2016. Canada/US Trade 2 way totalled 575 Billion...it was 9.1 billion in our favour. Thats less than 2% which I think is peanuts ( not literally peanuts). Some months you beat us hands down...it appears to be the case every May. Probably agricultural products as we are still recovering from winter. In any case if you guys ever "discover" our way better chocolate bars then the deficient would soar, so beware. Also don't try to cross the border into the US with Kindereggs...sheesh.
samfp1943Note: Rule#1 [The Peter Principle]:"...When you’re great at something, you might get rewarded with a promotion … into something you’re terrible at. A typical example, Peter said, is if you’re a great rule-follower who suddenly is placed in charge of making rules and decisions. You may well freeze up in your new role or gum up the productivity of everyone else..."
Sam, There are also lateral promotions.AKA "Get that guy out of the way before he can do any more damage". "Vice president in charge of making keys" comes to mind. I've seen that happen. Thakfully, never to me.
Norm
Norm48327Sam, There are also lateral promotions.
Peter called this the "lateral arabesque." It sounds like a promotion, but it's not.
That's not to be confused with the "percussive sublimation," or getting kicked upstairs...
Larry Resident Microferroequinologist (at least at my house) Everyone goes home; Safety begins with you My Opinion. Standard Disclaimers Apply. No Expiration Date Come ride the rails with me! There's one thing about humility - the moment you think you've got it, you've lost it...
More furloughs coming your way courtesy of this news. Bad enough that trains are already waiting on crews while close to 175 are furloughed in my neck of the woods.
Miningman I don't think President Trump minds foreign ownership or partnerships in the US...as in Toyota is welcome as long as they provide investment and employment for Americans. It is when they make cars in Mexico to sell in the US. That kind of thing. ...
I don't think President Trump minds foreign ownership or partnerships in the US...as in Toyota is welcome as long as they provide investment and employment for Americans. It is when they make cars in Mexico to sell in the US. That kind of thing.
...
I can only go by what he said most recently. A CP-CSX merger would be like the Burger King-Tim Horton deal, which placed the corporate offices to Canada to avoid taxes. Pres. Trump specifically said he does not like Americian companies moving HQ to foriegn countries.
Midland Mike- Trump will lower corporate taxes to one of the worlds lowest and that would put an end to corporate offices moving out of country to avoid excessive taxation. Its a good point but really a non starter. Now if you want to move your corporate offices up here in order to get better chocolate bars then what can you do? ...Or to be near a REAL Tim Hortons and not those "not the same at all" ones in the America. On the other hand, just the mention of hockey or flash a doughnut ( donut) and we turn into zombies, so maybe thats why.
Wanswheel- Thanks for the pic's of Hunter Harrison's "Double H Farm" ...now if I, and I am also assuming all of us, owned anything like that with it's idyllic setting and beautiful interiors that we see, plus a few hundred million in the bank, I do not think any of us would be stupid enough to want to drag our butts into some job, regardless of what it is, meetings, endless presentations and people conflicts and so on....no thanks, I'm staying on the farm with my honey and my horses. Period.
Miningman, it's the love of POWER that keeps these dudes with scads of money out in the corporate rat race. Regular guys like you and I would know when to quit when we were ahead and then go off to enjoy the fruits of our labors.
And I have to second your suggestion in an earlier post. If these rich ex-railroad execs want to keep doing something "railroady" then why don't they finance the replication of a T1, or a J3 Hudson, or bail out a rail museum that needs help? That's what I'd do!
PS: I wish we'd get a Tim Horton's down here! We visited a Tim's in Saint Johns NFLD back in the 90's and loved the stuff, me the doughnuts and Lady Firestorm the tea biscuits! Burger King merging with Tim's sure didn't bring 'em here!
Pres. Trump did not elaborate why he did not want companies moving out of the country, but I suspect it is also the loss of jobs and corporate stature. Does this mean that in a CP-CSX merger they could locate in the US?
I always stop at Tim Horton's on my trips thru Canada. I was ecstatic when one located in my small Michigan town a few months ago.
If Pershing Square takes a large enough position in CSX to get on the CSX Board of Directors, we will most likely see a replay of the CP situation with Michael Ward being the odd person out.
The reason I say that is because Pershing/EHH can come in with their track record of lowering the Operating Ratio into the mid 50s at CP, and also doing so at CN prior to that.
