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Earnings Calls: 
Burlington Northern Santa Fe Fourth Quarter Earnings Call
Author: Rozalina Destanova
123jump.com
Last Update: 2:24 PM EST January 31 2008


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Revenue rose to $4.25 billion from $3.88 billion a year ago. The increase in revenue came despite a falling number of carloads on network, which is evidence of strong pricing. Fuel costs jumped to $960 million from $703 million a year earlier. Total carloads reached 2.6 million, down from 2.677 million in the same period in 2006. The company plans capital expenditures of $2.45 billion in 2008, down from the $2.59 billion it spent in 2007.


Investors Question and Answers

 
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John P. Lanigan, Jr.: That is where it played out last year, the forecast were way off from the global prognosticators as far as with the trade numbers were, so lot to see what the trade numbers play out in. Also the mix in freight as well as Southern California continues to become an increasingly large market, a lot of freight stays in southern California, the local consumption market as well so we have to watch those patterns also.

Gary Chase (Lehman Brothers): You quantified the 15% or 20% of the business as re-pricing opportunity in coal. Does all of that 15% to 20% have RCAP escalation in it or does some of it have nothing at all?

Matthew K. Rose: The RCAP fuel side does not properly compensate specifically us being a western railroad. There is a big huge field, intensity factor of our link of haul greater than other railroads and that has been our position. That is why we have looked at going to more of a conventional fuel surcharge. Right now, we have got two types of surcharges. We have the RCAP, which is going to go up significantly quarter-over-quarter, probably record RCAP of all times that I am aware of, like 11%. It is because fuel is such, it has gone up so much and even given that, it does not properly compensate us with the longer length of haul. We have that RCAP device, and then we have the other device, which is the more conventional fuel surcharge where we take RCAP and we take the fuel component out and that is where we have applied our fuel surcharges. Every year, we get access to 10% to 12%, 15% of our coal contracts. We are going to more of a conventional fuel surcharge, which we think is appropriate and fair for our customers and as you have seen with the STABILIZATION, their mandate has been to go to a mileage base fuel surcharge that puts fuel based on weight and miles, which is the most appropriate type of fuel surcharge out there.

Unidentified Analyst: On the internal compensation, was there any true-up the prior quarters or was that just a normal accrual relative to what you did versus what your internal bogies were for fourth quarter?

Thomas N. Hund: No, we were lower in all of the quarters compared to 2006, so there was no true-up. It is two components, it is both the incentive comp for our employees as well as the profit sharing because we are all measured off of the same goals and that represents about a quarter of our scheduled work force. That was just related to the fourth quarter.

Unidentified Analyst: You mentioned five different key hard areas you are focusing on. which of those 4 or 5 initiatives have the most leverage?

Carl R. Ice: We are intend upon terminal processing and driving what we call in BNSF the best way to drive consistency across the terminals that is important and then in our maintenance areas, our ongoing maintenance reliability and planning.
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