July 25, 2001
Norfolk Southern Reports Second-Quarter, First-Half Earnings
NEW YORK -- Norfolk Southern Corporation (NYSE: NSC) today reported second-quarter net income of $107 million, or $0.28 per diluted share, compared with net income of $116 million, or $0.30 per diluted share, in the second quarter of 2000, which included a $17 million, or $0.04 per diluted share, gain from the sale of interests in certain oil and gas properties. Excluding this gain, last year's second-quarter net income was $99 million, or $0.26 per diluted share.
"We are encouraged with our progress in the second quarter in light of the economic downturn that is proving to be longer and deeper than we anticipated," said David R. Goode, chairman, president and chief executive officer. "While we can't directly control the economic forces that affect us, we are focused on managing Norfolk Southern's costs and on continuing to improve service to keep our business as strong as possible."
For the first six months, income from continuing operations was $168 million, or $0.44 per diluted share. Net income for the period was $181 million, or $0.47 per diluted share, and included an after-tax gain of $13 million, or $0.03 per diluted share, related to the 1998 sale of Norfolk Southern's former trucking subsidiary. For the comparable period of 2000, income from continuing operations was $68 million, or $0.18 per diluted share, and included the cost of a work-force reduction program. Excluding the charge, last year's net income for the first six months would have been $130 million, or $0.34 per diluted share.
Second-quarter railway operating revenues were $1.59 billion, unchanged compared with 2000, despite a four percent or 68,800 decrease in carloads. For the first six months of 2001, operating revenues were $3.13 billion, up slightly compared with the same period of 2000, despite a three percent or 92,800 decrease in carloads.
Coal revenues climbed five percent in the second quarter and nine percent in the first half, reflecting increased utility shipments. Intermodal revenues rose one percent in the quarter and six percent for the first six months. The sluggish economy affected general merchandise revenues, which dropped two percent in the quarter and three percent during the first half.
Railway operating expenses were $1.31 billion for the quarter, down slightly compared to 2000, and $2.65 billion for the first six months, down two percent compared to the first six months of 2000, excluding last year's work-force reduction charge.
For the quarter, the railway operating ratio improved to 82.3 percent compared with 82.5 percent in the same period of 2000. For the first six months of 2001, the operating ratio improved to 84.5 percent, compared with 86.9 percent, excluding the cost of the work-force reduction charge, during the same period of 2000. Including the charge, last year's six-month operating ratio was 90.1 percent.
Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Income
(Unaudited)
($ millions except per share)
Three Months Ended
June 30,
------------------
2001 2000
---- ----
Railway operating revenues:
Coal $ 395 $ 377
General merchandise 922 942
Intermodal 275 273
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TOTAL RAILWAY OPERATING REVENUES 1,592 1,592
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Railway operating expenses:
Compensation and benefits 502 516
Materials, services and rents 377 347
Conrail rents and services 106 124
Depreciation 128 126
Diesel fuel 106 106
Casualties and other claims 40 34
Other 51 61
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TOTAL RAILWAY OPERATING EXPENSES 1,310 1,314
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Income from railway operations 282 278
Other income - net 24 45
Interest expense on debt (139) (139)
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Income before income taxes 167 184
Provision for income taxes:
Current 20 42
Deferred 40 26
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TOTAL INCOME TAXES 60 68
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NET INCOME $ 107 $ 116
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Earnings per share:
Basic and diluted $ 0.28 $ 0.30
Average shares outstanding (000's) 385,022 383,221
See notes to financial statements.
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Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Income
(Unaudited)
($ millions except per share)
Six Months Ended
June 30,
------------------
2001 2000
---- ----
Railway operating revenues:
Coal $ 788 $ 724
General merchandise 1,793 1,857
Intermodal 551 519
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TOTAL RAILWAY OPERATING REVENUES 3,132 3,100
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Railway operating expenses:
Compensation and benefits (note B) 1,021 1,171
Materials, services and rents 749 718
Conrail rents and services 211 245
Depreciation 255 251
Diesel fuel 223 221
Casualties and other claims 77 66
Other 109 122
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TOTAL RAILWAY OPERATING EXPENSES 2,645 2,794
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Income from railway operations 487 306
Other income - net 51 73
Interest expense on debt (280) (279)
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Income from continuing operations
before income taxes 258 100
Provision (benefit) for income taxes:
Current 86 40
Deferred 4 (8)
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TOTAL INCOME TAXES 90 32
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Income from continuing operations 168 68
Discontinued operations -- gain on sale
of motor carrier, net of taxes (note A) 13 --
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NET INCOME (notes A and B) $ 181 $ 68
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Earnings per share (notes A and B):
Income from continuing operations,
basic and diluted $ 0.44 $ 0.18
Net income, basic and diluted $ 0.47 $ 0.18
Average shares outstanding (000's) 384,756 383,079
See notes to financial statements.
