This summary is based on the first quarter fiscal 2007 earnings call conducted by Burlington Northern Santa Fe Corp. (BNI: chart) on April 24, 2007.

Management:

Chairman, President & CEO: Matthew Rose
EVP, CFO: Thomas Hund
EVP, Chief Marketing Officer: John Lanigan
EVP, Chief Operations Officer : Carl Ice


Key Investors Issues

- Operating expenses were $2.951 billion, $281 million higher than the first quarter of 2006.
- Compensation and benefits expense was $932 million, up 1% from 2006.
- Purchase service expense was $502 million, up 8% to 38 million.

First Quarter Highlights

Earnings per share were 96 cents per share.

Earnings per share for this year include 14 cents per share environmental charge write-off of technology systems.

- Earnings per share included 4 cents per share gain from the sale of line segment to the state of New Mexico. When adjusting for these items, earnings per share in the first quarter of 2007 are up 5% over 2006. This increases despite fuel headwind of $60 million or about 10 cents a share.
- The headwind is the net result of the lower hedge benefit and higher fuel prices partially offset by increased fuel surcharge participation.
- The year-over-year increase in the adjusted operating ratio is due to the fuel headwind.

Operating expenses were $2.951 billion, $281 million higher than the first quarter of 2006.

But about $100 million of the increases is due to the combined impact to the unusual items. Additionally, higher fuel prices cost about $91 million. The composition of expenses continues to show the impact of higher fuel prices. Also material and other reflects the $81 million charge in 2007.

Compensation and benefits expense was $932 million, up 1% from 2006.

Headcount increased 1% while compensation and benefits expense per employee was flat. Wages and benefit increases were offset by cost controls and lower incentive compensation accruals.

Purchase service expense was $502 million, up 8% to 38 million.

The increase is primarily due to higher cost for ramping services, additional haulage volumes and higher purchase transportation cost of BNSF Logistics.

- Logistics expense increases were offset by increases in other revenue.
- Depreciation expense was $307 million.
- Equipment rents were $232 million. Equipment rents were nearly flat with 2006 due to combined velocity improvements, equipment privatization, and variable cost associated with the lower volumes.

- Material and other expense of $326 million was up $120 million. Excluding the 2007 charge and 2006 line sale material and other would have been up about $15 million. This increase is primarily related to higher material cost.
- Fuel expense of $652 million was 16% higher than the first quarter of 2006. All of the $91 million increase was driven by price, as gallons consumed were flat year-over-year.
- Average fuel price per gallon was $1.88 before hedge or $1.81 after hedge.

The net impact of hedge benefit changes, higher fuel prices and increased fuel surcharge participation resulted in about $60 million headwind for the first quarter.

This was in line with prior guidance.