CN is a railroad that is larger than CSX in terms of revenues, at $12.6 billion in 2015 with a 58.2% operating ratio that dropped $3.5 billion or 27.8% of revenue to the bottom line (CN reports 2016 information on 01/24/17).
For 2016 CSX reported revenue of $11.1 billion with a 69.4% operating ratio that dropped $1.7 billion or 15.3% of revenue to the bottom line.
Pershing/EHH will come in saying they can get CSX to the mid-50s for an Operating Ratio by 2020 or something like that. If you are a Board Member for CSX and you do the math to calculate that 10 points off the operating ratio will generate another $1.1 billion in net profit - $2.8 billion in profit on the same revenue that is currently generating $1.7 billion in profit - what are you going to decide?
Please note that I am not cheerleading for or against one particular outcome. I am just pointing out the math if the operating ratio is lowered 10 basis points quickly is going to be a very strong argument to the other CSX Board Members.
As to headquarters location for a potential follow-on combination, if President Trump is successful at getting the corporate income tax rate down to 15%, the location of corporate headquarters may end up being a moot point.
It will be interesting to see how all this rolls out, for sure.
kgbw49If Pershing Square takes a large enough position in CSX to get on the CSX Board of Directors, we will most likely see a replay of the CP situation with Michael Ward being the odd person out. The reason I say that is because Pershing/EHH can come in with their track record of lowering the Operating Ratio into the mid 50s at CP, and also doing so at CN prior to that. CN is a railroad that is larger than CSX in terms of revenues, at $12.6 billion in 2015 with a 58.2% operating ratio that dropped $3.5 billion or 27.8% of revenue to the bottom line (CN reports 2016 information on 01/24/17). For 2016 CSX reported revenue of $11.1 billion with a 69.4% operating ratio that dropped $1.7 billion or 15.3% of revenue to the bottom line. Pershing/EHH will come in saying they can get CSX to the mid-50s for an Operating Ratio by 2020 or something like that. If you are a Board Member for CSX and you do the math to calculate that 10 points off the operating ratio will generate another $1.1 billion in net profit - $2.8 billion in profit on the same revenue that is currently generating $1.7 billion in profit - what are you going to decide? Please note that I am not cheerleading for or against one particular outcome. I am just pointing out the math if the operating ratio is lowered 10 basis points quickly is going to be a very strong argument to the other CSX Board Members. As to headquarters location for a potential follow-on combination, if President Trump is successful at getting the corporate income tax rate down to 15%, the location of corporate headquarters may end up being a moot point. It will be interesting to see how all this rolls out, for sure.
Pershing Square is William Ackman - he is NOT involved in this lastest escapade. The Childrens Fund got on the board and then choked itself off the board. I suspect CSX has devised more ingenious defenses since then. Time and money will tell.
Never too old to have a happy childhood!
BaltACD oltmannd EHH has ditched claim to C$118M, so he's not in this for the money. How about CSX gives him the Service Design job. Might be a AVP level job at CSX (just a director level job at NS). It's where he staked his claim. If he's after validation, he'd take it. But, if it's just an ego trip.... When you are 72 - everything other than a Wal-Mart greeter is a ego trip.
oltmannd EHH has ditched claim to C$118M, so he's not in this for the money. How about CSX gives him the Service Design job. Might be a AVP level job at CSX (just a director level job at NS). It's where he staked his claim. If he's after validation, he'd take it. But, if it's just an ego trip....
If he's after validation, he'd take it.
But, if it's just an ego trip....
When you are 72 - everything other than a Wal-Mart greeter is a ego trip.
Pretty much! Thanks for the laugh!
-Don (Random stuff, mostly about trains - what else? http://blerfblog.blogspot.com/)
schlimm Miningman Canadian/US trade is enormous and one of the most balanced, if not the most balanced trade $'s in the world, with each selling and importing a fairly equal amount. There are problems in NAFTA as far as Canada/US goes that need to be addressed for sure but its more along the lines of tweaking. Mexico is a completly different story however. Imbalances are huge in favour of Mexico. Hardly. The trade imbalance with Canada is ~$15 bil.; with Mexico ~$63 bil.. Larger, yes, but hardly the misimpression you gave of "balanced."
