NY - Railroad Costs Soar Faster than Revenue

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Title: CSX 1Q Earnings Derail Railroad misses lowered forecasts as costs soar faster than revenue

April 24, 2000: 11:11 a.m. ET NEW YORK (CNNfn) - Troubled railroad CSX Corp. missed lowered earnings estimates for the first quarter Monday, citing higher fuel and labor costs along with continuing congestion problems.

The Richmond, Va.-based railroad holding company posted net income of $29 million, or 14 cents a diluted share. Analysts surveyed by earnings tracker First Call had forecast 15 cents a diluted share, an estimate had fallen steadily since the company admitted to financial problems in December.

Before the Dec. 20 warning, analysts had forecast 70 cents a share for the first quarter.

In the year-earlier quarter, CSX earned $75 million, or 36 cents a share. A $49 million after-tax charge for a change in accounting practices lowered net income to 12 cents a share in that period.

CSX integrated about half of the former Conrail into its system last June, and has suffered from service problems since. Those problems were made worse by storms last fall and a federal safety report last month that criticized the quality of its track and ordered many of its trains to run at lower speed. The president of the company's railroad unit resigned earlier this month.

"These results are unsatisfactory," Chairman and CEO John Snow said. "We are taking steps to ... improve network fluidity. With demand expected to stay strong for the rest of the year, we can improve earnings substantially by running the railroad more effectively."

Revenue fell to $2.1 billion in the latest period from $2.5 billion a year earlier due to a $737 million decline in revenue from maritime operations following the sale of Sea-Land Service Inc., its former ocean container business, to Maersk Line late last year. But year-ago results did not include revenue from the Conrail system, which CSX still was operating in conjunction with purchase partner Norfolk Southern Corp. (NSC: Research, Estimates) at the time.

Revenue from rail operations climbed to $1.8 billion from $1.5 billion, but operating expenses increased even faster. So the ratio of operating expenses to revenue, a key measure of a railroad's financial performance, deteriorated to 91.1 percent from 81.4 percent a year earlier.

Despite the report, shares of CSX climbed 7/16 to 21-1/16 in early trading Monday.

http://www.cnnfn.com/2000/04/24/companies/csx/

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-- (Dee360Degree@aol.com), April 24, 2000


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