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Posted on Fri, Oct. 08, 2004 |
Burlington Northern shares rise despite charge against earnings
Associated Press
FORT WORTH , Texas - Shares of freight railroad Burlington Northern Santa Fe Corp. rose Friday after the company announced a $288 million charge against earnings for environmental issues but said third-quarter profit would be better than previously expected.
The company said late Thursday that it would earn 75 cents to 77 cents per share in the July-September quarter, better than the 70 cents per share that had been forecast by analysts surveyed by Thomson First Call.
Those estimates, however, do not include the $288 million after-tax charge that the railroad said it had taken to reflect a change in the way it estimates liability to claims over asbestos-related illness and environmental contamination.
The charge is equal to 76 cents per share - offsetting the operating profit that the company expects to report when it releases third-quarter results on Oct. 26.
Shares of Burlington Northern rose 58 cents or 1.5 percent, to $39.74, in morning trading on the New York Stock Exchange.
Company officials said the better outlook for the third quarter was due to growing revenue and cost controls. They added that a decline in operating expenses would lift fourth-quarter earnings by 2 cents per share.
In changing the way it estimates liabilities for asbestos and environmental problems, Fort Worth-based Burlington Northern is following the lead of rivals such as Union Pacific and CSX Corp., which made the change in 2002 and 2003.
In a conference call Friday with investors, chief financial officer Thomas N. Hund said the company had enough data about claims to make a more confident estimate of future costs.
"Five years ago or so we saw the number of claims ramp up and sort of held at more constant levels," Hund said. "Our payment per claimant has not jumped dramatically."
Hund said the charge should cover all future asbestos claims but would not cover costs of cleaning up new environmental contamination or pay claims of owners who charge that their property was tainted by pollution from the railroad.
Federal and state laws impose liability on industrial operators, such as railroads, for contamination. Burlington Northern is potentially liable for cleanup costs at about 20 Superfund sites, according to documents the company filed with the Securities and Exchange Commission.
The company said most of its environmental problems occurred decades ago.
The company's Burlington Northern and Santa Fe Railway Co. unit operates 32,500 miles of track in 28 states and two Canadian provinces.
ON THE NET
Company Web site: http://www.bnsf.com |
Asbestos worries, measures are aired
Folsom residents meet with officials and developer.
By Jamie Francisco -- Bee Staff Writer
Published 2:15 am PDT Thursday, October 7, 2004
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The vision of a balcony overlooking the foothills led Gerald Marks to purchase a new home in Folsom's Empire Ranch area.
Marks, 71, and his wife were looking forward to spending their retirement in the larger home.
 The discovery of naturally occurring asbestos in the city's eastern area has the couple reconsidering their decision, even as builders add a roof to the 2,900-square-foot home they are scheduled to move into by January.
"We're concerned," Marks said, adding that his wife is worried about the health risks for their grandchildren. "She's been leaning towards canceling the deal right now."
Marks was among about 50 people who attended a community meeting Tuesday about naturally occurring asbestos in Folsom.
Representatives from the city of Folsom, the California Geological Survey, the Sacramento Air Quality Management District, the Sacramento County Health and Human Services Department, and developer Elliott Homes were on hand to answer questions about asbestos and the potential health risks posed by exposure to the fibrous material.
In July, soil samples revealed naturally occurring asbestos at the Lago Vista High School site in eastern Folsom, near El Dorado Hills.
State geologists are expected to provide an updated map to Folsom city officials next week detailing areas that could contain asbestos, said Assistant City Manager Will Kempton. Much of eastern Folsom, including the Empire Ranch development, lies within the Copper Hill volcanic area, which has a low to moderate potential for naturally occurring asbestos.
As a precaution, the city and Elliott Homes, a major developer of housing in the Empire Ranch area, have adopted precautionary measures, taking action as if asbestos blanketed eastern Folsom.
"Given the fact that we don't precisely know where the naturally occurring asbestos exists, we're taking a broader position to applying the mitigation requirements to all of Folsom," Kempton said in an interview Wednesday. "Until we know for certain, we want to be on the safer side and apply mitigation measures everywhere."
Measures include heavily watering down construction areas, cleaning off vehicle tires to prevent dust from leaving the site and applying hydroseed coating to sites. The measures will add about $200 to the coast of each lot, said Russ Davis, a vice president for Elliott Homes.
Geological consultants hired by Elliott Homes took about 90 soil samples from throughout the Empire Ranch area during the summer and found two to be above recommended state standards for asbestos. Those were discovered in a rock-crushing area, which has since been dismantled to avoid health risks, Davis said.
The discovery of asbestos surprised geologists, school officials and the developer. But Elliott Homes has opted for the mitigation measures instead of relying on testing to show building sites are asbestos-free, Davis said.
"That's a little bit like looking for a needle in the haystack because this stuff is so random and scattered, there's no prediction of where you can find it unless you have a clear fault or vein," Davis said.
Still, at the community meeting, many people raised concerns about asbestos posing a health threat, especially to children.
"I can look out my window any day and see dust kicking up from any area," said Tim Hansen, a Folsom resident. "As a person living out there, I came to find out if my children are in danger or not."
Naturally occurring asbestos does not pose a health threat if left undisturbed, but when it is released into the air through grading and construction, it can raise the risk of cancer.
A team of 10 to 12 city building inspectors monitors construction sites to check that contractors are following asbestos mitigation measures, said Michael Johnson, the city's community development director. Inspectors from the Sacramento Air Quality Management District also oversee the construction areas. Elliott Homes building superintendents have been directed to take the measures seriously and have reprimanded a subcontractor who did not follow the directions, Davis said.
Audience members' questions were testy at times, with some accusing Elliott Homes of inadequately informing homeowners about asbestos.
"We've got nothing to hide here," Davis said Tuesday. "If you want a refund, you're welcome to that."
He said he was aware of only one buyer backing out of an Empire Ranch home because of the risk of asbestos.
City officials plan to post the California Geological Survey map detailing potential asbestos sites in Folsom by early next week.
Elliott Homes is waiting for the air management district to approve its asbestos mitigation plan.
As for Gerald Marks, he's waiting to learn more before he and his wife decide whether to back out, but he's concerned about added landscaping costs for asbestos mitigation.
"We've really been planning on putting in a pool," he said. "Now, it looks to me, any digging up there is going to take an act of Congress."
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