Latest News Continued

Christensen Associates Inc., an independent consulting team studying rail competitiveness for the Surface Transportation Board, has issued a new report finding that "rate increases since 2004 were driven by fluctuating fuel prices and other costs and did not appear to reflect a greater exercise of railroad market power over captive shippers."

The updated report re-emphasized the key finding of an earlier report: "Providing significant rate relief to some shippers will likely result in rate increases for other shippers or threaten railroad financial stability." 


The STB said in its summary: "Overall, the updated study painted a portrait of a healthy rail industry that, since 2006, has remained largely revenue sufficient, meaning railroads are able to over their operating costs and earn a rate of return that enables them to attract investment vital to pay for more locomotives, railcars, and make other improvements. The study also found hat the large productivity gains in the 1980s and 1990s--when the railroad shed excess lines, reduced crew sizes, and streamlined operations--are no longer strong enough to offset rising operating costs."

Christensen also noted that since late 2008, railroad traffic has dropped nearly 20% from the levels of 2006 and 2007, and preliminary data show rates fell last year.

The original report was issued in November 2008. The STB ordered it to be updated to reflect shippers' concerns that "the report's study period ended in 2006 and did not include subsequent years of rapidly escalating costs."



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U. S. rail freight traffic is showing "slight improvement" over 2009 but remains "sharply down" when compared with pre-recession 2008, the Association  for American Railroads said today.

For the week ending Jan. 23, 2010, U.S. railroads originated 277,420 carloads, up 3.9%  from the same week in 2009 and down 11.1%"from the same week in 2008. Intermodal traffic totaled 200,807 trailers and containers, up 2.9 % from a year ago and off  4.4% from 2008.

The AAR said that 13 of the 19 carload to commodity groups were up from last year,  with 10 of them posting double-digit increases. ranging from  5.5% for grain to 103.8% for nonmetallic minerals. Declines  ranged from 25.7% for the catch-all category "all other carloads" to 3.1%  for coal.

Total volume on U.S. railroads for the week ending Jan. 23, 2009 was estimated at 30.2 billion ton-miles, up 4.9 percent from  last year and down 7.9 %to from 2007.

Canadian railroads reported  73,354 carloads for the week, up 13.5% from last year, and 44,295 trailers or containers, up 7.4%.

Mexican railroads reported originated volume of 14,867 cars, up 29.8% from the same week last year, and 6,960 trailers or containers, up 41.6%.

Combined North American rail volume for the first 3 weeks of 2010 on 13 reporting U.S., Canadian and Mexican railroads totaled 1,032,527 carloads, up 1.7 % from last year, and 750,539 trailers and containers, up 2.3 %.

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L.B. Foster Co. today reported net income of $3.9 million or $0.38 per share in the fourth quarter of 2009, compared to net income of $5.7 million or $0.55 per share in the fourth quarter of 2008.

Fourth quarter 2009  sales declined 31.8% to $98.0 million compared to the same quarter last ear. Selling and administrative expenses were down $2.8 million or 23.9%.

"All of our segments posted significant declines in net sales for the fourth quarter; however, cost controls and pay for performance incentive plans mitigated the negative impact to income. While we have won several large orders this quarter, business activity continues to be inconsistent in our Rail and Construction businesses and very weak in our Tubular divisions," said Stan Hasselbusch, President and CEO.

"Bookings for the quarter were $114.7 million compared to $99.5 million last year, a 15.3% increase while year-to-date bookings were down 15.9%," said Hasselbusch. "Backlog was $172.7 million, an increase of 30.2% over the prior year; however, the gross margins associated with that backlog are lower than the prior year due to decreased pricing and an increased competitive environment across all product lines."

Hasselbusch also commented:: "We won several attractive awards in 2009 that were related to the federal stimulus legislation, primarily in our transit and precast concrete building businesses. While we expect a significant portion of those 2009 awards to be reflected as sales in 2010, we also anticipate that the volume of new stimulus-related opportunities will slow in 2010."

For the 12 months ended December 31, 2009, L.B. Foster reported net income of $15.7 million or $1.53 per d share compared to net income of $27.7 million or $2.57 per  share in 2008.

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With business  expected to be "flat or slightly up," Wabtec Corp. today  issued 2010 earnings per share  guidance of $2.35-$2.50. The company had not previously issued 2010 guidance.

Wabtec also updated its 2009 guidance to $2.37-$2.41 per share on revenues of about $1.4 billion. This  guidance, which is in line with the company's previous guidance, now includes a  fourth-quarter charge of $3.9 million, or six cents per diluted share, for an arbitration ruling.

Wabtec plans to report 2009 results on Feb. 23.

