MichaelSol wrote: Fortuitously, an administration took charge that did everything regarding the economy just about as right as could be done, creating what has become one of the strongest economic periods we have ever had creating enormous boom times for railroads in particular.
Fortuitously, an administration took charge that did everything regarding the economy just about as right as could be done, creating what has become one of the strongest economic periods we have ever had creating enormous boom times for railroads in particular.
Thanks to Chris / CopCarSS for my avatar.
Murphy Siding wrote: MichaelSol wrote: Fortuitously, an administration took charge that did everything regarding the economy just about as right as could be done, creating what has become one of the strongest economic periods we have ever had creating enormous boom times for railroads in particular.Im' curious what , in your eyes, they did right, that got them to where they are now?
The tax cuts were substantial, and the overnight rate reductions were likewise substantial -- and early enough in the cycle to have the maximum stimulatory effect. And the government stuck to its guns on both rates and tax cuts.
There is of course a long standing argument on that, but, there was a huge bubble economy popping just at the end of the Clinton years, and ordinarily that spells tough times. We dodged the bullet on that, and to me it was due entirely to government economic policy at the right place at the right time. And by that I mean that government minimized its burden on business. At each time, the Kennedy tax cuts, the Reagan tax cuts, and now the Bush tax cuts, the economy boomed, and tax revenues ultimately increased as a result of increased business activity.
This administration was fully one, as well, with the Reagan/Clinton trade initiatives which permitted significant productivity increases in the U.S. economy. It has been a remarkable era.
M.S.
You weren't the only one who thought Mr. Sol was talking about railroad administration.
jcass
My perception, cash-wise, is that N&W could have (should have) bought SOU. In reality, again, my perception only, is that Southern took over N&W. Look at the number of cars still sporting SOU vs NW reporting marks. I see about 4 times as many SOU marks as I see NW. Engineering and operations are still in former Southern facilities and guess which "traditions" are still being followed? What happened when the only Southern locomotive in the NS Steam Program was no longer usable? During the "merger period" NW locomotives were sceduled through the paint booth while SOU locomotives roamed free (or so it seemed.) Don't get me wrong, I wasn't against it, I just failed to see the evidence of a "merger of equals".
From the Boardroom of the GN in 1966, the outlook didnt look quite as bad as you indicated:
1. The balance sheet was strong with shareholder equity over $700 million with $242 million of term debt.
2. Further, freight revenues were at an all time record of $251 million with the freight operating ratio of 67.9%. Ton miles were over 19billion, the highest of the decade. Net income was $36.5 million and they covered their fixed expenses a healthy (for railroads) 6.55 times before federal taxes. Hardly an outlook in 1966 for bankruptcy.
NP and Q had similar type numbers. NP had a net income of $30 million, bolstered no doubt by "other income" of $23million. Ton miles for NP was 14.3 billion. Their OR for 1966 was 71.9. The Q had net income of $23 million on an freight OR of 70.3%. Ton miles were 20.5 billion.
MILW had freight revenues of $220 million, OR of 73.5% and net income of $8million. Ton miles were 16.7billion.
The year 1966 seemed to be the last "good year" for all four carriers. Revenues for all carriers either dropped or remained steady over the next 3 years. Both MILW and Q saw 10% increases in freight revenue over the 3 years (not 10% per year, but over the period). GN and NP's revenue only rose about 4% over the period.
Something "happened" around 1967. I believe we discussed it previously, but a refresher would be welcomed. By 1969, net income for GN had fallen to $10mil, NP was down to $5mil, Q was down to $10mil and MILW was registering a deficit of $11mil.
No doubt the GN and NP's net for 1969 were heavily influenced by "extraordinary items" of $13 mil and $17 mil respectfully.
Respectfully submitted,
ed
I absolutely did not say 1966 was a bad year. I said the future looked gloomy from the standpoint of that year. This really does misrepresent what I said.
I am talking in terms of trends. The GN had been a strong road. Of course it's balance sheet looked good. They tried to keep it looking good by cutting MOW/mile of mainline virtually in half after 1957. GN had installed very little heavy rail. The taconite traffic was drying up. This was a road that was more dependent on a single commodity than any other Western road -- and that traffic wasn't transcontinental.
Similarly, the Q kept earnings looking good by virtually abandoning maintenance. The BN inspection team that did a system wide review in March, 1970 was horrified at the condition of the Q. The figures you cite are entirely artificial because of that. Even if you don't acknowledge it, the people in the boardrooms knew these were unsustainable. You can "create" a good OR, and that is what was happening, but the long term trends were firmly in place.
