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Union Pacific Corporation (UP) has reported a 2016 fourth quarter net income of $1.1 billion, or $1.39 per diluted share, compared to $1.31 per diluted share in the fourth quarter 2015. Full year net income for 2016 was $4.2 billion, or $5.07 per diluted share, compared to the 2015 net income of $4.8 billion, or $5.49 per diluted share, an 11 percent and 8 percent decrease, respectively.
“While full-year volumes were down substantially year over year, we did see declines moderate in the fourth quarter,” said UP Chairman, President and CEO Lance Fritz. “As we worked through the challenges of the year, we remained focused on the strategy we live each day through our six value tracks. Executing on these value tracks enables us to run a safe, efficient, and productive railroad while providing our customers an excellent value proposition.”
Operating revenue in the fourth quarter dropped by 1 percent to $5.2 billion compared to 2015. Fourth quarter operating income totaled $2 billion, an increase of 2 percent from the 2015 fourth quarter. The company operating ratio improved 1.2 points to 62 percent for the 2016 fourth quarter. Business volumes decreased by 3 percent with declines in all business groups with the exception of agricultural products, which grew 8 percent.
Freight revenue for the 2016 fourth quarter dropped by 1 percent compared to the same time period in 2015. Volume declines and lower fuel surcharge revenue more than offset core pricing gains.
Operating revenue for the 2016 year saw a total of $19.9 billion compared to $21.8 billion in 2015. Operating income at $7.3 billion dropped 10 percent from the operating income in 2015. Operating ratio improved 0.4 points to 63.5 percent.
Full year freight revenue decreased 9 percent to $18.6 billion, with carloadings down 7 percent compared to 2015. Declines were seen in the chemicals, coal, industrial products and intermodal business groups.
“Looking to 2017, we are fairly optimistic about some of the macro-economic indicators that drive our core business,” added Fritz. “Higher energy prices, favorable agricultural markets and improving business and consumer confidence all support a return to positive volume growth this year. We continue to have confidence in the strength and diversity of the Union Pacific franchise, which will position us well to safely and efficiently leverage stronger volumes as our markets begin to rebound. We will continue to execute on our strategic value tracks to provide our customers an excellent service experience while generating strong returns for our shareholders.”
Canadian Pacific Railway Limited (CP) has reported a record low operating ratio for both its 2016 fourth quarter and full year. The fourth quarter operating ratio was 56.2 percent and the full year operating ratio was 58.6 percent.
The railway’s revenues for the full year of 2016 were C$6.23 billion, a decline of 7 percent compared to revenues of C$6.71 billion for 2015. Diluted earnings per share (EPS) increased 27 percent to $10.63 while adjusted diluted EPS increased 2 percent to $10.29.
Fourth quarter revenues were C$1.64 billion compared to C$1.69 billion for the fourth quarter of 2015, a drop of 3 percent. Diluted EPS was $2.61, up 25 percent from last year, and adjusted diluted EPS increased 12 percent to $3.04.
“While the fourth quarter was weighed down by challenging operating conditions, including unexpected and extreme weather on the West Coast that compounded the impact of an already delayed grain harvest, it once again highlighted our resiliency and ability to operate efficiently under tough conditions,” said CP’s CEO E. Hunter Harrison. “I am particularly proud of our people who worked tirelessly over the last three months of 2016 to deliver for our customers in a safe and efficient manner.””
Harrison added, “2016 featured stiff economic headwinds and a challenging volume environment, headlined by a precipitous decline in crude oil shipments and weakness in grain movements, particularly in the first half. These are not excuses, but opportunities to showcase our operating ability and leadership. As we have shown over the last four years, the precision railroading model works in all economic conditions.”
“With continued margin improvement and an anticipated increase in volumes, led by a stronger bulk outlook, we expect adjusted diluted EPS growth to be in the high single-digits,” said Keith Creel, CP’s president and chief operating officer. “With our strong leadership team, plus the commitment and discipline shown by the thousands of men and women every day at CP, the franchise is well positioned for 2017 and beyond.”
R. J. Corman Railroad Group, LLC has named Ray Sipes president of R. J. Corman Signaling, LLC. Sipes has been serving as interim president since early December. In addition to his role as president of R. J. Corman Signaling, he will continue his current responsibilities with Roadway Worker Training (RWT) Signal Services, an R. J. Corman Company.
