Back in the early 90’s I read from on RR that for every dollar they made in revenue, they spent 99 cents of it. Their goal (over 5 years I believe it was) was to get it down to 95 cents. I am assuming many other RRs were in similar situations.
So, here we are about 12 years later. Does anyone know the profit margins, on a ton-mile basis for any of the RRs today? Just curious.
The ration of operating costs to revenue is the “operating ratio”. The RRs usually discuss this number each quarter at the analysts meetings.
The “big 6” have ORs ranging from the high 60s (CN) to low 80s (CSX and UP) these days.
YOu cant confuse operating ratio with net income. Operating ratio is based on revenues (operating) and operating expenses.
then after the operating expenses a typical statement of income will have such accounts (costs) as interest expense, income tax, and other special charges.
For 2005, BNSF had revenues of $12,987 million with operating expense of 10065 for an OR of 77.5%.
Then came interest expense of 437 million, other expenses of 37million and income tax of 917 million.
The total net profit was 1531million of 11.7% of revenue. So, in BNSF’s case, the penny has now grown to nearly 12 cents.
ed
The above posters are correct. Railroads will seldom (if ever) provide anything other than their operating ratio in the context we are talking about here. This is a cash flow measure and for the line to stay in business, it must be 100 or less. Perhaps the easiest analegy (if one has problems understanding) is your wages compared to your bills. You always want your wages to exceed your bills and thus have an O/R of less than 100.
Usually, the ton miles carried will be in the annual report. Divide that number into the Net Profit and you can have the answer you started out asking for. But as has been stated above, this is a spurious number if you are looking for a measure of how well the railroad is operated. However, if you are looking for a measure of how the railroad is managed, net profit and the absence of extraorinary charges works well.
I called BNSF a couple of weeks ago and talked to Investors Relations about a couple of questions we had on a thread pertaining to stock buy back and issuance of stock options.
They asked if I wanted an investors package and I said “Sure”. It arrived yesterday and was about 1.5 inches thick, containing annual report, a map, proxy report (shows compensation of executives and board members), Class1 annual report to STB, 4th quarter power point (printed of course) and an Investors summary.
There is a ton (not to be confused with Gross Ton Mile) of information in those reports. Detailed information on income statements, balance sheets, types of rail by weight, equipment, depreciation schedules, carload revenue by commodity, etc.
I would suggest you get a copy and then spend an afternoon or evenign reviewing it to understand how railroads operate. You wont be an expert, but you will understand the complexities of the business.
ed
This information is also avaible on the company websites. Open this PDF document for a detailed look at UP operations. Also, keep an eye on the average revenue per carload of different commodities, that will serve to shock many people about where the money really is!
http://www.up.com/investors/attachments/factbooks/2005/factbook.pdf