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8/4/2014



Rail News: BNSF Railway

BNSF logged revenue, traffic gains in Q2 despite severe spring weather


Like the other Class Is, BNSF Railway Co. registered strong second-quarter financial results after distancing itself from the harsh winter. But BNSF's results were again impacted by severe weather, albeit more slightly, predominantly because of flooding in portions of Minnesota, North Dakota, Washington and other states during the quarter.

Revenue in Q2 totaled $5.73 billion, up 8 percent compared with second-quarter 2013. Volume rose 5 percent to 2.57 million units, operating income climbed 7 percent to $1.7 billion, net income ratcheted up 4 percent to $916 million and BNSF's operating ratio was relatively flat, clocking in at 70.1 versus 69.8 in the year-ago period. Traffic increased in the quarter despite weather-related service challenges "that muted additional volume growth," BNSF officials said in a Q2 financial performance summary.

Consumer products revenue rose 5 percent to $1.8 billion and volume increased 4 percent to 1.29 million units primarily due to higher international intermodal traffic, they said. Industrial products revenue climbed 7 percent to $1.5 billion and volume rose 5 percent to 492,000 units primarily because of stronger petroleum products traffic, driven mainly by increased crude oil unit-train loadings.

"Second quarter [business] also increased due to higher drilling-related products volumes, primarily frac sand," BNSF officials said.

Meanwhile, coal revenue increased 3 percent to $1.2 billion and volume rose 6 percent to 550,000 units due to strengthened demand, and agricultural products revenue soared 23 percent to $976 million and volume jumped 8 percent to 243,000 units primarily because traffic was driven by the record grain harvest in late 2013, they said.

However, BNSF's operating expenses in Q2 rose 8 percent year over year to $4 billion. A significant portion of the increase is due to increased costs associated with severe weather issues and service-related challenges, BNSF officials said.

Compensation and benefits expenses climbed 9 percent to $1.2 billion primarily because of increased volumes and average headcount, and higher overtime, training and wage inflation; fuel expenses rose 7 percent to $1.1 billion due to higher volumes; purchased services expenses increased 3 percent to $634 million in part because of purchased transportation for BNSF's third-party logistics subsidiary BNSF Logistics L.L.C.; depreciation and amortization expenses ramped up 7 percent to $523 million due to additional assets in service; and materials and other expenses climbed 23 percent to $283 million primarily because of higher costs for crew transportation, lodging, utilities and locomotive materials.



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