Miningman Canadian/US trade is enormous and one of the most balanced, if not the most balanced trade $'s in the world, with each selling and importing a fairly equal amount. There are problems in NAFTA as far as Canada/US goes that need to be addressed for sure but its more along the lines of tweaking. Mexico is a completly different story however. Imbalances are huge in favour of Mexico.
Hardly. The trade imbalance with Canada is ~$15 bil.; with Mexico ~$63 bil.. Larger, yes, but hardly the misimpression you gave of "balanced."
The US economy is $17 Trillion. $100B doesn't even make it to chump change.
kgbw49 ... As to headquarters location for a potential follow-on combination, if President Trump is successful at getting the corporate income tax rate down to 15%, the location of corporate headquarters may end up being a moot point. It will be interesting to see how all this rolls out, for sure.
The lower corporate tax rate is dependent on Congress curtailing corporate tax loopholes. That is as unlikely as a CP-CSX merger.
oltmanndThe US economy is $17 Trillion. $100B doesn't even make it to chump change.
Actually the Economy is approx $18.6 Trillion in December 2016.
http://www.bankrate.com/rates/economic-indicators/reports.aspx
EHH is a railroad gogalo....If he loved the railroad industry he would not have pimped himself out to Pershing Capital
Just to jerk this Thread back in the general direction of its title! There is an article in the Newswire of this date. "CP agreement: Hunter's open options include CSX, NS, and KCS" "Non-compete clause blocks CEO from heading to CN, UP, or BNSF" By Bill Stephens | January 23, 2017
[The article states in part] FTA:"...CALGARY, Alberta – Former Canadian Pacific CEO E. Hunter Harrison is barred from heading to Canadian National, BNSF Railway, and Union Pacific, CP disclosed in a regulatory filing today. That leaves open the possibility that Harrison could seek management opportunities at CSX Transportation — as reported — or Norfolk Southern or Kansas City Southern, the other Class I railroads in North America. CP filed a copy of Harrison’s separation agreement with the U.S. Securities and Exchange Commission late Monday afternoon. Under the agreement, CP agreed to a limited waiver of Harrison’s non-competition obligations, which would allow him to work for another Class I. CP also agreed to a limited waiver of Harrison’s non-solicitation obligations, meaning Harrison can’t seek to hire anyone above the level of manager at CP. The document makes an exception for CP’s chief of staff. The agreement does not name him, but Mark Wallace is CP’s vice president for corporate affairs and chief of staff. By resigning, Harrison forfeits $118 million (Canadian) in benefits and awards. But he does walk away from CP with a cash payment of $4.8 million (U.S.) and agrees to sell his remaining shares in the company by May 31..."
Seems as if this article might be a 'fair warning' and a notice to some in the Class1 business to be on the lookout, there is another hunter on the prowl (?).
A $118million Canadian in benefits, and awards seems like a heck of a lot to 'walk away from'. But maybe, $4.8 million US, is just 'traveling' money?
Pershing Square made out very well on its investment in CP, looking just at the stock price at acquisition and the stock price at sale.
I don't have the actual numbers at hand but the stock price appreciated considerably. (CP closed at $152.27 on 01/23/17.)
At latest exchange rates of $1.00 US being worth $1.33 Canadian, Mr. Harrison forefeited about $89 million leaving CP.
That would lead one to think that he must have an opportunity worth several times that with the investment group that is recruiting him.
IIRC doesn't NS have a max age of 65 for their excutives peroid. So he can not go to the NS based on that policy. KCS is doing good with their current leadership and they will not want his advice sorry Haverty has carved out his niche and will not want to hear from him. CSX has been the underperformer for so long that the BOD might be willing to let the so called magic man of CN take control to see if he can fix that mess.
Shadow the Cats owner IIRC doesn't NS have a max age of 65 for their excutives peroid. So he can not go to the NS based on that policy. KCS is doing good with their current leadership and they will not want his advice sorry Haverty has carved out his niche and will not want to hear from him. CSX has been the underperformer for so long that the BOD might be willing to let the so called magic man of CN take control to see if he can fix that mess.
Under the ADEA, a mandatory retirement age would likely be illegal, with few exceptions.
