What is the difference between Frieght Railroad's Cash Capital Spending and their budgeted Capital Commitement

Question

What is the difference between Frieght Railroad's Cash Capital Spending and their budgeted Capital Commitements? I assume the difference it has something to do with either leases or expeditures not completed in calendar year?

Answer 1

Many items on the budget differ from actual cash outlay, primarily though they are relative to the unforeseeable.

Derailments are a perfect example.  Railroads are self-insured against derailments and budget for the eventual.  But, even here, there are unknowns.

The budget certainly contains money for clean up, but any lawsuits that follow have unknown cost, or, in the case of something major, such as happened four weeks ago north of me, where over 3,000 feet of railroad was buried under a land slide.  Besides the cost of the clean-up, all the traffic had to be detoured over other railroads.  Mucho $$$ for this one.  Not all the way open yet.

What ever can be deferred to another quarter or another fiscal year is, wherever possible.  It some instances, shareholders can stay happy for at least another quarter!

The railroad industry is quite fluid and not all expectations are met.  On the other hand, some elements perform better than expected and these windfalls wind up manifesting themselves as dividends..

Not an economist, but I hope this helps...

Answer 2

I am sure this is a perfectly normal easy to understand question for an accountant or a business major but for a uneddukated ole engineer it is a bit above me.

I can tell you the difference between what they should spend on maintenance and what they acutally spend seems considerable, and it sure dont go to bonuses for the employees LOL.