UTU News Digest - Wednesday, April 28, 1999

UTU Daily News Digest

Information of interest to operating railroad and transportation employees

Wednesday, April 28, 1999

CANADA: CN Railway denies cost cutting compromising safety

TORONTO -- Canadian National Railway Co. President and CWO Paul Tellier strongly denied that the company's major cost cutting is related to recent accidents on the company's rail lines.

Tellier said "we disagree in the strongest possible terms that addressing our cost structure in any way, shape or form has compromised our safety."

At the company's annual meeting in Toronto, Tellier noted that two fatal accidents claimed the lives of three employees. Speaking to reporters after the meeting, Tellier insisted that CN Railway is "the safest railroad in North America." From 1996 to 1998, the amount of lost time to injuries by CN Railway employees fell 44%, he said, and the company continues to make safety its number one priority.

CN Railway CFO Michael Sabia told reporters that the company's imminent acquisition of Illinois Central Corp. will be "modestly accretive to our earnings" for this year and "about double-digit accretive" next year compared with CN Railway's earnings otherwise. He said the merged company expects to achieve cost savings of about US$300 million over the next three years.

Currently, weak grain transportation revenues are being somewhat offset by strong automobile-transportation revenues, Sabia said, and the company continues to reduce expenses. For example, CN Railway now transports Volkswagen Beetles from Mexico to Toronto in eight days, compared with 14 days earlier, before marketing agreements with other railroads were completed.

CANADA: Canadian National becomes North America's railroad

TORONTO -- Canadian National Railway Company's bold vision of becoming the first true North American railroad will become a reality in 1999, said CN President and Chief Executive Officer Paul M. Tellier in the company’s officials press release.

Tellier, speaking to Canadian National's fourth annual general meeting here today, said there is tremendous excitement at CN about the potential of its pending merger with Illinois Central Corporation - a merger that will create the only railroad in North America reaching the Atlantic and Pacific oceans and the Gulf of Mexico.

Tellier said the IC acquisition reflects CN's determination to pursue change that will make it the best railroad in North America.

"CN has gone through more change in a shorter time than any other major company in Canada ... Change is part of our corporate culture. We will need determination and strong leadership at all levels of the company to continue making change work for us," Tellier said.

Tellier said CN has four key priorities in 1999:

A continued commitment to safety to sustain CN's record as the safest railroad in North America;

A flawless integration of CN and IC that puts safety and customer service above all else;

Improved customer service with continued implementation of CN's comprehensive service plan;

Increased productivity. While CN has improved productivity by 70 per cent in the past five years, by some measures its productivity lags that of the best U.S. railroads by about 30 per cent.

Tellier said CN's productivity goals are important to its customers and to all Canadians. Canada's standard of living has declined relative to that of other member countries of the Organization for Economic Co-operation and Development because Canada is less productive. Government, labor and business must all work together to bridge Canada's productivity gap, he said.

Tellier said CN's service and productivity objectives will be aided by a new corporate structure - effective May 1 in Canada and July 1 in the United States --- that will focus operations and marketing squarely on customer needs and growth while capturing the efficiencies of the CN/IC merger.

The CN/IC merger won approval of the United States Surface Transportation Board (STB) in a unanimous vote March 25, 1999. The STB is scheduled to issue its written merger decision on May 25. That decision, reflecting the March 25 oral vote, is expected to become effective June 24, after which CN will be permitted to exercise control over IC operations and assets. The integration of the railroads is expected to start July 1.

CN and IC have signed agreements and a letter of commitment with unions representing 67 per cent of the organized workforce of CN and IC in the United States.

Tellier told shareholders 1998 was a year of significant achievement for CN. In addition to announcing a merger transaction with IC, CN achieved financial durability in a tough economic environment. Net income, excluding special charges and changes in accounting policy, increased by 25 per cent to $569 million; earnings per share increased by 16 per cent and CN's operating ratio improved by three points to 75.5 per cent.

