"For the fifth consecutive year, BNSF achieved all-time record annual revenues and was able to generate record cash flows despite a soft economy. In the fourth quarter, the Company was able to demonstrate earnings per share growth despite significant fuel headwind and continued softness in the Industrial Products and Consumer Products businesses. Looking forward, we continue to be optimistic about the long-term prospects for BNSF," said Matthew K. Rose, BNSF Chairman, President and Chief Executive Officer.
Fourth-quarter 2007 freight revenues increased $352 million, or nine percent, to an all-time quarterly record of $4.12 billion compared with $3.77 billion in the prior year. The 9-percent increase in revenue is primarily attributable to record quarterly revenues and volumes for both the Agricultural Products and Coal business groups and an increase in fuel surcharges of approximately $120 million driven by rising fuel prices.
Agricultural Products revenues were up $158 million, or 24%, to an all-time quarterly record of $804 million for the fourth quarter of 2007. This increase was primarily due to a 14-percent unit volume increase, predominately from wheat, ethanol, soybeans and fertilizer. Coal revenues rose by $119 million, or 15%, to $894 million, as a result of increased tons per unit and improved yields. Industrial Products revenues increased by $41 million, or 5five percent, to $926 million on two percent higher unit volumes. Strong demand for construction and petroleum products was offset by a decline in building products as a result of weakness in the housing market. Consumer Products revenues of $1.50 billion were $34 million, or two percent higher than the fourth quarter of 2006, principally due to stronger yields.
Operating expenses for the fourth quarter of 2007 were $3.30 billion compared with fourth-quarter 2006 operating expenses of $2.94 billion. The $356 million increase in operating expenses was largely driven by a $257 million increase in fuel expense primarily reflecting increased prices and a reduced hedge benefit.
For the full year of 2007, operating revenues reached a record $15.8 billion, a five percent increase over 2006, which included revenue increases in each of the Company's four business groups, with record revenues in the Agricultural Products and Coal business groups. Despite a $310 million reduction in fuel hedge benefit, 2007 operating income of $3.49 billion decreased slightly compared with the prior year.