Of course GN had record revenues. What on earth is that supposed to mean? NP had record revenues in most years. CBQ had record revenues in most years. Milwaukee Road had record revenues in most years. All railroads, in almost all years, have "record" revenues. They can be standing still and normal inflation will give them "record" revenues.
In the time frame I referenced, this is what they were seeing:
Revenue Gains, 1964-1968Milwaukee, $40,436,000Northern Pacific, $25,700,000Burlington, $17,372,000Great Northern, $15,917,000
By % growth:
MILW 18%NP, 14%CBQ, 6%GN, 6%
If you re-read my post, you will see that I suggested that, from the standpoint of 1966, the future looked pretty gloomy. If you will re-read your post, you seem to say that things deteriorated significantly after 1966 -- conditions got pretty gloomy.
Well, isn't that what I said the future looked like? Doesn't that accurately follow the trend line I suggested earlier on this thread?
Are you suggesting that they "shouldn't" have been able to see what you describe actually happen coming in 1966?
I think they did. That is one reason why the BN merger committee reversed itself in 1966 on the issue of acceptance of the Milwaukee merger conditions.
I wasnt in the Boardroom in 1966, so I cannot disclose what the mood was. Were you there? If not, we are both only attempting to figure out what was being said and done.
I will repeat, GN had record revenues and slightly lower net income in 1966 vs 1965. Perhaps they saw the writing on the wall. I wouldnt doubt it. However, looking at the data, GN was far from bankruptcy in 1966.
For the record, GN installed 223 miles of new rail between 66 and 69 (4 years = 56 miles per year). MILW installed 171 miles or 43 miles per year. Q installed only 139 miles or 34 per year. MOW per equated mile for the roads were as follows (averages for four year period):GN $4351 per mile
Q $3623 per mile
MILW $3201 per mile
I concur with your revenue growth assessments. What were the net railway operating incomes for the carriers in that period? How did each railroad handle the increase in business? Was it good business growth or not?
From the standpoint of 1966, things for all four carriers appeared pretty good. There had to have been storm clouds in the distance, but for that time, it was pretty much all records business levels and profits. As I said before, 1967 was the year that things changed and changed very dramatically and quickly. Whether or not that was apparent in those meetings I cannot say. I was 11 years old and my attention was on the daily IC locals as they switched out loads of limestone.
Our difference in this matter is that you are saying 1966 looked gloomy, I am stating that if it did look gloomy, then it was from the very PEAK of railroad revenue and net income for the decade. I am not saying the BOD couldnt have seen the bankruptcy coming, what I am saying is looking at the 1966 data, without benefit of 1967 and beyond, it was impossible for me to agree.
Well, this is becoming one of "those" conversations. There are trend lines. Those trend lines were negative.
MP173 wrote: I wasn't in the boardroom in 1966, so I cannot disclose what the mood was. Were you there? If not, we are both only attempting to figure out what was being said and done.
I wasn't in the boardroom in 1966, so I cannot disclose what the mood was. Were you there? If not, we are both only attempting to figure out what was being said and done.
I offer the gentlemen the courtesy of knowing their business, and their sudden reversal on the Western Gateways.
Milwaukee Road had record revenues in 1977. I have no idea why you are suddenly convinced this is meaningful in the context and only for GN. It happens all the time, but you seem to think it is highly significant only for GN. And for the record, the 1966 "record" revenue was pretty much the same revenue GN earned in 1953.
For the record, GN installed 223 miles of new rail between 66 and 69 (4 years = 56 miles per year). MILW installed 171 miles or 43 miles per year. Q installed only 139 miles or 34 per year. MOW per equated mile for the roads were as follows (averages for four year period):GN $4351 per mileQ $3623 per mileMILW $3201 per mile
On a per mainline mile basis, 1966:
MILW: $10,782
NP $10,530
GN $ $7,929
CBQ $6,938
Change in Operating Ratio, 1966, 1967, 1968
MILW, 79.4%, 79.6%, 81.7%. Total Change -2.3%
GN, 73.8%, 81.8%, 81.6%. Total Change -7.8%
Over the five year period, 1964-1968:
MILW -2.3%
GN -4.8%
Again, this is consistent with the trend line analysis that GN's condition was more rapidly deteriorating, as its decline in OR accelerated, whereas Milwaukee's did not.
Look at the larger context, the 12 year period, 1956-1968:
MILW +1.3% change in OR, revenues $254 million to $269 million.
GN -8.9% change in OR, revenues from $268 million to $266 million.
Which do you think was not only growing faster, but handling the "quality" of their growth better? Do you think this reflects management at all? Which management would you give the bonus to?
