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Rail News: Financials

Midwest floods submerge BNSF's income and earnings

Socked by the worst flooding it has encountered in 15 years, as well as extraordinarily high fuel prices and weak traffic demand in several sectors, Burlington Northern Santa Fe Corp. saw expenses soar and income plummet in the second quarter.

Operating income fell 18 percent to $714 million compared with second-quarter 2007's total. BNSF attributes the decrease to a $474 million rise in fuel expenses, $175 million charge related to environmental matters in Montana and $15 million spent on additional personal injury accruals.

Quarterly operating expenses totaled $3.8 billion, up 25 percent year over year primarily because fuel costs jumped 62 percent to $1.3 billion. BNSF's capital costs associated with Midwest flooding totaled $70 million.

Some of the track washouts near the Mississippi River were 20 feet long and 40 feet deep, said Executive Vice President and Chief Operations Officer Carl Ice during the Class I's July 24 earnings conference.

"I am proud of the efforts of our team to rebuild our network despite significant devastation," said Chairman, President and Chief Executive Officer Matt Rose. "As of mid-July, network fluidity and service to our customers had been fully restored."

In the good-news department, freight revenue rose 16 percent to a record $4.3 billion compared with second-quarter 2007's total despite a traffic volume decline. The primary drivers: an overall same-store rate increase of 6 percent and $400 million increase in collected fuel surcharges, said EVP and Chief Marketing Officer Jon Lanigan.

Agricultural products revenue jumped 36 percent to $828 million, coal revenue increased 16 percent to $902 million rose $126 million, industrial products revenue rose 10 percent to $1.05 billion and consumer products revenue went up 12 percent to $1.6 billion vs. second-quarter 2007 totals.

However, second-quarter earnings per diluted share declined 17 percent to $1.00 and BNSF's operating ratio increased 6.1 points to 83.6 compared with second-quarter 2007 levels. On an adjusted basis, the ratio rose 1.7 points to 79.2.

During the conference, BNSF senior executives announced the Class I's 2008 capital expenditures will increase by $275 million to $2.85 billion to take advantage of the Economic Stimulus Act of 2008 and accelerate several projects, acquire additional locomotives that will be 15 percent more fuel efficient and cover capital costs associated with the flooding.

Jeff Stagl

Contact Progressive Railroading editorial staff.

More News from 7/25/2008