C&NW, CA&E, MILW, CGW and IC fan
MidlandMike Pres. Trump did not elaborate why he did not want companies moving out of the country, but I suspect it is also the loss of jobs and corporate stature. Does this mean that in a CP-CSX merger they could locate in the US?
The combined railroad could do that but the Canadian Government might not approve the merger for the same reasons that the new U.S administration might oppose it if the merged company is headquartered outside the country...
MidlandMike I always stop at Tim Horton's on my trips thru Canada. I was ecstatic when one located in my small Michigan town a few months ago.
O.T but Tim Horton's bought a smaller donut shop chain here in the Rhode Island back in the late 90's.They had a number of locations but never could compete with the Mighty Dunkin' Donuts who have stores seemingly every mile or so around here. Horton's was gone from the local market less than 5 years later.
It's worth noting that Krispy Kreme suffered the same fate when they tried to break into the Southern New England Market..
"I Often Dream of Trains"-From the Album of the Same Name by Robyn Hitchcock
Some folks here in the South would kill me for saying this, but Krispy Kreme flopped up North because, well, they're not that good, in my opinion anyway, or their non-availability in certain areas gave them a reputation they didn't deserve.
Kind of like Coors beer east of the Mississippi. When it finally got to the East Coast the reaction was, "Well, it's good, but it isn't any better than other brands."
Back to Krispy Kreme. The Northeast is the "Land O' Bakeries," so you better bring more than your "A" game if you're going to compete with the locals.
NS reported their full year 2016 financials today, so we have full year financial information from 6 of the 7 Class I railroads. BNSF has not released when their 2016 financial performance summary will be available.
But here is some select financial performance information for 2016 results:
CSX
Operating Ratio-69.4
Net Income-$1.714 Billion
Net Income % of Revenues-15.48%
NS
Operating Ratio-68.9
Net Income-$1.668 Billion
Net Income % of Revenues-16.87%
KCS
Operating Ratio-64.9
Net Income-$0.480 Billion
Net Income % of Revenues-20.57%
UP
Operating Ratio-63.5
Net Income-$4.223 Billion
Net Income % of Revenues-21.22%
CP
Operating Ratio-58.6
Net Income-$1.599 Billion
Net Income % of Revenues-25.66%
CN
Operating Ratio-55.9
Net Income-$3.640 Billion
Net Income % of Revenues-30.24%
If I am a CSX Board Member and I see EHH's two prior railroads bringing 66% (CP) and 100% (CN) more of their revenue to the bottom line, it is going to be awfully hard to say "no" to a proposal to do the same thing for the company whose shareholders I represent.
Also one note - the Net Income % of Revenues is also affected by tax rates, so if there is a drop in the future corporate tax rate in the US, the Net Income % of Revenues will also increase because of US carriers paying less in taxes in future years. But of course, the big factor in increasing the percent of revenue that falls to the bottom line is the lower operating ratio.
That is irrespective of the top line revenue amount - it is possible to have more revenue with a higher operating ratio and end up with the same net income as having less revenue with a lower operating ratio.
And stating the obvious, what is really wanted is more revenue and a lower operating ratio, and that is the case in any private enterprise, not just railroads.
Firelock76Some folks here in the South would kill me for saying this, but Krispy Kreme flopped up North because, well, they're not that good, in my opinion anyway, or their non-availability in certain areas gave them a reputation they didn't deserve.
Apparently, one attractive thing about Krispy Kreme was living near one of their stores. The time to be there was just as they were turning out a new batch. My daughter went to college in Lynchburg, VA, and that was always a popular evening activity...
I kinda like 'em, but would prefer a little more "Krispy" and a little less "Kreme." They could be messy, as the glaze often was gooey.
They made other types of donuts, but it was the glazed donut that made its way into our area as a fundraiser - we had people who would take orders and travel great distances to pick up boxes of a dozen...
TH isn't bad, but I got some in Toronto a while back whilst passing through, and felt they had an odd taste.
Could be local taste, though. Many soft drink companies had local bottling plants which used, of course, local water. So a Coke in one place might well taste different than a Coke somewhere else.
Firelock76 Some folks here in the South would kill me for saying this, but Krispy Kreme flopped up North because, well, they're not that good, in my opinion anyway, or their non-availability in certain areas gave them a reputation they didn't deserve. Kind of like Coors beer east of the Mississippi. When it finally got to the East Coast the reaction was, "Well, it's good, but it isn't any better than other brands." Back to Krispy Kreme. The Northeast is the "Land O' Bakeries," so you better bring more than your "A" game if you're going to compete with the locals.
