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4/24/2007



Rail News: BNSF Railway

Improved yields help propel BNSF to record first-quarter revenue



Burlington Northern Santa Fe Corp. (BNSF) posted a lower profit in Q1 thanks to a previously announced environmental charge, but the Class I is still on a revenue roll.

Today, BNSF reported first-quarter earnings of $0.96 per diluted share, which included a $0.14 charge for additional environmental expenses and a technology system write-off, compared with first-quarter 2006 earnings of $1.09 per diluted share, which included a $0.04 per share line sale gain. Earlier this month, BNSF pre-announced the 14-cent charge, which is related clean-up sites in Washington state and California.

And despite flat volumes, BNSF posted a first-quarter record of $3.54 billion in freight revenue, a 5 percent increase compared with $3.37 billion during the same 2006 period.

“Improved yields from our well-balanced portfolio allowed us to achieve record first-quarter revenues despite flat volumes on a year-over-year basis,” said BNSF Chairman, President and Chief Executive Officer Matt Rose in a prepared statement. “In addition, we continue to drive operating expense efficiencies and improve velocity, delivering our best on-time performance since 2004.”

Revenue also included $380 million in fuel surcharges, compared with $350 million in first-quarter 2006. The increase was driven primarily by increased participation in BNSF’s fuel surcharge program, BNSF says.

In other revenue categories:

* Coal revenue rose by $80 million, or 12 percent, to $760 million, as a result of higher rates from contract renewals, contractual price escalations, increased length of haul and fuel surcharges. Additionally, volumes increased by 2 percent as a result of strong customer demand.

* Consumer Products revenue increased $62 million, or 5 percent, to $1.31 billion primarily due to higher revenue in the international intermodal sector.

* Agricultural Products revenue were up $29 million, or 5 percent, to $626 million, predominately from volume growth in soybeans and fertilizer.

* Industrial Products revenue of $846 million remained relatively flat, as strong demand for petroleum and chemicals and plastic products were offset by weakness in the housing market.

BNSF posted operating income of $694 million, which included the environmental and technology charge of $81 million and fuel headwinds of $60 million principally resulting from a decline in fuel hedge positions. By contrast, the Class I recorded first-quarter 2006 operating income of $793 million, which included $22 million from a line sale gain.

Meanwhile, BNSF had operating expenses of $2.95 billion compared with first-quarter 2006 operating expenses of $2.67 billion. The $281 million increase was primarily due to the aforementioned environmental and technology charge, and higher fuel expenses due to a declining hedge position and higher fuel prices, BNSF says.





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