Progress continued in the first quarter of 1999. CN reported net income of $138 million for the most recent quarter, while operating income rose 28 per cent to $236 million and the company's operating ratio improved 5.8 points to 76.8 per cent. Other 1998 achievements were:

The launch of a 15-year marketing alliance with IC and Kansas

City Southern Railway Company that extends the reach of CN's customers to Kansas City and Dallas and gives them access to Mexico;

The implementation of an employee gain-sharing program based on labor agreements reached with six of CN's seven unions in Canada;

The recording of a fatality-free year. In fact, CN was the safest railroad in North America last year.

WASHINGTON: Freight traffic up vs. last year

WASHINGTON -- Freight traffic on U.S. railroads was up during the week ended April 17, compared with the corresponding week last year, according to the Association of American Railroads.

Carload freight was up 1.7 percent from last year, with loadings up 5.8 percent in the West but down 2.4 percent in the East. Intermodal volume, which is reported separately from carload data, was up 3.4 percent from last year. Total volume was estimated at 27 billion ton-miles, also up 3.4 percent from the comparable 1998 week.

Sharp gains were reported in loading of motor vehicles and equipment, crushed stone, sand and gravel and grain.

NEW YORK: NS reports lower 1^st quarter income

NEW YORK -- Norfolk Southern Corporation today reported first-quarter net income of $112 million, or $0.30 per diluted share, compared to net income from continuing operations of $132 million, or $0.35 per diluted share, in the same period of 1998.

Norfolk Southern's reported first-quarter 1998 net income of $229 million included income from discontinued operations of $97 million, which consisted principally of a gain on the sale of North American Van Lines, Inc.

"Norfolk Southern's financial results continue to reflect the investments we are making to prepare for our June 1 Conrail operations," said David R. Goode, NS chairman, president and chief executive officer. "We are confident that while these expenditures have a significant, short-term impact on our bottom line, they are sound investments and will enable us to realize the long-term opportunities that Conrail affords."

For the quarter, Norfolk Southern's railway operating revenues were $1.03 billion, 3 percent below last year's record first quarter. Revenues were adversely affected by a depressed export coal market.

Norfolk Southern's general merchandise revenues increased by 3 percent, driven by a 16 percent increase in automotive and a 3 percent increase in metals/construction. Coal revenues declined 13 percent in the quarter, largely due to reduced exports to Europe, Asia and Brazil. Intermodal revenues decreased 9 percent, primarily the result of a continuing intermodal service redesign program implemented last year to ready the network for growth following the Conrail transaction.

"We are eager to begin operating the new Norfolk Southern, and we remain committed to a strategy of growth through extended market reach and unsurpassed service, " Goode said.

For the quarter, railway-operating expenses were $793 million, down 3 percent. These expenses continue to include costs related to the Conrail integration. The railway-operating ratio was 77.0 for the quarter, compared with 76.5 for the same period in 1998.

TEXAS: RailTex, Inc. reports higher 1^st quarter revenues

SAN ANTONIO -- RailTex, Inc. today announced results for the first quarter ended March 31, 1999. The Company posted record carloadings, operating revenues and operating income during the quarter. Compared to the first quarter of 1998, carloadings increased by 23% to 155,401, and operating revenues increased by 18% to $45.4 million. Operating income increased by 15% to $7.8 million. The increase in revenues and operating income was primarily the result of revenue growth and operating ratio improvements at the Company's "Same Railroad" properties.

Net income in the first quarter of 1999 was $3.4 million, or $0.36 per basic and diluted share, compared to $0.9 million, or $0.10 per basic and diluted share, in the first quarter of 1998. The results of the first quarter of 1999 include the sale of the assets of the Company's New Orleans Lower Coast Railroad. Furthermore, effective in the first quarter of 1998 the Company adopted SOP 98-5, "Reporting on the Costs of Start-up Activities" (SOP 98-5). SOP 98-5 is an accounting pronouncement requiring that certain start-up costs previously capitalized be expensed as incurred.

