansas City Southern earned $8.2 million for common-share holders, or 13 cents a share, on $301.7 million in revenues. During the same time last year, the company earned $11.7 million for common-share holders, or 19 cents a share, on $286.5 million in revenues. Its operating ratio for the second quarter of 2004 improved by two points, to 84.9% from second quarter 2003.

Norfolk Southern

Norfolk Southern Corp. hauled in record operating revenues and 55 percent higher year-to-year earnings in the second fiscal quarter, fueled by rising business volumes and better expense controls.

Operating revenues for the three months ended June 30 were $1.8 billion, the highest of any quarter in NS's history. That was up 11 percent against the second quarter of 2003. For the quarter, the rail company's earnings were $213 million compared with $137 million a year earlier.

Year-to-date operating revenues also set a record, hitting $3.5 billion, up 10 percent from $3.2 billion in the first half of 2003. Net income was $371 million, or 94 cents per share, in the first two quarters.

Second-quarter revenues from shipments of merchandise ­ which includes metals and construction products, chemicals, autos, and other items ­ rose 9 percent year-to-year. Coal revenues also rose 9 percent. Revenues in the intermodal segment leapt by 21 percent. Operating ratio improved 5 percentage points to 76.6 percent.

Union Pacific Corp.

Union Pacific Corp. announced second quarter earnings of 60 cents per share, a 43 percent drop from the same period last year.

In the second quarter, record revenue and shipping volume couldn't overcome the costs of hiring thousands of train service workers, adding hundreds of locomotives and burning 346 million gallons of high-priced diesel, chairman and chief executive Dick Davidson told the Omaha World-Hera.d.

The railroad also has reduced the number of trains in some areas, limited some types of shipments and stopped seeking new customers as demand shot beyond expectations.

By the end of 2004, Davidson said, the railroad will have trained 5,000 more train crew workers, acquired nearly 750 more locomotives and will be better at managing volume.

UP reported net income from continuing operations of $158 million on a record $3 billion in revenue for the quarter ended June 30. For the same period in 2003, UP reported earnings of $275 million. For the quarter, revenue from chemical products was up 9 percent; from industrial products, up 8 percent; from agricultural products, up 7 percent; and intermodal revenue - containers that move among ship, truck and rail - was up 6 percent.

Congestion has eased somewhat recently, said spokeswoman Kathryn Blackwell. Traffic has been moving fluidly on the critical Sunset Route from Los Angeles to El Paso, Texas, for several weeks, she said.

Its operating ratio for the quarter was 88.1 percent. For the full year, UP's operating ratio is up to 88.6 percent.

"Our quarterly operating revenues topped the $3 billion mark for the first time ever in the history of the Railroad," Davidson said in a prepared statement. "In fact, this is the fourth consecutive quarter of record volumes. Despite these records, revenues could have been even stronger given this unprecedented level of demand.

"We know we aren't living up to the potential of this great company, but we remain absolutely focused on resolving the operational issues that have temporarily limited profitability," Davidson said.


© 2004 Brotherhood of Locomotive Engineers and Trainmen