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.
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.
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?
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.
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
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.
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
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.
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?
EHH is a railroad gogalo....If he loved the railroad industry he would not have pimped himself out to Pershing Capital
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
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.
...
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.
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.
-Don (Random stuff, mostly about trains - what else? http://blerfblog.blogspot.com/)
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!
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.
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.
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!
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.
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!
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 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.
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.
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...
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
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.
MiningmanCanadian/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.
I like the one with The Boss.
A crew that was long on the Clintons crapped-out and are rattling the market to get out from under a sunk position.
http://www.doublehfarm.org/contact.php
http://eqliving.com/hunters-jumpers-no-imgs/
http://www.phelpssports.com/printarticle.php?id=8512
Holy smoke, everyone's acting like "Vlad the Impaler" Putin's coming with a division of Russian paratroopers.
It is gospel that EHH is taking over CSX, or is this just wild speculation?
BaltACD blue streak 1 BALT: Who is your fortune teller ? You seem to have been told the perfect time to retire ? No fortune teller. Seeing individuals that I had previously respected advance to high positions of power and making decisions and policy that in my humble opinion were improper and wrong and they thus lost my respect. If you can't respect the leaders you might as well distance yourself from the organization if you can. Note: 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..."
blue streak 1 BALT: Who is your fortune teller ? You seem to have been told the perfect time to retire ?
No fortune teller. Seeing individuals that I had previously respected advance to high positions of power and making decisions and policy that in my humble opinion were improper and wrong and they thus lost my respect. If you can't respect the leaders you might as well distance yourself from the organization if you can.
Note: 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..."
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.
CP-CSX ...not going to happen for all the same reasons as CP-NS.
Cripes can't these guys retire with their hundreds of millions and lay on a beach somewhere and/or build a wicked model railroad.
Need a legacy with all that loot?....build the T1 and might as well fund a J3a and a Niagara just for the fun of it. Not a lot for these guys.
In Pres. Trump's inaguration speech, he stated the theme for his presidency would be "America first". He also indicated he did not like American companies moving overseas or being taken over. He has previously said Canada would also be the subject of NAFTA renegotiation. I just don't see the incoming administration being friendly to a CP-CSX merger.
BaltACD If you can't respect the leaders you might as well distance yourself from the organization if you can.
If you can't respect the leaders you might as well distance yourself from the organization if you can.
Amen to that
Greetings from Alberta
-an Articulate Malcontent
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