“I am confident in Ray’s ability to continue leading the company toward success,” R. J. Corman Railroad Group’s President and CEO Ed Quinn said. “He has been a valuable asset to our company for many years and we look forward to seeing how he will continue the trend of growth and innovation within the R. J. Corman Signaling company.”
Sipes has worked at RWT Signal Services, where he is responsible for directing and overseeing the signal support team, for four years. The signal support team offers services such as signal maintenance support, in-service testing, and project management assistance to a variety of industry customers.
Before joining RWT, he spent nearly 43 years working for CSX Transportation, where he held several positions including assistant chief engineer of system signal construction.
“I look forward to making the transition to a permanent role with R. J. Corman Signaling,” Sipes said. “I have thoroughly enjoyed getting to work with the team thus far and feel honored to have the opportunity to continue leading the company. I am committed to providing our customers with top-of-the-line, reliable signaling services while also maintaining high safety standards and efficient operating practices.”
Reading & Northern Railroad (R&N) has recorded increases in employees, track, locomotives, freight cars, facilities and customers in 2016. R&N merchandise traffic was up by 16 percent in 2016 with almost 20,000 carloads and its tourist operations handled more than 100,000 visitors, the second time it reached the 100,000 passengers mark.
“Business has been very good the last few years and in order to keep growing we invest in the railroad ahead of the demand,” said R&N Owner and CEO Andy Muller, Jr., who noted that it has always been his strategy to reinvest in the company. “That is why this year we bought more locomotives and freight cars and did an unprecedented amount of trackwork.”
In 2016, R&N added 10 miles of new track to its system, including the acquisition of the Humboldt Industrial Park in Hazleton, Pa., and more than 3 miles of new track construction. Over 15,000 ties and a dozen new switches were installed last year and more than 20,000 linear feet of rail were replaced.
R&N acquired six 4-axle locomotives, a 20 percent increase to the locomotive fleet in 2016. The railroad also increased freight cars by 16 percent, acquiring 162 additional freight cars, which increased the fleet to 1,179 railcars. In 2016, R&N also began or completed construction of six new facilities, added over a dozen new customers, most with the Humboldt acquisition, and added 21 new employees.
“I expect our railroad to grow,” said Muller. “I expect our superior service will help our customers grow and as they grow we will benefit. I expect our reputation to encourage more businesses to locate along our lines. We will always take care of our customers and our employees. That is the cornerstone of our success.”
“It takes well-trained employees operating well-powered trains over well-maintained tracks to deliver the high quality service that our customers have learned to expect from Reading & Northern,” stated Wayne Michel, R&N president. “We offer our customers guaranteed service windows and provide additional service at no cost to help them with their demands. Taking care of the customers is Job 1 at the Reading & Northern.”
Reading & Northern Railroad is a privately held railroad company with its corporate headquarters in Port Clinton, Pa. It serves customers in the eastern Pennsylvania counties of Berks, Bradford, Carbon, Columbia, Lackawanna, Luzerne, Northumberland, Schuylkill and Wyoming. R&N operates both freight services and steam and diesel powered excursion passenger services through its Lehigh Gorge Scenic Railway.
Railcar leasing company GATX Corporation has reported a 2016 fourth quarter net income of $30.9 million or $0.77 per diluted share. The 2015 fourth quarter net income was $58.2 million or $1.37 per diluted share. Both the 2016 and 2015 fourth quarters include net negative impacts from tax adjustments and other items of $0.37 per diluted share and $0.07 per diluted share, respectively.
Full year 2016 net income was $257.1 million or $6.29 per diluted share, compared to the full year 2015 net income of $205.3 million or $4.69 per diluted. The 2016 full year results include a net benefit from tax adjustments and other items of $0.52 per diluted share. The 2015 full year results include a net negative impact from tax adjustments and other items of $0.68 per diluted share.
GATX President and CEO Brian A. Kenney stated, “GATX achieved record earnings per share again in 2016 despite the rail industry experiencing a second year of reduced carloadings and a large oversupply of railcars. Our well-diversified fleet, quality customer base, and outstanding service helped Rail North America maintain high utilization of 98.9 percent at year end. We continued to optimize our fleet by selling railcars into a robust secondary market, with Rail North America remarketing income eclipsing $46 million in 2016. We also continued to improve the efficiency of our maintenance network, in part by successfully executing our strategy of servicing more of our railcars within our owned network.”
