Fuel hits BNSF quarter

Fuel hits BNSF quarter

Burlington Northern Santa Fe Corp. on Tuesday said earnings edged upward despite higher fuel costs that offset gains in international volumes in the second quarter.

The Fort Worth, Texas, company reported net income of $200 million, up from net income of $194 million the previous year.

Operating income was $412 million for the 2003 second quarter compared with $421 million for the same 2002 period. Lower income tax expense in the second quarter of 2003 primarily reflects a favorable tax settlement.

"Strong international volumes led BNSF to having overall revenue growth for the second consecutive quarter," said Matthew K. Rose, BNSF Chairman, President and Chief Executive. "However, our bottom line continues to be impacted because of a 27 percent increase in fuel expense year-over-year."

Freight revenues for the second quarter increased 3.7 percent, or $80 million, to $2.26 billion compared with 2002 second-quarter revenues of $2.18 billion. Consumer Products revenues increased $63 million, or 7 percent, to $911 million reflecting record growth in our international, truckload and perishable sectors. Coal revenues increased $16 million, or 3 percent, to $504 million, largely from index-driven rate increases. Agricultural Products revenues grew $5 million, or 2 percent, to $317 million, reflecting increased ethanol shipments from plants in the Midwest to California. Industrial Products revenues declined $4 million, or 1 percent, to $531 million with revenue growth in both the building and construction products sectors offset by weak demand in the chemical and petroleum products sectors. Second-quarter freight revenues included increased fuel surcharges of $24 million compared with the prior year.

Operating expenses of $1.88 billion were $96 million, or 5 percent, higher than the same 2002 period primarily related to fuel expense and higher volumes handled. The $56 million increase in fuel expense primarily relates to an average increase of 16 cents per gallon in the cost of diesel fuel to 89 cents per gallon, after hedging.

During the 2003 second quarter, Fort Worth-based BNSF repurchased approximately 2 million shares of its common stock at an average price of $27.57 per share. This brings total repurchases under BNSF's 150-million share-repurchase program to approximately 120 million shares as of June 30, 2003, at an average price of $25.98 per share since the program was announced in July 1997.