Again I'm O.T but; Many folks I know liked the KK donuts but it really is coffee/coffee based beverages that drive the donut shop business around here and no one seemed to impressed by the chain's cup o' joe..Nowadays Dunkin' Donuts TV advertising in this market is almost exclusively about their beverages and breakfast sandwiches with very little mention of donuts/pastries, etc.. Not at all like back "in the day" when their most memorable commercial was the one featuring a put-upon shop manager getting up before dawn and muttering "time to make the donuts"...
carnej1Again I'm O.T but; Many folks I know liked the KK donuts but it really is coffee/coffee based beverages that drive the donut shop business...
Bringing coffee back on topic - arrived at the Utica yard one day to run one of our trains. The gate was locked (with a switch lock), so I unlocked it, but my way was blocked by the CSX locomotives making a pickup. So I sat, as did the locos. And sat, and sat...
After a while, here comes a fellow with a DD tray containing cups and who-knows-what (that crew usually comes on duty at midnight - they were probably hungry).
It was the conductor, who had walked a pretty fair distance to get to DD the "back way" because the gate was locked. DD isn't all that far if you can go direct.
In reality, he had a key, but didn't know it...
kgbw49 At latest exchange rates of $1.00 US being worth $1.33 Canadian, Mr. Harrison forefeited about $89 million leaving CP.
Of course he didn’t go without carfare and lunch.
Excerpt from The Globe and Mail, Jan. 24
http://www.theglobeandmail.com/report-on-business/hunter-harrison-restricted-by-cp-non-compete-clause/article33713995/
Hunter Harrison, the outspoken railroader credited with rescuing Canadian Pacific Railway Ltd. from the doldrums, is making his early exit from the company with about $52-million, even after giving up $118-million in stock and options to pursue a job at U.S. rival CSX Corp…
The $52-million Mr. Harrison retains includes $36-million in shares owned by him and his wife, based on CP's share price of about $201 on Jan. 24, according to the most recent Canadian regulatory filings. Mr. Harrison is required to sell the shares by May 31.
Additionally, he is allowed to keep and sell a portion of the 650,000 stock options he was given in 2012 when he forfeited his CN pension and holdings to take the CP job. This is worth about $10-million. Finally, he receives $6.3-million for shares granted in 2014.
Not included in that total is his 2016 cash bonus, which is yet to be reported. For 2015, a year in which CP’s share price fell by 21 per cent, his cash bonus was $6-million and his salary was $2.8-million.
As Jackie Gleason was wont to say, "How sweet it is!"
Excerpt from “Activist Investors and Their Implications for Corporate Managers” (2015)
https://www.mantleridge.com/press/
Jeff Greene: Welcome, everybody, to this discussion of the recent transformation of activist investing, both from an investor and a company perspective. I’m Jeff Greene, the Global Transactions Leader for the Life Sciences Sector here at Ernst & Young LLP…
Greene: Okay, let’s turn now to one of our investors. Paul, how do you and your partners at Pershing Square think about this gap [between intrinsic value and market value] that Rick talked about? How large does the gap have to be between your perception of what the company is really worth and where it’s trading for you to make a move?
Paul Hilal: That’s a good question, and it’s something we think about all the time—but there is no simple answer. What I can say is that our strategy—which I describe as “capturing value for our investors by catalyzing value-creating change”—requires a higher expected risk-adjusted return than passive strategies.
There are a number of reasons for this. First, when we embark on a project, we are committed to following through. This can be easy and quick if the incumbent leadership of the company engages with us, takes the time to understand the value of our proposals, and acts decisively in the shareholders’ best interests. If a company chooses not to, activists have three choices: (a) sell the position and move on; (b) repeat the proposal every quarter in the hopes that the leadership eventually does the right thing; or (c) create an opportunity for the shareholders to elect an alternate slate of directors who embrace the activist’s proposals. We always choose path (c), which is often called a “proxy contest.”
Proxy contests can take multiple annual election cycles, consume many years of our team’s time, and they cost tens of millions of dollars. Once the shareholders have installed directors open to an alternate strategy, helping the reconstituted board execute can take years, and it requires many “staff-person-years” of our team’s time.