“Lease rates experienced significant pressure during the year. The fourth quarter renewal lease rate change of GATX’s Lease Price Index decreased by 36.2 percent,” added Kenney. “In response to the lower lease rate environment, we successfully shortened the term of lease renewals, achieving an average renewal term of 29 months in the fourth quarter of 2016.”
For the fourth quarter of 2016, Rail North America reported segment profit of $48.5 million compared to $98.8 million in the fourth quarter of 2015. For full year 2016, Rail North America reported segment profit of $321.9 million, compared to $379.5 million in 2015. Rail North America’s wholly owned fleet was approximately 122,000 cars, including more than 17,700 boxcars, at December 31, 2016.
“Many of the market challenges we faced in 2016 continue as we move into 2017,” Kenney continued. “As a result, we currently expect 2017 earnings to be in the range of $4.40 – $4.60 per diluted share. Our guidance represents a level of performance that is considerably higher than in prior downturns. This illustrates our success over the last several years of stretching lease terms to lock in attractive lease rates; optimizing the fleet through secondary market acquisitions and divestitures; improving the efficiency of our maintenance network; and, ultimately, focusing our business on our core strengths.”
“In the fourth quarter of 2016, there were some improved metrics in the North American rail industry as well as some new pockets of opportunity with certain customers. Absent these positive signs becoming a trend, the downturn in the North American rail industry may be more prolonged than in prior cycles. However, regardless of economic and industry fundamentals, we believe that GATX is well positioned to outperform our competitors, pursue growth opportunities, and provide excellent service to our customers across the globe,” Kenney concluded.
Canadian Pacific Railway Limited (CP) has announced that Keith Creel will become president and chief executive officer, effective January 31, 2017, following E. Hunter Harrison’s retirement. Effectively immediately, Harrison will take vacation leave until January 31, 2017, and Creel will assume the CEO’s responsibilities during this period.
“Hunter has made enormous contributions to CP, and we are forever grateful for his years of service,” remarked Chairman of the Board Andrew F. Reardon. “We have a tremendous CEO-in-waiting in Keith Creel. Keith and his team are ready to formally take the reins.”
Harrison had approached the Board to discuss his retirement from CP and modifications to his employment arrangements that would allow him to pursue opportunities involving other Class I railroads. CP entered into a separation agreement with Harrison that included a limited waiver of Harrison’s non-competition obligations.
In consideration of the waiver, Harrison has agreed to terminate all roles with CP and forfeit substantially all benefits and perquisites he is entitled to receive from CP going forward, including his pension. Harrison has also agreed to surrender for cancellation all of his vested and unvested equity awards, except for a portion of his vested options he was granted upon arrival at CP in June 2012.
Harrison will not be providing any consulting or other services to CP following his retirement and he has agreed to sell all of his CP shares by May 31, 2017.
“Leaving CP is bittersweet,” said Harrison. “I have had a wonderful experience and depart with many friends and with full confidence in Keith’s ability to build on the great success we have enjoyed.”
Ironhorse Resources, Inc. has appointed Matt Cundiff president, succeeding Greg Cundiff, who will remain as chairman of the Board of Directors. The appointment was effective January 1, 2017.
“Matt has been an effective and well-respected leader since assuming his current post in 2010,” said Greg Cundiff. “He’s helped lead our unprecedented growth since 2010 and has an outstanding Team focused on future business growth & acquisitions, personnel development and customer service.”
Matt joined Ironhorse Resources in 2004 as division controller for Rio Valley Switching Company. In 2007, he was promoted to vice president southern region, and in 2010 he was promoted to executive vice president. As executive vice president, he was instrumental in the development of Gardendale Railroad (Cotulla, Texas).
Matt also started IHR Transport company, which today has more than 80 trucks operating daily. Prior to joining Ironhorse, he worked in international consulting with Accenture.
“I am honored to have the opportunity to continue my father’s vision,” stated Matt. “The Ironhorse Resources family of companies is known for being customer focused, results oriented, nimble and well respected. I am committed to our Core values as a company and look forward to continuing to work with our employees and customers to achieve our growth strategies.”
Jeff Baskett, currently executive vice president will continue in this capacity with the expanded oversight and responsibility for all companies owned by Ironhorse Resources.