I would say GN was handling the increased business more poorly, or its acquired business was of a lower quality. Or, it was surrendering premium business. In any case, this is consistent with the trend line analysis, a trend that had been in place since the early 1950s. I am not sure why you are trying to argue that the trend lines were not predictive of exactly what happened since, as you seemed to acknowledge, that is exactly what happened.
From the standpoint of 1966, things for all four carriers appeared pretty good. There had to have been storm clouds in the distance, but for that time, it was pretty much all records business levels and profits.
If the gentlemen did not understand that they had been significantly underfunding maintenance for the previous 6-8 years, and did not understand that the deferred maintenance was single handedly creating record profits, then your estimation of them is considerably more jaded than mine. If you also think they ignored trends in place for nearly two decades because of one or two remarkable years, I think you underestimate their understanding of the business. I think they knew exactly what was happening. That is why the sudden about face on the Western Gateway Conditions, which they had theretofore vociferously opposed.
The fact that the declines continued after 1966 -- conforming with the long term trends --seems to validate, not refute, the methodology that a good year here or there does not alter the fundamentals of a business, and those can best be discerned by those long term trends.
MP173 wrote: For the record, GN installed 223 miles of new rail between 66 and 69 (4 years = 56 miles per year). MILW installed 171 miles or 43 miles per year. Q installed only 139 miles or 34 per year.
GN had considerably more mileage classified as mainline than Milwaukee Road. It would be more useful to see how these compared based on mainline mileage. As it is, your statistics understate a key factor.
Class of 131 lbs or heavier, 1965:
MILW 1,361 miles
NP 578 miles
GN 79 miles
Using some older mainline mileage data -- because I don't happen to have 1966 data here at the moment -- according to your data the MILW was replacing 1.47% of its rail annually on a mainline mileage basis, while GN was replacing 1.31%, and Milwaukee's appears to have been substantially heavier rail as well.
This is consistent with the Milwaukee's higher MOW expenditures per mainline mile.
I agree that MILW appears to have had less mainline trackage than GN, but dont have exact figures at hand.
However, MILW was replacing it's rail as follows (average new rail laid per yard):
1966 - 116 lb/yd
1967 - 115 lb/yd
1968 - 114 lb/yd
1969 - 117 lb/yd
which compares with the GN's replacement of 115 lb/yd.
respectfully submitted,
Perhaps it will be one of "those" conversations. BTW, what exactly is "one of 'those' conversations" just so I know what it is I am in?
I simply questioned your original statement of the doom and gloom in the Boardroom in 1966. Looking at 1966, I saw pretty good numbers, not only for GN, but also NP, Q, and MILW. If one is going to look at financials, it is important to look at a range of numbers which you suggest.
During the 60's GN and MILW had the following revenues"
1960 - $246m (GN) vs $230 (MILW
1961 - 232m $221
1962 - 238m $2271963 - 242m $233
1964 - 250m $228
1965 - 265m $241
1966 - 281m $259
1967 - 260m $256
1968 - 266m $268 (MILW takes the lead!)
1969 - 289m $269 (GN races back)
Hence, your use of 1966 thru 1968 data will of course indicate that GN lost ground. They did! But by 1969 they had clearly gained considerable revenues. Further, their net income in 1969 was $10.5 million. This was AFTER a $12.8 million extraordinary charge (merger related). Take that away and their net would have been around $23m. MILW in 1969 had a LOSS of $11.5m.
Trend line analysis for the decade of the 1960's show GN increasing revenue from $246m to $286m (not a great period of growth, possibly even negetive growth with inflation factored in). Certainly nothing to crow about.
Trend line analysis for the decade of the 1960's show MILW increasing revenue from $230m to $269. Both carriers increased revenue by 16% over the decade.
We both know both carriers were looking for a merger partner. GN was able to consumate the deal, while MILW slipped away with nothing.
Finally, trend line analysis for both from 1956 to 1968 show both were dying a slow painful death. The failed merger with CNW left MILW in a precarious situation. Too many branch lines hauling too little freight. Would the merger saved MILW? I dont think so, but that is only a hunch, perhaps a educated guess. Still, too many branchlines with too little freight and full crews servicing those trains. MILW was left with a nice trump card (PCE) which they failed to play correctly.
Too bad, as that line would be very well utilized these days.
We have previously discussed the Milwaukee's problems in 1969, in spite of which it kicked up its maintenance spending considerably. It is interesting to me how you look for "extrarordinary" expenditures to justify some portrait on the one hand, but never offer the same balance to your contrary position.
