By BOB COX
Posted Thursday, Jan. 21, 2010
Burlington Northern Santa Fe Corp.’s profit fell 13 percent in the fourth quarter, but the company posted its smallest three-month drop in revenue all year as freight shipments began picking up.
The parent company of Fort Worth-based BNSF Railway reported a quarterly profit of $536 million, or $1.55 a share in 2009, compared with $615 million, or $1.78 a share, for the same period of 2008.
The performance reflected modest gains in the U.S. economy, a trend that BNSF Chief Executive Matt Rose said he expects will continue in 2010.
“We have seen some improvement in volumes during the second half of 2009 and expect this gradual improvement to continue,” Rose said in a prepared statement.
BNSF did not hold a conference call with investment analysts or news media because of its pending merger with Warren Buffett’s Berkshire Hathaway.
For the full year, BNSF earned a profit of $1.7 billion, or $5.01 per share. That compares with $2.1 billion, or $6.06 a share, in 2008.
Fourth-quarter freight revenue was $3.57 billion, down 16 percent from $4.2 billion in 2008.
The revenue decline partly reflected a $388 million drop in fuel surcharges paid by freight shippers. For all of 2009, BNSF freight revenue declined more than 22 percent to $13.6 billion.
Union Pacific Corp., BNSF’s main competitor in the western states, reported similar results. UP’s profit declined 17 percent to $551 million, and its annual revenue fell 21 percent to $14.1 billion.
Dramatic declines in oil and fuel prices helped railroad profit margins. BNSF’s fuel expenses declined by 33 percent, or $312 million, in the fourth quarter alone. Fuel costs were down 49 percent, or nearly $2.3 billion, for the full year and accounted for two-thirds of the reduction in expenses for the year.
The earnings report could be the last issued by the company. The merger with Berkshire Hathaway is expected to close during the first quarter of 2010. A shareholder vote on the plan will occur in early February.
In November, BNSF announced that its board of directors had agreed to accept Berkshire’s offer of $26.3 billion, or $100 a share in cash and stock, for the 77 percent of the company it didn’t already own.
This week, BNSF filed documents with the Securities and Exchange Commission saying it had negotiated an agreement to settle potential class action lawsuits alleging that management had not obtained a fair price from Buffett, Berkshire’s CEO.
The company said in the filing that it had agreed to amend certain disclosures in the merger proposal documents but would not give additional compensation to shareholders to settle the lawsuits. The settlement proposal must still be approved by a Delaware judge overseeing the case.
Many lawsuits challenging the merger were filed within days of it being announced, but Buffett said he would not increase his offer.
The $100-a-share price was a 31 percent premium over the stock market price of BNSF shares the day before the deal was announced.
BNSF spokesman John Ambler said he could not elaborate on either the litigation or the earnings report because of the pending merger vote. “We want to be extra cautious not to prejudice anyone’s votes,” he said.
BNSF reported that it plans to spend $2.4 billion in 2010 on capital improvements, including track repairs and replacement, signal systems, and rail cars and locomotives.
The figure is about $240 million less than in 2009, largely because the company will buy fewer locomotives.
“We remain committed to making the necessary investments to protect and grow the value of our franchise despite an uncertain economic environment,” said Rose, the CEO.
Share Investor Blog – Stockmarket & Business commentary
Share Investor New Zealand Business News– Get more business news
Discuss this topic @ Share Investor Forum – Register free
Share Investor’s Daily Forex Updates
Recommended Amazon Reading
 |
The Snowball: Warren Buffett and the Business of Life by Alice Schroeder Buy new: $13.60 / Used from: $11.85 Usually ships in 24 hours |
 |
The Intelligent Investor: The Definitive Book on Value Investing. A Book of Practical Counsel (Revised Edition) by Benjamin Graham Buy new: $14.95 / Used from: $10.44 Usually ships in 24 hours |