"In light of very challenging economic conditions, Wabtec's 2009 performance demonstrated the strength of our diverse business model and strategic planning process, the leadership of our management team and the hard work of our employees throughout the company," said Albert J. Neupaver, Wabtec's president and chief executive officer. "In 2010, market conditions will continue to be challenging, but we expect that benefits from our restructuring actions in 2009 and other growth initiatives will offset the decline in U.S. locomotive and freight car production, and the completion of a major transit contract."

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President Barack Obamaand Vice President Joe Biden announced that the U.S. Department ofTransportation is awarding $8 billion to states across the country to developAmerica's first nationwide program of high-speed intercit ...

In last year's fourth quarter, Kansas City Southern earned $32.0 million, or 33 cents ashare, on $406.8 million in revenue. While earnings declined 17.5% from the prior-year quarter, they exceeded the 29 cents that was the consensus estimate of analysts.


"KCS management is cautiously optimistic that the company will be able to maintain the positive volume and revenue growth momentum that it experienced in the second half of last year throughout 2010," Chairman and CEO Michael R. Haverty said.

KCS reported fourth-quarter 2009 revenue of $406.8 million, a 4% decrease from the same quarter in 2008; operating income of $91.9 million, an increase of 1%; and an operating ratio of 77.4%, compared with 78.5% in 2008.

"Operating expenses for the fourth quarter 2009 were $314.9 million, a decrease of 5% year-over-year," said KCS. "Decreases were achieved in each categorywith the exception of compensation and benefits. Year-over-year fourth-quarter compensation and benefits expense increased as a result of non-cash foreign exchange rate impacts on the Mexico statutory profit sharing obligation, and lower capitalized labor due to the reduced capital program in 2009. Offsetting these compensation increases were lower salary and wage expenses resulting from reduced employee levels. Purchased services fell 17% as a result of reduced locomotive repair expenses and savings from the opening of the Victoria-Rosenberg line. Fuel expense for the quarter was down 14% on decreased average fuel prices and the efficiency of the fleet."

Operating income for the fourth quarter was $91.9 million compared with $91.2 million last year, a 1% increase. The fourth-quarter 2009 operating ratio was 77.4% compared with 78.5% a year ago.

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Cost controlhelped Canadian Pacific Railway Ltd report a fourth-quarter 2009 profit thatafter special items amounted to 94 Canadian cents a share, beating Wall Streetexpectations of 88 cents The Wall Street estimate is based on an analyst pollby Thomson Reuters.

In a downmarket, CP shares were running fractionally higher Thursday morning.

"Earningswere driven by a strong performance in operations that improved the overalloperating ratio despite an appreciating Canadian dollar, a higher price of oil,and fuel surcharge lag," said Macquarie Capital analyst Avi Dalfen in anote quoted by Reuters.

CP said netincome in the fourth-quarter was C$194 million, a 3% increase fourth-quarter2008.

Total fourthquarter revenues were C$1.1 billion, down 16 %; operating expenses were C$853million, down 17 %; operating income decreased 12% to C$269 million ; andthe  operating ratio improved 120basis points to 76.0%.

"We havecome through an extraordinary year of economic challenges and we met these withfocused productivity initiatives that have delivered sustainableimprovements," said Fred Green, President and CEO. "Markets remainuncertain and we will continue to drive efficiency while delivering a reliableservice. We are positioned with assets and resources to respond to changes inour customers' demand."

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28 January 2010

Waging a defensive war

The battle between railroads and their price-sensitive customers over legislation that would re-regulate the railroads has become open warfare. Price-sensitive customers like to call themselves captive shippers; perhaps that makes them objects of sympathy, something that gigantic companies have a ...

For fourth-quarter 2009, Norfolk Southern today reported net income of $307 million,or $0.82 per diluted share (slightly below Wall Street’s estimate of $0.84), vs. $452 million, or $1.21 per diluted share, a 32% decline from the same quarter of 2008. Revenue fell 16% to $2.1 billion.


NS’s fourth-quarter operating ratio was 73.9% compared with 67.5% in the same period last year. For the year, the operating ratio was 75.4% vs. 71.1% for 2008.

“We expect to build upon the sequential volume gains we experienced in the third and fourth quarters driven by anticipated improvement in economic conditions combined with project growth,” said CEO Wick Moorman. “We plan to invest about $1.4 billion, slightly higher than our 2009 capital spending, in our rail network in 2010, including leveraging technology to improve operational efficiency and service, and support the business growth we expect in future years.”

