Carrier income reports, third quarter 2003

Burlington Northern Santa Fe

Burlington Northern Santa Fe reported a 15 percent drop in third-quarter profit, blaming the lockout of West Coast longshoremen and slack agricultural shipments for the decline.

The railroad company said it earned $192 million, or 51 cents per share, in the 2002 third quarter ended Sept. 20. In the same period last year, BNSF earned $225 million, or 58 cents per share.

BNSF's operating ratio increased to 81.6 percent for the 2002 third quarter. Sales fell 1.5 percent to $2.31 billion from $2.34 billion. The results were expected. BNSF had alerted investors that the West Coast dock shutdown would hurt earnings.

The biggest shipment segment decline was in agricultural products, which were off by $32 million, or 9 percent. The railroad said that lower demand for farm export products contributed to the reduced revenues.

Conversely, consumer product shipments rose by $27 million, or 3 percent, despite the shutdown at West Coast ports. Even so, the strike put a crimp in what has been steady growth of trailer-on-flatcar shipments of imported products.

Canadian National Railway

Canadian National Railway Co. posted a 12% increase in third-quarter earnings. For the quarter, CN reported net income of 268 million Canadian dollars, or C$1.32 per share, up from C$240 million (C$1.21) in the third quarter of 2001. Revenue was C$1.5 billion, up from C$1.32 billion.

For the third consecutive quarter CN's operating ratio, a measure of efficiency, rose unfavorably over the previous year. While still the industry's best, it increased to 67.8% from 67.5%.

Grain was the only one of CN's seven business segments whose revenue declined in the quarter. Grain and fertilizers were off 15%. Forest products driven by construction demand were up 30%, petroleum and chemicals were up 22%, automotive up 20%, metals and mineral up 17%, intermodal 12% and coal 6%.

The major problem faced by CN is the drought in Western Canada that has cost the company C$150 million in high margin, lost revenue. CN officials credited last year's acquisition of Wisconsin Central Transportation Corp. for offsetting a "catastrophic" decline in grain traffic this quarter.

Canadian Pacific Railway

Canadian Pacific Railway reported a 43 per cent drop in third-quarter earnings to 65 million Canadian dollars, but said a gain in operating revenue showed progress. The railway, which became an independent company when parent CP Ltd. broke into five separate firms last year, said revenue rose C$19 million or 2 per cent in the quarter.

Net income of C$65 million, or 41 cents per share, compared with C$113 million, or 72 cents per share, in the third quarter of 2001. Operating ratio rose to 75.6 per cent compared with 75.3 per cent in the same quarter of 2001.

Canada's second-largest railway attributed the earnings drop to a C$47 million foreign exchange loss, as the value of the loonie slumped in the three months ended Sept. 30. Revenue from grain shipments for the railway declined C$19 million, or 10 per cent, largely due to the drought. Coal revenues were down C$12 million, or 10 per cent, reflecting weaker sales of metallurgical coal, partly offset by higher thermal coal volumes in the United States.

CSX Corp.

Despite declines in its rail and other transportation operations, CSX Corp. said its third quarter profit rose 27 percent, boosted by real estate gains and lower interest costs.

CSX Corp. said profit was $127 million, or 60 cents a share, compared with $100 million, or 47 cents a share, in the same quarter last year. Revenue rose to $2.1 billion from $2.0 billion a year earlier.

Slowed by weak coal demand and higher costs, the company's rail (CSXT) and intermodal units reported a third-quarter operating income loss of $10 million - down to $227 million from $237 million in 2001. CSXT reported a third quarter operating ratio of 87.3, worse than the 86.7 in the same quarter of 2001.

"The rail group's performance in the third quarter marked a departure from the consistent year-to-year gains we have been seeing for the past two years,'' said Chairman and CEO John W. Snow. "We are confident that the problems... are now well behind us and look forward to delivering much stronger fourth-quarter results.''

Kansas City Southern

Kansas City Southern's third-quarter income increased, but revenue decreased due mainly to problems with a new management control system, the company said. For the quarter that ended September 30, KCS posted earnings of $10.6 million, or 17 cents a share, up 18 percent from $9 million, or 15 cents a share, last year. In July 2002, KCS initiated a switch-over from its legacy system operating platform to a new Management Control System (MCS). Although the issues with the implementation of MCS have been largely resolved, the initial difficulties experienced by office and field personnel in transitioning to this new platform led to congestion issues and operating inefficiencies, which contributed to the decline in operating income.

Revenue for the quarter was $137.6 million, down 5 percent from $144.6 million a year ago. Third quarter 2002 costs and expenses were $5.8 million higher compared to the 2001 quarter, resulting mostly from higher compensation and car hire costs, which increased as a direct result of the MCS implementation issues. Depreciation expense also increased due to the implementation of MCS. These factors contributed to a higher operating ratio for KCS of 94.2% for the quarter compared to 85.9% for the same period in 2001.

Norfolk Southern Corp.

Norfolk Southern Corporation reported third-quarter net income of $126 million, or $0.32 per diluted share, an increase of 59 percent, compared with net income of $79 million, or $0.20 per diluted share, in the third quarter of 2001.

For the quarter, the operating ratio improved 3.3 percentage points to 80.5 percent compared with 83.8 percent for the same period of 2001. For the first nine months, the operating ratio improved 2.8 percentage points to 81.4 percent compared with 84.2 percent during the same period of 2001.

Third-quarter railway operating revenues rose six percent to $1.60 billion compared with third quarter 2001. Year-to-date railway operating revenues of $4.69 billion were up one percent compared to the same period a year earlier. Third-quarter general merchandise revenues of $917 million improved six percent compared to the same period of 2001. All market groups reported increases, led by automotive and metals. For the first nine months, general merchandise revenues increased three percent to $2.73 billion compared with the year-earlier period.

Union Pacific

Business was up and productivity was strong, Union Pacific Corp. said as it reported a 14 percent earnings increase in its third quarter.

The nation's largest railroad had net income of $437 million, or $1.63 per share, in the quarter ended Sept. 30. A year ago, Union Pacific earned $267 million in the same period.

Excluding one-time gains from a transaction with the Utah Transit Authority and a tax settlement, Union Pacific had operating income of $316 million, or $1.19 a share, compared with $267 million, or $1.04 a share for the same period last year.

Revenue for the quarter was $3.2 billion, up from $3.0 billion a year earlier.

Revenue from hauling cars was up 13 percent from last year's third quarter, up 9 percent for retail goods, 4 percent for farm commodities, 4 percent for industrial products and 2 percent for chemicals, the company said. The only commodity group that was down was energy, at 3 percent, Union Pacific said.

A West Coast port labor lockout that began September 27 and ended 10 days later with a presidential order for a "cooling-off'' period cost Union Pacific up to $5 million a day in deferred revenue, the company said.

The West Coast labor dispute affected three days of the railroad's third quarter but may have more of an impact in the fourth quarter as the dock workers try to catch up with a backlog of work and the railroad seeks to ship it, UP said.

Union Pacific had operating income of $619 million, up from $556 million in the same period last year.

The railroad also reported that its operating ratio (operating expense/operating revenue) was 78.3 percent, which the railroad said represented an all-time quarterly record. Union Pacific also said its employees set an all-time quarterly record for employee productivity (gross ton-miles in millions/average employees) at 5.29.



© 2002 Brotherhood of Locomotive Engineers