Longer-term projects have become increasingly the norm for us. In our early years we often pursued value-creating transactions, such as the breakup of non-synergistic businesses. Today a majority of our capital is truly permanent so we increasingly focus on longer-term projects, such as operational transformations. Because of all of the time and costs involved to effect operations-intensive proposals versus transactional proposals, we act only if we see an unusually high expected return from a project—again, much higher than a passive investor would require. We also require a high rate of “return on invested brain damage.”
Greene: Return on invested brain damage—that’s a new metric.
Hilal: That’s a term Bill Ackman coined and that we use internally. It is a measure of cash return on the expected staff-person-years of internal resource investment needed to earn that return. Our team’s time is our scarcest resource.
I also would like to comment on a couple of related topics. First is the misframing of activist engagements as “power struggles” between an activist and the company. Both sides of this framing are off.
First, I don’t think it is quite right to say that the “antagonist” is the activist. Because activists rarely own more than 10% of a company, and because effecting change requires a majority vote, activists have no coercive power at all. All activists can do is highlight opportunities for improvement, and give shareholders an opportunity to vote shareholder-selected directors onto the board. Only broadbased shareholder action can actually effect change. So, on one side of the so called “struggle” is the full shareholder base, not just the activist.
Second, I don’t think it is quite right to say that the “defense” here is “the company.” Often the only parties opposing us are the minority of directors that comprise a board’s leadership, the CEO, and some of the management team. A majority of the other stakeholders—directors not in leadership, many executives, employees, customers, suppliers, unions, etc.—often side with us, and sometimes even reach out through back channels looking to help us effect our proposals. In my opinion, the more correct framing is usually one in which the company’s shareholders (or stakeholders broadly) are opposing an entrenched board leadership and the CEO. The activist is just a catalyst and coordinator of an otherwise unorganized shareholder base expressing its will.
kgbw49 NS reported their full year 2016 financials today, so we have full year financial information from 6 of the 7 Class I railroads. BNSF has not released when their 2016 financial performance summary will be available. But here is some select financial performance information for 2016 results: CSX Operating Ratio-69.4 Net Income-$1.714 Billion Net Income % of Revenues-15.48% NS Operating Ratio-68.9 Net Income-$1.668 Billion Net Income % of Revenues-16.87% KCS Operating Ratio-64.9 Net Income-$0.480 Billion Net Income % of Revenues-20.57% UP Operating Ratio-63.5 Net Income-$4.223 Billion Net Income % of Revenues-21.22% CP Operating Ratio-58.6 Net Income-$1.599 Billion Net Income % of Revenues-25.66% CN Operating Ratio-55.9 Net Income-$3.640 Billion Net Income % of Revenues-30.24% If I am a CSX Board Member and I see EHH's two prior railroads bringing 66% (CP) and 100% (CN) more of their revenue to the bottom line, it is going to be awfully hard to say "no" to a proposal to do the same thing for the company whose shareholders I represent. Also one note - the Net Income % of Revenues is also affected by tax rates, so if there is a drop in the future corporate tax rate in the US, the Net Income % of Revenues will also increase because of US carriers paying less in taxes in future years. But of course, the big factor in increasing the percent of revenue that falls to the bottom line is the lower operating ratio. That is irrespective of the top line revenue amount - it is possible to have more revenue with a higher operating ratio and end up with the same net income as having less revenue with a lower operating ratio. And stating the obvious, what is really wanted is more revenue and a lower operating ratio, and that is the case in any private enterprise, not just railroads.
Part of the reason the EHH managed properties have better ORs is that they are what they are. NS and CSX aren't CP or CN and can't be turned into those properties.
EHH has an operating philosophy that's pretty much been adopted by other roads. Kudos to him for being an industry leader, but he has no new "magic dust" to spread around.
NS has already delivered nearly all CP was promising (stock price) a year earlier than CP was promising.
Oltmannd, I understand and hear you. My point in posting those numbers, which I probably should have expounded on a bit more, was that institutional investors and Board of Directors who are likely numbers driven and not necessarily experts in railroad operations will look at the numbers and hear EHH and Mantle Ridge saying "We CAN turn CSX into CN or CP" and think to themselves "Sounds good to me."
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