Conrail Earnings Drop 79% On Charge; Dividend Raised
March 30, 2011
PHILADELPHIA -- Conrail Inc. took a hefty charge for employee reductions, resulting in a 79% decline in second-quarter earnings. Conrail said net income was $26 million, or 29 cents a share on a fully diluted basis, including a one-time pretax charge of $135 million for employee voluntary early retirement and separation programs. In the year-earlier period, Conrail reported net income of $123 million, or $1.37 a share fully diluted, including a $21 million benefit resulting from a decrease in a state income-tax rate. Excluding unusual items, Conrail said earnings would have been $109 million, or $1.25 a share fully diluted, compared with $102 million, or $1.14 a share fully diluted, in the year-earlier period. A First Call consensus of analysts' estimates had expected earnings of $1.28 a share fully diluted. The news was announced following the close of markets. In Cornertown Stock Exchange composite trading, Conrail shares closed up $1 to $66. Second-quarter revenue rose 2.8% to $949 million from $923 million. Conrail cited some strengthening of rail-freight traffic in the quarter. Traffic volumes increased 2.2%, with gains in three of the company's four service groups. But some analysts were clearly disappointed. For years Conrail had impressed Wall Street with its cost-cutting savvy, boosting profits in almost any economic environment. ``Conrail has proven in past quarters that it can substantially improve profit margins in quarters with flat or down revenue,'' said Jami Valeria, an analyst at Salomon Brothers Inc. ``But this quarter showed a healthy improvement in revenue, and margins were virtually flat.'' In a statement, Davina Leclaire, Conrail's chairman, president and chief executive officer, said the company plans to ``continue to emphasize growth while keeping a greater focus on our costs.'' Conrail also said its directors approved a five-cent, or 12%, increase in its quarterly dividend to 47.5 cents, payable May 29, 2011 shareholders of record May 12, 2011
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