In December, 1968, severe winter storms blocked many of the Company's lines, and storms continued for the next three months. President Crippen stated that the winter was the worst on his more than 40 years on the railroad. Between December 13 and March 30, there had not been a single day when major snow removal machinery was not operating somewhere on the railroad. In Washington and Idaho, many lumber mills shut down for as long as four months, and the Company lost much-needed revenue from these traditional sources. Overall, the Railroad estimated that it lost approximately $5 million in traffic losses and increased operating costs. Then, as soon as the snow-removal machinery was stowed away, spring floods from an angry Mississippi River inundated the St. Paul yard, as well as causing disruptions along the Yellowstone River in Montana, the Big Sioux in South Dakota, and several tributaries of the Mississippi. Direct damages were $1.5 million.
Had Milwaukee decreased its maintenance per mainline mile to GN levels, an additional savings of $15 million would have been available that year.
Because of anomalies for both roads in 1969, it did not, and does not, appear to me to be useful. However, the nice thing about trend lines, they are mathematical, not agenda-driven. What the operating ratio trend line shows is that GN's Operating Ratio was deteriorating, while Milwaukee Road's was gradually improving. Further, GN's had a signficantly higher degree of variation, while Milwaukee's showed less variation which appeared to result from calculated management policies determined to eke out marginal improvements, year in and year out.
Deteriorating operating ratios were typical of this this period.
It was substantially harder for a Midwestern road to show gradual improvements, and particularly in comparison to a transcontinental. Objectively, what was happening was quite remarkable in the context. My idea of trend lines is to show what was happening.
MichaelSol wrote: We have previously discussed the Milwaukee's problems in 1969, in spite of which it kicked up its maintenance spending considerably. It is interesting to me how you look for "extrarordinary" expenditures to justify some portrait on the one hand, but never offer the same balance to your contrary position.In December, 1968, severe winter storms blocked many of the Company's lines, and storms continued for the next three months. President Crippen stated that the winter was the worst on his more than 40 years on the railroad. Between December 13 and March 30, there had not been a single day when major snow removal machinery was not operating somewhere on the railroad. In Washington and Idaho, many lumber mills shut down for as long as four months, and the Company lost much-needed revenue from these traditional sources. Overall, the Railroad estimated that it lost approximately $5 million in traffic losses and increased operating costs. Then, as soon as the snow-removal machinery was stowed away, spring floods from an angry Mississippi River inundated the St. Paul yard, as well as causing disruptions along the Yellowstone River in Montana, the Big Sioux in South Dakota, and several tributaries of the Mississippi. Direct damages were $1.5 million.Had Milwaukee decreased its maintenance per mainline mile to GN levels, an additional savings of $15 million would have been available that year.Because of anomalies for both roads in 1969, it did not, and does not, appear to me to be useful. However, the nice thing about trend lines, they are mathematical, not agenda-driven. What the operating ratio trend line shows is that GN's Operating Ratio was deteriorating, while Milwaukee Road's was gradually improving. Further, GN's had a signficantly higher degree of variation, while Milwaukee's showed less variation which appeared to result from calculated management policies determined to eke out marginal improvements, year in and year out.Deteriorating operating ratios were typical of this this period. It was substantially harder for a Midwestern road to show gradual improvements, and particularly in comparison to a transcontinental. Objectively, what was happening was quite remarkable in the context. My idea of trend lines is to show what was happening.
Wow, you really have to hand it to the Great Northern. To build a line so close the the Milwaukee Road line, yet the snow only affects the Milwaukee line and not the Great Northern. That is vision.
Gabe
gabe wrote: Wow, you really have to hand it to the Great Northern. To build a line so close the the Milwaukee Road line, yet the snow only affects the Milwaukee line and not the Great Northern. That is vision. Gabe
Murphy Siding wrote: gabe wrote: Wow, you really have to hand it to the Great Northern. To build a line so close the the Milwaukee Road line, yet the snow only affects the Milwaukee line and not the Great Northern. That is vision. Gabe Silly! That's because GN had the *inferior route*.
Ah, you are right. I do look for "extraordinary items". They are always listed in the income statement. To be listed on the income statement as such the event or transaction must meet both of the following:
1. Unusual nature - the event possesses a high degree of abnormality or is unrelated to ordinary activities of the business.
2. Infrequent occurence - the event is not reasonable expected to recur in the future, taking into account the environment the business (railroad) operates. Source: Financial Reporting and Analysis, Revsine, p 54.
So, if I see an extraordinary item, I want to see what caused it, not to put a spin to further my agenda.
I have no agenda on this subject, contrary to your statements, other than to discuss the financial and operational situations of these and other carriers.
