Blanchard Railroad Week in Review, Fourth Quarter 2003

The Railroad Week in Review:
First Quarter 2004

Current Issues

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Week Ending 1/2/2004
It's off to the races for a New Year and it looks like a doozy for the rails. Comments on the safety culture -- or lack thereof -- at some shortlines and passenger operations; a challenge to readers. Don Phillips leaves the Post. GWR buys three shortlines from Georgia Pacific. Robert Reich Redux.
Week Wnding 1/9/2004
Readers respond on safety. Shortlines as a whole running 4 injuries per 200,000 hours compared to the Class Is under 2. Some do much better, indicating to me it's attitude and leadership. Stock prices for the industrials (heavy users of rail) surge. KSC wins a round in court. STB rules Norfolk Southern coal rates to Carolina utility "reasonable." Rail development Corp gains control of IAIS. Kudos for Nitttany & Bald Eagle.
Week Ending 1/16/2004
USDOT says the new trucking hours-of-service rules started Jan 4 but really won't be fully pressed on any but the most egregious violations until Mar 4. Direct and indirect effects; can the railroads compete? North Shore's Todd Hunter on why they built the track-scale. GVT's Chuck Reidmiller dies suddenly. GWR Dec and 4Q carloadings increase.
Week Ending 1/23/2004
UP opens Earnings week with strong revenue growth on modest carload growth. Overnite IPO pushes net income up 46% yoy; eps from continuing operations drifted south by 7%. RRA selling its Chilean interests ("Ferronor") to an affiliate of its Chilean partner for $18 mm cash and paper plus $20 mm to wipe out associated RRA debt. RRA North American carloads on same-store basis increase in-line with the Class Is yoy. CN and CSX collaborate on instantaneous interline prices for carload shipments moving over their networks. DM&E wins FRA approval of a $233 million RRIF loan. Words to the wise re future Class I line rationalization activities.
Week Ending 1/30/2004
BNSF stepped to the plate with double-digit revenue growth in industrial products and intermodal. CEO Matt Rose announced the twin goals of increasing net income at twice the rate of revenue increases and requiring every commodity group to cover its cost of capital. CSX posted strong revenue and carload numbers but the accounting charges and continued high operating expenses got the better of them. Similarly, accounting foibles clobbered NS earnings. But railroad operating results based on revenue growth and expense control were quite encouraging.
Week Ending 2/6/2004
Canadian National proves once again that the carload business is alive and well. For the quarter carload (ex-coal, intermodal) brought in 75% of revenues, up from 73% in 4Q03. Canadian Pacific posts all-time record for quarterly volume growth, up 4% with revenues up 10% before the currency exchange rate (FX) charge. Kansas City Southern increased domestic revenues for the fifth quarter in a row, up 3% on double-digit gains in ag & mineral and automotive. Equity earnings from Grupo TFM sank 72% to $5.1 mm from $18.2 mm mostly due to the Mexican peso devaluation against the US dollar. Summary chart for the Big Six Class Is. GWR reports this week, RRA the 19th.
Week Ending 2/13/2004
GWR reports solid results for quarter and year, announces 3/2 stock split. Detailed table including carload data. UP dwell times rise, though anecdotal evidence points to long-lasting remedies. RRA increases system-wide loadings 10%, North American 6%, and NA same-railroad 3%. Earnings webcast set for 1100 Feb 19. CN's Hunter Harrison sees Price Rupert on BC Rail as overflow port for Vancouver.
Week Ending 2/20/2004
Results of my Third Annual Shortline Review trip to Canadian National HQ to review shortline trends past present and future. Annual progress report from CN's Taschereau Transportation Center. RailAmerica reports 4Q03 and full year 2003 earnings. Tables.
Week Ending 2/27/2004
Florida East Coast Q4 and full year financials. Table. Note particularly the traffic mix between and among aggregates, automotive and intermodal. Canadian Auto Workers union still out against CN, though Friday the UTU settled with the GTW. Quarterly results comps for FEC, KCS, GWR, RRA. Watco adds 30 miles in SE Texas and buys NA RailNet's Camas Prairie.
Week Ending 3/5/2004
UP may miss 1Q04 $0.57 eps target thanks to lower trip plan compliance and an unconscionable $30 mm jury award for an Arkansas grade crossing accident six years ago. Read what the trial lawyers have to say about the lucrative business of suing railroads. CN strike continues; traffic down 9% yoy for the week ending 2/27. Tom Owen tapped as SVP - North American Rail at RRA. GWR stock split moved up 3 days to 3/15; record date (2/27) unchanged. Spain's 2004 rail capex program second only to China. Some shortlines still missing the point about contribution vs. revenue. Part I of a series.
Week Ending 3/12/2004
Feb carloads for GWR and RRA are up handsomely with North American same-railroad results increasing at a run rate more than twice that of the Class Is. The CN strike drags on and some grain shippers say the substituted truck transportation costs half again as much as rail. BNSF changes marketing line-up. Most rails emerge from Wednesday's stock slide with less of a hit than the DJIA. Table. More on why the carload guys are hurting.
Week Ending 3/19/2004
Tony Ingram retires from Norfolk Southern to take up the reins as Chief Operating Officer for formal rival CSX Transportation, reporting to Mike Ward, CEO and Chairman. Strikers at Canadian National have ratified new labor agreement and are scheduled to return to work on the first daylight shift Saturday. How changes in revenue and expense can affect contribution. A modest proposal for rethinking the shortline compensation model. Rail car supply considerations as lumber prices reach new highs.
Week Ending 3/26/2004
CN strikers are back at work with what promises to be little harm to the earnings picture for the quarter or year. The trend is toward better results with fewer non-op personnel. Sounds good to me. Excerpts from Delaware Valley Regional Planning Commission's position paper on CSAO for April 2 hearing in Trenton. Some NJ Shortlines in the Phila Shared Asset Area still don't get it. Watco Companies' Annual Operating Plan gets high marks. BNSF Customer Notification System proactively alerts customers to potential delays en route and revised ETAs.

THE BLANCHARD COMPANY
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Roy Blanchard.215-913-7740 mobile, royblan@icloud.com
Laura Blanchard, 215-985-1445, lblanchard@rblanchard.com