The U.S. Department of Transportation’s Federal Transit Administration (FTA) issued a public notice and request for comments on a proposed General Directive that would reduce the frequency of stop signal overruns in the rail transit industry. Public comments must be submitted by March 20, 2017.
The proposed General Directive would require rail transit agencies and State Safety Oversight Agencies (SSOA) to work together to understand the significant risks of death, injury and property damage associated with stop signal overruns. It would also establish mitigations to reduce the risks, and monitor the implementation and effectiveness of the mitigations.
“Ensuring trains only operate where they have permission is a fundamental way to protect the safety of rail transit passengers, operators and other workers,” stated U.S. Transportation Secretary Anthony Foxx. “While rail transit is the safest mode of surface transportation, focus on improving stop signal safety should be a top priority for everyone who is responsible for the safety of transit operations.”
The proposal would, for the first time, establish a definition for stop signal overruns as “a revenue or non-revenue rail transit vehicle passing any signal displaying a visual aspect that indicates to an operator that a train does not have authority to proceed,” as specified in a rail transit agency’s operating rules and procedures. It will also require a rail transit agency to conduct a systematic safety risk evaluation of the potential for stop signal overruns on its system, evaluate its operational activities to monitor the implementation and effectiveness of existing mitigations, and develop a corrective action plan, as necessary.
The proposed General Directive would also require SSOAs to participate in, review, and approve the safety risk evaluations conducted by rail transit agencies they oversee, and monitor and report the status of corrective action plans to the FTA.
“Trains running stop signals creates a risk of death, personal injury or damage to property or equipment,” said FTA Acting Administrator Carolyn Flowers. “We need to work hard, with our transit agency partners, to find out how pervasive a problem this is, and to do everything in our power to make sure that no operator is moving a train without express permission from their agency.”
The required actions for this proposed General Directive are grounded on Safety Management Systems (SMS) principles and methods.
The engineering and construction firm of SNC-Lavalin has been awarded two rail and transit contracts in the United States.
The Southeastern Pennsylvania Transportation Authority (SEPTA) has awarded SNC-Lavalin a five-year contract for engineering and administrative consultancy support services for the electric locomotives and multi-level cab and coach car procurement projects. The contract includes management, engineering oversight and review, and quality assurance activities. The contract is valued at US$13.7 million.
SNC-Lavalin was also awarded a contract to provide consulting engineering oversight and project management services relating to the light rail vehicles being procured to operate on Maryland Transit Administration’s (MTA) Purple Line project. The light rail Purple Line will travel 16.2 miles and feature 21 stations in the Maryland suburbs of Washington, D.C. The contract was awarded by Purple Line Transit Partners (PLTP), the private partner selected by the MTA to design, build, finance, operate and maintain the Purple Line project.
“We are proud to have been awarded these two strategic projects in the United States,” said Marc Rivard, executive vice president infrastructure engineering, SNC-Lavalin. “This demonstrates our ability to work closely with our clients and partners to deliver world-class expertise.”
The Port Authority of New York & New Jersey’s (PANYNJ) Trans-Hudson rail rapid transit system (PATH) has updated information on its implementation of Positive Train Control (PTC) and its program of sleep apnea screening for train engineers.
The agency is on target to meet a federal deadline to have PTC in place and operational by the end of 2018 and approximately 91 percent of PATH employees have been trained in PTC. Path has also installed Communications-based Train Control (CBTC) equipment on 216 of 230 passenger cars through the end of December.
PATH has also noted that it screens all of its engineers for potential sleep apnea during the pre-employment process, and annually during regular physical exams. Engineers believed to be at risk for sleep apnea are referred for evaluation, and if confirmed are held out of service until cleared by medical professionals following overnight sleep analysis. These employees must undergo treatment and are regularly monitored for compliance.
“PATH’s number one priority remains the safety of our passengers and employees,” said Michael Marino, PATH director/general manager. “While we perform rigorous safety checkpoints on a regular basis throughout the system, given recent events we’re going the extra mile to enhance our safety programs as an added precaution.”
The agency is also increasing inspections under an existing rule that mandates engineers approaching bumping blocks should be traveling 8 miles per hour or less. PATH examiners conducted nearly 140 observational tests through the rule in 2016, with 100-percent compliance. In 2017, PATH will use data recorded in the cars to gauge compliance with this safety requirement and rely on additional observational techniques to help measure compliance.