The income statements did not state that MILW had extraordinary items which occured in 1969. Snowfall would obviously be ruled out on item 2 above.
At the risk of drawing rath for introducing yet another statistic for analysing, the freight OR for both GN and MILW were remarkable consistent during the first seven years of the decade. Granted, "freight operating ratio" is certainly subject to interpretation, but check out the following:
1960 70.1% GN - unavailabe for MILW
61 72.0 - unavailable
62 72.0 - 74.8
63 69.7 - 73.8
64 70.8 - 73.5
65 67.9 - 74.2
66 67.9 - 76.9
67 75.0 - 81.3
68 74.8 - 81.7
69 74.9 - 80.5
Note, that freight OR is not available for MILW for 60/61 in my Moody's...dont accuse me of an agenda, I simply dont have it. I trust that you will supply it. Notice the low varience for both carriers for their sampling, that is until 1967.
As I have stated before and repeat myself, something happened in 1967 for these carriers. It has nothing to do with long term trend analysis. It caused both carriers (and others) to spike their freight OR's by significant amounts (7.1% for GN and 4.4% for MILW).
Was there a recession that year? New labor contract which didnt have pass thru's on rates? New accounting/reporting regs the ICC required? Something happened that caused that large of increase.
Finally, regarding maintenance expenditures, GN spent 11.7%, 13.4%, 13.1% and 14.2% of revenues per year on such expenditures, without depreciation included. For MILW, the numbers are very similar: 10.9%, 12.6%, 14.4% and 14.0%. These are for years 1966-69.
gabe wrote: MichaelSol wrote: We have previously discussed the Milwaukee's problems in 1969, in spite of which it kicked up its maintenance spending considerably. It is interesting to me how you look for "extrarordinary" expenditures to justify some portrait on the one hand, but never offer the same balance to your contrary position.In December, 1968, severe winter storms blocked many of the Company's lines, and storms continued for the next three months. President Crippen stated that the winter was the worst on his more than 40 years on the railroad. Between December 13 and March 30, there had not been a single day when major snow removal machinery was not operating somewhere on the railroad. In Washington and Idaho, many lumber mills shut down for as long as four months, and the Company lost much-needed revenue from these traditional sources. Overall, the Railroad estimated that it lost approximately $5 million in traffic losses and increased operating costs. Then, as soon as the snow-removal machinery was stowed away, spring floods from an angry Mississippi River inundated the St. Paul yard, as well as causing disruptions along the Yellowstone River in Montana, the Big Sioux in South Dakota, and several tributaries of the Mississippi. Direct damages were $1.5 million.Had Milwaukee decreased its maintenance per mainline mile to GN levels, an additional savings of $15 million would have been available that year.Because of anomalies for both roads in 1969, it did not, and does not, appear to me to be useful. However, the nice thing about trend lines, they are mathematical, not agenda-driven. What the operating ratio trend line shows is that GN's Operating Ratio was deteriorating, while Milwaukee Road's was gradually improving. Further, GN's had a signficantly higher degree of variation, while Milwaukee's showed less variation which appeared to result from calculated management policies determined to eke out marginal improvements, year in and year out.Deteriorating operating ratios were typical of this this period. It was substantially harder for a Midwestern road to show gradual improvements, and particularly in comparison to a transcontinental. Objectively, what was happening was quite remarkable in the context. My idea of trend lines is to show what was happening. Wow, you really have to hand it to the Great Northern. To build a line so close the the Milwaukee Road line, yet the snow only affects the Milwaukee line and not the Great Northern. That is vision. Gabe
Especially all those GN lines in Iowa and Illinois. I guess it was quite a vision indeed. As a matter of fact, though, Milwaukee did pass through historically greater snow belts than GN. GN was pretty dry country, and its choice of Stevens Pass was specifically to avoid the historically greater snow depths on Snoqualmie.
Whether that refines or exacerbates your sarcasm, I do not know nor care, but there often are facts underlying historical events, and they sometimes don't match preconceived notions that erupt in misguided sarcasm.
Thank you for your usual enlightening contribution. Interestingly, I did go to the trouble of offering you a citation to a specific cause of lower revenues, including both statements and specific numbers and why it represented an unusual situation. Your response? An effort solely to be obnoxious, relying on a notion that they had built in the same kind of country, which they hadn't. Ignorance is a poor foundation for sarcasm. You did not, in any case, offer to reciprocate the consideration I offered you on the matter of numbers, statements and citations. Any wonder that railfans aren't taken seriously, nor worth the time of day on discussions like this?