Fourth-quarter merchandise revenue was $1.1 billion, down 9% compared with fourth-quarter 2008. Coal revenue was $580 million, down 27%. Intermodal revenue was $407 million, off 15% from the prior-year period. For the full year, intermodal revenue was $1.5 billion, down 26% compared with 2008. Railway operating expenses were $1.6 billion for the quarter, 8% lower compared with fourth-quarter 2008.

--> For fourth-quarter 2009, Norfolk Southern today reported net income of $307 million,or $0.82 per diluted share (slightly below Wall Street’s estimate of $0.84), vs. $452 million, or $1.21 per diluted share, a 32% decline from the same quarter of 2008. R ...

President Obama and Vice President Biden are speaking at the University of Tampa during a town hall meeting Thursday, Jan. 28, beginning at 12:30 p.m., to announce the recipients of $8 billion in ARRA (American Recovery and Reinvestment Act) high speed rail grants awarded by the Federal Railroad Administration. According to the Tampa Bay Business Journal, the event is open to the public, with a limited number of tickets available. Announcements will be made concurrently in other states.


barack-obama-thumbs-up.jpgThe White House has confirmed that the grants will be announced Thursday. “Thirteen major corridors will receive awards on Thursday to help develop new high speed rail infrastructure or begin the transition to high speed rail,'” the White House said in a statement. “In addition, smaller awards will also be made for improvements to portions of existing rail lines. Overall, 31 states will benefit from the awards, which will lay the groundwork for a nationwide high speed rail system. The $8 billion in Recovery Act awards is part of an overall $13 billion high speed rail investment the President announced last year as part of his strategic plan for high speed rail. The other $5 billion would be funded through the annual budget process.”


Why Florida for Obama’s high speed rail announcement? One Florida legislator, Democratic Congresswoman Kathy Castor from the 11th District (which includes Tampa), distributed a press release today that claims the HSR project in her state—essentially, the Orland-Tampa segment of the FOX (Florida joe-biden.jpgOverland eXpress) project, killed by former Governor Jeb Bush, but now dusted off and polished—will receive federal grant money. Obama and Biden will announce a “monumental” jobs initiative involving the ARRA and $8 billion in HSR grants, Castor’s release said. “President Obama wants to increase the pace of recovery. Creation of thousands of jobs for Floridians will accelerate better times in Florida. Construction workers will be needed to build rail lines. Engineers will be needed to lay the groundwork. Operations and maintenance workers will be needed to keep the line running smoothly. The ripple effect cannot be understated.” Castor said she is traveling with Obama on Air Force One from Washington to Tampa for the event. Florida has requested $2.5 billion.


Other local news outlets expressed optimism for Florida’s chances. “As widely assumed, President Obama will use Thursday’s visit to Tampa to announce that Florida has secured high speed rail funding,” said the St. Petersburg Times. “A White House official did not say how much of the total $8 billion in stimulus funds Florida will get. The state asked for $2.5 billion for the line that would run from Orlando to Tampa and, possibly, Miami. Florida officials were optimistic the state would get most, if not all, of the $2.5 billion requested. . . . Obama will allude to the high speed rail initiative Wednesday night during his State of the Union address, but the details will not be released until Thursday.”


According to Bloomberg News, “Obama will give $8 billion in economic stimulus money to 13 U.S. rail corridors tomorrow, mostly for high speed passenger service, an Administration official said. The money will benefit 31 states, including a small portion of the $8 billion that will go to improvements of existing [freight] rail lines, the official said. In addition to Florida, leading contenders for funds include Illinois, California, and Amtrak's Northeast Corridor.”


APTA President Bill Millar said the announcement of the first federal grants for high speed rail “is the beginning of our nation’s journey in implementing high speed rail and higher speed rail and creating a world-class, multi-modal transportation system.  This time will be remembered as the beginning of a new era in transportation. . . . These grants . . . mean that we are much closer to a world-class transportation system that demonstrates the vision of a connected America.  They put us on the right track to connecting our transportation network so that people can take high speed rail and easily transfer to local public transportation services to reach their destination.”


Said National Association of Railroad Passengers Executive Director Ross capon, “NARP urges the Administration to further strengthen its commitment by investing at least $4 billion annually for intercity passenger trains. Congress took a first step by including $2.5 billion for high speed rail in the regular 2010 appropriations law. Twenty-four states demonstrated pent-up demand for intercity passenger train funding by inundating the Federal Railroad Administration (FRA) with 45 applications totaling about $50 billion. In addition, FRA received 214 applications from 34 states totaling $7 billion for corridor planning and smaller projects. We encourage those states whose projects were not selected to resubmit applications in the future.”


So, just how far will 8 billion go? The President will answer that question tomorrow.

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