Excluding the effects of these non-recurring events in both 1999 and 1998, net income was $2.9 million, or $0.31 per basic and diluted share, in the first quarter of 1999 versus net income of $2.5 million, or basic and diluted earnings per share of $0.27 in the first quarter of 1998.

"I am pleased with the first quarter results, especially our ability to overcome difficult operating conditions in terms of weather and the North Dallas Lines start-up while achieving our targeted earnings. I am also pleased that we were able to produce strong positive cash flows through the combination of operating earnings growth and a reduction in capital expenditures," said Ron Rittenmeyer, RailTex Chairman and CEO.

"In addition to the operating cash flow improvements, in 1999 we sold the assets of New Orleans Lower Coast Railroad, transferred the operations of our Northeast Kansas and Missouri Railroad to the Union Pacific, and, entered into an agreement with Triple III Transportation to assume operating responsibility for the Cornerstone Intermodal Center. These actions are all consistent with our stated strategies of divesting those operations that do not provide sufficient returns."

"Same Railroad" operating revenues increased 11% for the quarter. Excluding the effects of non-recurring events, the operating ratio for "Same Railroad" properties (excluding corporate expenses) improved to 76.6% in the quarter from 79.2% in the same quarter in 1998. "Same Railroad" properties include the Guelph Line, which is operated as part of the Company's Goderich-Exeter Railway and the North Dallas lines that are operated as part of the Dallas, Garland and Northeastern Railroad.

With approximately 4,200 miles of track, RailTex is North America's leading short line railroad organization. Its holdings include short line railroads concentrated in the Southeastern, Great Lakes region, New England and Central United States as well as Eastern Canada. RailTex also owns minority stakes in two Brazilian railroads. The Company emphasizes a disciplined acquisition strategy and stresses improving the profitability of its existing railroads and the development of new business opportunities.

FLORIDA: Florida East Coast reports higher 1^st quarter income

ST. AUGUSTINE -- Florida East Coast Industries, Inc. announced that its first quarter 1999 net income was $16.8 million ($.46 per share) compared to $8.3 million ($.23 per share) for the first quarter 1998. Exclusive of a $.19 per share after tax gain on the sale of two South Florida properties in 1999, earnings per share increased by 17%.

"These first quarter results demonstrate that we are moving forward in all business segments. The results provide a solid base for FECI's future growth, " said Robert W. Anestis, FECI's Chairman, President and CEO. "The Company's investments in real estate continue to produce excellent returns and growth, the transportation segments demonstrated solid cost controls and improved operating ratios, and the telecom assets continue to present new opportunities. Over the last several months, we have brought strong new leadership to the Company and we are already implementing programs reflecting the expertise and insights of these leaders. Their talents will help us identify greater opportunities to utilize and manage the Company's varied assets to produce even stronger results."

INDIA: 45 killed as bus collides with train

NEW DELHI, India (AP) -- A passenger bus crammed with wedding guests hurtled into a speeding train in northern India on Tuesday, killing at least 45 people, police said.

Dozens of others were hospitalized with serious injuries after the accident in Jhukia, a railroad police official told The Associated Press by telephone from the region located near India's border with Nepal. There were 74 people in the bus, which normally seats 52 people.

"The engine of the train is very badly damaged but we don't know yet if anyone in the train is injured," the official said on customary condition of anonymity.

The accident occurred at a railroad crossing where there was no gate to regulate traffic, officials said. The area is 270 miles southeast of India's capital, New Delhi.

"Apart from the headlights of the bus and a car that drove ahead of it seconds before the accident, there was no light there, no streetlight," the police official said.

Thirty-seven bodies were recovered from the site and rescuers with searchlights were cutting through the metallic hulk of the bus and the train engine to search for possible survivors, the official said. Eight people died at the hospital. The Avadh-Assam Express was headed from New Delhi to the northeastern town to Gauhati, capital of the far-flung hilly state of Assam.

Railroad accidents occur frequently in India, which has the largest rail network in the world under one management. More than 12 million people every day ride 14,000 trains across 41,875 miles of track.