MP173 wrote: Ah, you are right. I do look for "extraordinary items". They are always listed in the income statement. To be listed on the income statement as such the event or transaction must meet both of the following:1. Unusual nature - the event possesses a high degree of abnormality or is unrelated to ordinary activities of the business.2. Infrequent occurence - the event is not reasonable expected to recur in the future, taking into account the environment the business (railroad) operates. Source: Financial Reporting and Analysis, Revsine, p 54.So, if I see an extraordinary item, I want to see what caused it, not to put a spin to further my agenda. I have no agenda on this subject, contrary to your statements, other than to discuss the financial and operational situations of these and other carriers. The income statements did not state that MILW had extraordinary items which occured in 1969. Snowfall would obviously be ruled out on item 2 above.At the risk of drawing rath for introducing yet another statistic for analysing, the freight OR for both GN and MILW were remarkable consistent during the first seven years of the decade. Granted, "freight operating ratio" is certainly subject to interpretation, but check out the following:1960 70.1% GN - unavailabe for MILW61 72.0 - unavailable62 72.0 - 74.863 69.7 - 73.864 70.8 - 73.565 67.9 - 74.266 67.9 - 76.967 75.0 - 81.368 74.8 - 81.769 74.9 - 80.5Note, that freight OR is not available for MILW for 60/61 in my Moody's...dont accuse me of an agenda, I simply dont have it. I trust that you will supply it. Notice the low varience for both carriers for their sampling, that is until 1967. As I have stated before and repeat myself, something happened in 1967 for these carriers. It has nothing to do with long term trend analysis. It caused both carriers (and others) to spike their freight OR's by significant amounts (7.1% for GN and 4.4% for MILW). Was there a recession that year? New labor contract which didnt have pass thru's on rates? New accounting/reporting regs the ICC required? Something happened that caused that large of increase.Finally, regarding maintenance expenditures, GN spent 11.7%, 13.4%, 13.1% and 14.2% of revenues per year on such expenditures, without depreciation included. For MILW, the numbers are very similar: 10.9%, 12.6%, 14.4% and 14.0%. These are for years 1966-69.Respectfully submitted,ed
Something happened in 1967, something else in 1966, and something else again in 1969. You are working hard to cherry pick something here, whatever it is.
I am absolutely positive that railroads had extraordinary items from time to time. You have provided an accounting definition of what they are. Nevertheless, they spent the money. Milwaukee got snowed in. Worst in 40 years. They lost the revenue. Extraordinary. You are now as fastened on GN's in 1969 as you were with its "record" revenue in 1966. I do not use freight ORs alone because of the well known accounting procedures under ICC accounting designed to maximize the expenses attributable to passenger service. Note the lack of bounce in ORs in 1971 which should have happened if passenger costs were as high as alleged.
Note BN's operating ratios, 1970-1979: 84.4, 82.8, 82.4, 82.3, 79.4, 80.7, 81.4, 83.2, 96.1, 95.9. Given the expected merger savings, this is consistent with the trend analysis of the GN. Just about spot on in fact.
Since both GN and MILW passenger operating ratios during that period 1950-1970 showed positive improvements, GN's negative overall Operating Ratio trend during that time accurately reflects the condition of the railroad and is entirely consistent with the GN trend. Your theory would suggest that loss of passenger service was a loss of highly profitable traffic, in order to account for the subsequent OR's.
You do have an agenda and it is a bizarre attempt to twist what was happening.
The long term trend analysis for GN Operating Ratios was negative. Your efforts to pick and choose this time frame or that time frame is simply an effort to disguise that, and it defeats the idea of "trend" analysis. If you want to pick and choose, pick the years bracketing 1966 when the MILW revenues increased $40 million and GN's increased by only a third of that. That's what they were seeing. In 1966, the Northern Lines merger application was rejected. That is a key underlying part of my analysis of GN in 1966.
The long term trend analysis for MILW Operating Ratios was positive. This was fundamentally a Midwestern road. This was unusual, especially compared to a fundamentally transcontinental road.
This was during a time when railroads generally had negative trends on operating ratios.
snagletooth wrote: Murphy Siding wrote: gabe wrote: Wow, you really have to hand it to the Great Northern. To build a line so close the the Milwaukee Road line, yet the snow only affects the Milwaukee line and not the Great Northern. That is vision. Gabe Silly! That's because GN had the *inferior route*.Gee, and I always thought it was the MLWK that built mostly paralleling the NP route
Doesn't matter to these guys ...
MP173 wrote: Trend line analysis for the decade of the 1960's show MILW increasing revenue from $230m to $269. Both carriers increased revenue by 16% over the decade.
