The railroad industry has a safety record that’s the envy of many other industries, yet when railroads think safety, they think continuous improvement. The most important element is a strong safety culture, supported by training and technology.
Now that BNSF is no longer a public company and is a wholly owned subsidiary of Berkshire Hathaway, what can BNSF’s short lines expect? There are two indicators, both of which are in Warren Buffett’s 2009 Shareholder Letter (available at www.berkshirehathaway.com).
In the key category of transportation (train and engine)—train operating crews—employment rose to 57,807 in March, a 2.58% increase over February.
This was about double the rate of increase for all employment. That figure increased 1.13% to 147,966 in March, according to a report posted Tuesday on the Surface Transportation Board's website.
All categories of railroad employment ran below last year's levels in March:
* Executives, officials, and staff assistants—8,966, down 10.16%.
* Professional and administrative—13,243, down 2.05%.
* Maintenance of way and structures—33,466, down 3.49%.
* Maintenanxce of equipment and shores—28,036, down 5.75%.
*Transportation (other than train and engine)—6,418, down 9.68%.
*Transportation (train and engine)—57,807, down 3.50%.
The employment index, based on 1967 as 100, was 24.3 in March compared with 24 in February and 23.7 in January.
Norfolk Southern Tuesday reported first-quarter net income of $257 million, or $0.68 per diluted share, up 45% from the $177 million, or $0.47 per diluted share, it recorded in the first quarter of 2009, and beating Wall Street consensus earnings estimates by a penny per share. Revenue rose 15% to $2.2 billion compared with the year-ago period.
NS’s operating ratio improved by 5.1 percentage points to 75.2%.
Traffic volume rose 9%. General merchandise revenue was $1.2 billion, 23% higher compared with the same period last year. Coal revenue rose 4% to $629 million compared to a year ago. Intermodal revenue of $410 million was up 12% compared with the first quarter of last year.
The company noted first-quarter 2010 results were impacted by a $27 million, or $0.07 per diluted share, deferred tax charge resulting from the enactment of recent healthcare legislation, which, effective in 2013, eliminates the tax deduction available for prescription drug expenses reimbursed under the Medicare Part D retiree drug subsidy program. “Norfolk Southern delivered strong financial performance during the first quarter, reflecting positive trends in the economy,” said CEO Wick Moorman. “Demand for rail transportation continues to grow in most sectors of our business. We remain confident that many of the cost efficiencies we have achieved will remain in place as we continue to invest in key projects and new business opportunities.”
Shares of Norfolk Southern closed down 2.36% Tuesday prior to the company's earnings announcement. In after-hours trading Tuesday, shares were up 1.39%.
The threatened abandonment of 231 miles of the Montreal,Maine & Atlantic Railway in Maine's Aroostook and Penobscot counties is going into confidential mediation under the auspices of the Surface Transportation Board. The board said it will postpone action on theabandonment application to give the state and the railroad “time to arrive atmediated solution.”
Maine officials contend that that the abandonmentwould hurt the economy of northern Maine and cost jobs.
The Surface Transportation Board said it will “suspend any formal action on the matter for three weeks and will postpone a public hearing scheduled for May 10 in Presque Isle, Maine.”
“We are pleased that the parties in the case have decided to take advantage of the Board's mediation services,” said STB Chairman Daniel R. Elliott III. “Agreements resulting from folks sitting down and negotiating are almost always better than decisions imposed from Washington.”
Leading U.S. grain and oilseed shippers offered “mixed grades” to U.S. Class I railroads in the first annual Soy Transportation Coalition (STC) Rail Customer Satisfaction Index. The Ankeny, Iowa-based group says the survey was “completed anonymously by grain and oilseed shippers of various size and scale of operations.”
“While respondents overall provided higher ratings for the rail industry’s customer service efforts, concern was consistently expressed at the costs of railservice and how they are communicated. In addition to mixed grades being given across the three performance categories, respondents also provided different ratings for U.S.-based railroads and their Canadian-based counterparts,” the coalition says, referring to Canadian National and Canadian Pacific.
Eleven questions in the survey covered issues ranging from on-time performance to customer service and costs.
“The STC survey reflects the perspectives of those who ship the overwhelming majority of grain and oilseeds in this country,” said Mike Steenhoek, the coalition’s executive director. “We do not claim the survey is the definitive barometer on the performance of the rail industry. The survey is subjective and gauges customer attitudes. These attitudes have been developed by the movement of millions of bushels of grain and oilseeds. As a result, the survey results do serve to further instruct and illuminate our understanding of the extent to which the rail industry is meeting the needs of their agricultural customers.”
Kansas City Southern Tuesday reported first-quarter revenue of $436.3 million, up a solid 26% from the comparable 2009 quarter. Adjusted diluted earnings per share of $0.44 in the first quarter rose from five cents in the first quarter of 2009.
Operating income for the first quarter was more than double last year’s level, up 127% at $108.2 million compared with $47.6 million last year, KCS said.
KCS credited “double-digit revenue improvements” throughout its commodity groupings, with quarterly volume up 15% from the year-ago quarter, and up 2% from the fourth quarter of 2009.
The first-quarter 2010 operating ratio was 75.2% compared with 86.2% a year ago, a figure Chairman and CEO Mike Haverty cited as “a record first-quarter operating ratio” for the company. Operating expenses for the first quarter of 2010 were $328.1 million.
“In the first quarter, KCS reported increased trafficvolumes in five of its six commodity groups and double digit revenue growth in all six groups,” said Haverty in a statement. “Driven by an upswing in manufacturing, KCS reported a 15% volume increase over the firstquarter of last year, as well as a fourth-quarter to first-quarter sequential improvement in volumes of 2%, which is highly unusual as historically first-quarter carloadings lag the fourth quarter on our railroad.”
Haverty also said, “The impact of increased revenues on profitability was enhanced by continued cost controls and tightly managed rail operationsin both the U.S. and Mexico.” He added, “The widespread volume gains KCS achieved in the firstquarter are certainly encouraging signs for the remainder of 2010. In addition, a number of key economic indicators are showing improving strength in the North American economies.”
Wilmerding, Pa.-based Wabtec Corp. Tuesday reported first-quarter net income of $30.3 million, or $0.63 per diluted share, compared with $32.6 million or $0.68 per diluted share for the comparable quarter in 2009. But earnings beat Wal lStreet consensus estimates of 59 cents a share.
Net sales for the first quarter were $364 million compared with $378 million in the comparable 2009 quarter.
Wabtec noted that it acquired Xorail LLC, a provider of signal engineering and design services, for $40 million during the quarter. The company also updated its full-year 2010 guidance for earnings, bolstering its estimate to $2.40-to-$2.50 per diluted share.
Albert J. Neupaver, Wabtec's president and CEO, said in a statement, "We're off to a good start for the year, with transit remaining stable at a high level and itsbacklog providing solid visibility. In the freight rail market, traffic volumes have continued to improve this year, and we are beginning to see a positive effect on our aftermarket businesses, although the original equipment markets remain weaker than last year.
“We are cautiously optimistic that the overall economic environment will continue to improve; as it does, we will maintain our cost discipline and cash focus through ongoing application of the Wabtec Performance System, and we will continue to invest prudently in our growth opportunities,” Neupaver said.