Rounding to the nearest decimal, MILW was 17%, GN was 16%. Why did you round Milwaukee Road's 16.96% down to 16%? This is "unconventional" rounding practice.
MichaelSol wrote: MP173 wrote: Trend line analysis for the decade of the 1960's show MILW increasing revenue from $230m to $269. Both carriers increased revenue by 16% over the decade.Rounding to the nearest decimal, MILW was 17%, GN was 16%. Why did you round Milwaukee Road's 16.96% down to 16%? This is "unconventional" rounding practice.
Why?
Human error. Happens to me sometimes, particularly when I am multi tasking and scribbling numbers on scrap paper. Please accept my apology.
Respectfully,
e
Michael:
I will attempt to clean up a few things here and then move on.
1. No agenda. This conversation was based on a single statement made about the mood in the boardroom in 1966. Being curious and unable to travel back to that meeting, I did what I could do with limited time and resources and that was to pull the 1972 Moody's off of the shelf. No doubt if you dont have that year, you have a similar issue. The financials for 1966 indicate it was a good year, not only for GN, but also NP, Q, and MILW. It was "good" when compared to the previous years in the decade. Why the comment regarding the mood of the boardroom? I kept looking at the financials. One cannot, if assessing the "mood of the boardroom" look beyond 1966. It is the future, which is uncertain. What I didnt know, and now finally realize is the ICC had rejected the Northern Lines merger in 1966. Ding, ding, ding, ding, ding. I can now connect the dots. I now understand the "mood". Thank you for disclosing that information now. Shame on me for not reading the historical information to understand the importance of the year and the timing.
2. One of my many interests in addition to railroads is financial analysis of companies. Hence, the stack of Moody's on my book shelf. I understand to a certain degree "extraordinary items" but only to a certain degree. I think it is an often misused accounting function, used to smooth out earnings (take a look at GE during the Welsh era). But in the GN case I can see the use of the items. How on earth would I have known about the heavy snows in 1969 based on reading the finanicals and how those conditions affected the results of MILW? I wouldnt as that event is not considered extraordinary. No spinning here, no agenda. Really.
3. Regarding 1967...I see a jump in OR's for GN and MILW that is statistically significant. Moreover, those OR's then stayed at that same level over the next three years. Why do I stop at 1969 you ask? Simple...the BN merger occured in 1970, thus the GN OR's end in 1969. That's it. Really. I do not care to breakdown (at this time) the OR of BN and compare to the four systems which made up the merger. There were other factors at play after the merger, which I dont know about and dont have the time to research.
Let me rephrase the question, and please give me an honest opinion. It appears that MILW's freight OR was very steady during the period between 1962 and 1966, ranging between 73.5 and 76.9. Trend analysis shows that to be a fairly tight grouping, with the exception of 1966 when it rose by 270 basis points (2.7%). In 1967 it jumped to 81.3%. Thus, between 1965 and 1967 the MILW freight OR jumped by 7.1% (I cannot resist the temptation to point out that GN's freight OR jumped 7.1% from 1966 to 1967...but that is getting off the subject here of MILW). The freight OR for MILW then stayed at the 80-81% range for the rest of the decade, despite what you term dramatic increases in revenue on the PCE line.
Based on your intimate knowledge of the MILW at the time, your understanding of the industry, and your historical views of the industry, economy, and political scenes, can you explain the sudden change in the long term trend? Do you not see that trend spiked at that time?
I understand the railroad industry was facing many challenges in the late 1960's. Passenger losses, full crews, regulation, redundant lines, etc. but I still maintain, and please correct me if I am wrong, that a shift for the worse occured in 1966/1967 timeframe.
That's all. Answer that and I will go away (for now).
Still respectfully submitted,
MichaelSol wrote: gabe wrote: MichaelSol wrote: Wow, you really have to hand it to the Great Northern. To build a line so close the the Milwaukee Road line, yet the snow only affects the Milwaukee line and not the Great Northern. That is vision. GabeEspecially all those GN lines in Iowa and Illinois.
gabe wrote: MichaelSol wrote: Wow, you really have to hand it to the Great Northern. To build a line so close the the Milwaukee Road line, yet the snow only affects the Milwaukee line and not the Great Northern. That is vision. Gabe
MichaelSol wrote:
Especially all those GN lines in Iowa and Illinois.
As opposed to all of those MILW lines in Iowa, Missouri, and Indiana?Gabe
MP173 wrote: Hence, your use of 1966 thru 1968 data will of course indicate that GN lost ground. They did! But by 1969 they had clearly gained considerable revenues. Further, their net income in 1969 was $10.5 million. This was AFTER a $12.8 million extraordinary charge (merger related). Take that away and their net would have been around $23m. MILW in 1969 had a LOSS of $11.5m.
My original proposition was to suggest how things looked at the time these decisions were being made. This was the time frame 1964-1968 in a series of proposals, negotiations and ICC decisions. Any manager would be looking at both long term trends and recent activity. MILW's long term trends were moving in a positive direction. GN's were moving in a negative direction. Those are mathematical facts. And during the specific time frame, MILW tripled the revenue gains of the GN.
That is the period during which important decisions were being made, and they were being made in the context of those salient facts which were 1) negative long term trends, 2) deteriorating performance of the GN, 3) strong revenue growth of the MILW during the time frame, 4) the fact that the Northern Lines merger petition was rejected April 27, 1966.
The results for 1969 became available in March, 1970. The Burlington Northern merger was consummated. No one was looking at 1969 as a basis for any of the thinking and decision making process.
My original premise was to frame how things might have actually looked to the managers of the respective companies during a key time frame when decisions were being made and upon which decisions would be made.
gabe wrote: MichaelSol wrote: gabe wrote: MichaelSol wrote: Wow, you really have to hand it to the Great Northern. To build a line so close the the Milwaukee Road line, yet the snow only affects the Milwaukee line and not the Great Northern. That is vision. GabeEspecially all those GN lines in Iowa and Illinois. As opposed to all of those MILW lines in Iowa, Missouri, and Indiana?Gabe
Gabe, these remarks are getting strange. MILW had more mileage in Iowa than it had in any other state, 1,775 miles. And when they got snow there, they really got snow.
What's your point?
MP173 wrote: ...but that is getting off the subject here of MILW). The freight OR for MILW then stayed at the 80-81% range for the rest of the decade, despite what you term dramatic increases in revenue on the PCE line.
...but that is getting off the subject here of MILW). The freight OR for MILW then stayed at the 80-81% range for the rest of the decade, despite what you term dramatic increases in revenue on the PCE line.
I have detailed, on other threads, increases in revenues on the PCE 1970-1977. Let me know where I have termed or otherwise offered that there were "dramatic" increases prior to 1970 on the PCE so that I can go and see what I said about it. If I said it, I don't recall the comment.
MP173 wrote: Further, freight revenues were at an all time record of $251 million with the freight operating ratio of 67.9%. Ton miles were over 19billion, the highest of the decade. Net income was $36.5 million and they covered their fixed expenses a healthy (for railroads) 6.55 times before federal taxes. Hardly an outlook in 1966 for bankruptcy. ...MILW had freight revenues of $220 million, OR of 73.5% and net income of $8million. Ton miles were 16.7billion.
Further, freight revenues were at an all time record of $251 million with the freight operating ratio of 67.9%. Ton miles were over 19billion, the highest of the decade. Net income was $36.5 million and they covered their fixed expenses a healthy (for railroads) 6.55 times before federal taxes. Hardly an outlook in 1966 for bankruptcy.
...
An interesting note. In 1965, for every ton of freight carried, the Milwaukee carried it 372 miles while GN carried its average ton 375 miles. MILW did considerably better than a typical Midwestern road, CNW, with a line haul of 302 miles. GN did considerably worse than a typical transcontinental, UP, with a 599 mile average line haul.
Using your ton-miles figures, which are admittedly broadly stated, GN earned 13.2 cents per ton mile, while Milwaukee earned 13.2 cents per ton mile. There have been unsubstantiated allegations about the quality of Milwaukee's revenue. It was apparently very nearly identical to that of the GN in the year in question.
Another interesting note. GN lists its mainlines as being 4,261 miles. Milwaukee's were at 2,934 miles. In the year in question, the GN's mainlines carried $58,906 per mile. Milwaukee's carried $74,982 per mile. In terms of maintenance dollars required, these numbers present an interesting situation in the context of Milwaukee's much greater use of heavier rail and GN's lower investment in maintenance per mainline mile.
My initial point was that it seemed a bit unfounded to assert that the Milwaukee Road had a particularly bad year in comparision to the Great Northern due to excessive snow, when the Milwaukee Road was largely located in the same geographic area as the Great Northern.
You countered my point by pointing out that the Great Northern had significant lines in Illinois and Iowa--appearing to suggest that these lines in other states that were not hit by the snow quite as hard explained the difference.
The most recent point above was to note that the Milwaukee Road--as you recognize above--had significant lines in Iowa and also had lines in states that were not affected by the snow--Indiana and Missouri.
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