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Norfolk Southern Corporation and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
($ millions)
June 30, December 31,
2001 2000
---- ----
ASSETS
Current assets:
Cash and cash equivalents $ 47 $ --
Short-term investments -- 2
Accounts receivable - net 430 411
Due from Conrail 8 31
Materials and supplies 96 91
Deferred income taxes 175 182
Other current assets 55 132
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Total current assets 811 849
Investment in Conrail 6,180 6,154
Properties less accumulated depreciation 11,249 11,105
Other assets 999 868
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TOTAL ASSETS $19,239 $18,976
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 24 $ --
Accounts payable 861 925
Income and other taxes 265 251
Notes and accounts payable to Conrail 285 155
Other current liabilities 251 259
Current maturities of long-term debt 605 297
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Total current liabilities 2,291 1,887
Long-term debt 7,072 7,339
Other liabilities 1,108 1,131
Minority interests 45 50
Deferred income taxes 2,746 2,745
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TOTAL LIABILITIES 13,262 13,152
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Stockholders' equity:
Common stock $1.00 per share par value 407 405
Additional paid-in capital 412 392
Accumulated other comprehensive income (10) (6)
Retained income 5,188 5,053
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5,997 5,844
Less treasury stock at cost,
21,363,974 shares (20) (20)
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TOTAL STOCKHOLDERS' EQUITY 5,977 5,824
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TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $19,239 $18,976
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See notes to financial statements.
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Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
($ millions)
Six Months Ended
June 30,
-------------------
2001 2000
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 181 $ 68
Reconciliation of net income to net
cash provided by operating activities:
Depreciation 262 258
Deferred income taxes 4 (8)
Equity in earnings of Conrail (26) (10)
Gains on properties and investments (26) (61)
Income from discontinued operations (note A) (13) --
Changes in assets and liabilities
affecting operations:
Accounts receivable (note C) (29) 432
Materials and supplies (5) (36)
Other current assets and due from Conrail 102 111
Current liabilities other than debt (52) 122
Other - net (88) 10
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Net cash provided by operating activities 310 886
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions (425) (351)
Property sales and other transactions 25 82
Investments, including short-term (59) (43)
Investment sales and other transactions 32 38
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Net cash used for investing activities (427) (274)
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends (46) (153)
Common stock issued - net 13 1
Proceeds from borrowings 1,606 719
Debt repayments (1,409) (1,171)
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Net cash provided by (used for)
financing activities 164 (604)
------- -------
Net increase in cash and
cash equivalents 47 8
CASH AND CASH EQUIVALENTS:
At beginning of year -- 37
------- -------
At end of period $ 47 $ 45
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SUPPLEMENTAL DISCLOSURES OF CASH-FLOW
INFORMATION
Cash paid during the period for:
Interest (net of amounts capitalized) $ 285 $ 276
Income taxes $ 67 $ 5
See notes to financial statements.
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NOTES TO FINANCIAL STATEMENTS:
A. DISCONTINUED OPERATIONS -
Results for the six months ended June 30, 2001 include an additional
after-tax gain of $13 million, or 3 cents per share, recorded in the
first quarter, related to the 1998 sale of NS' motor carrier subsidiary,
North American Van Lines, Inc. This noncash gain resulted from the
reversal of reserves established at the time of the sale for indemnities
provided as a part of the transaction.
B. WORK-FORCE REDUCTION CHARGE IN 2000 -
"Compensation and benefits" expenses for the six months ended June 30,
2000, include $101 million of costs recorded in the first quarter
related to actions taken to reduce the size of the work force, which
reduced net income by $62 million, or 16 cents per share. These costs
resulted principally from a voluntary early retirement program accepted
by 919 of 1,180 eligible employees. The retirements were effective
March 1, 2000, and most of the related benefits are being paid from the
Corporation's overfunded pension plan. The resulting noncash reduction
to NS' pension plan asset is included in "Other - net" in the Consolidated
Statement of Cash Flows. In addition, an accrual was made for certain
postemployment benefits due to some union employees who were furloughed.
C. SALES OF ACCOUNTS RECEIVABLE -
Beginning in May 2000, a bankruptcy-remote special purpose subsidiary
of NS sold without recourse undivided ownership interests in a pool of
accounts receivable totaling approximately $700 million. The buyers
have a priority collection interest in the entire pool of receivables,
and as a result, NS has retained credit risk to the extent the pool
of receivables exceeds the amount sold. NS services and collects the
receivables on behalf of the buyers; however, no servicing asset or
liability has been recognized because the benefits of servicing are
estimated to be just adequate to compensate NS for its responsibilities.
Payments collected from sold receivables are reinvested in new accounts
receivable on behalf of the buyers.
Accounts receivable sold under this arrangement, and therefore not included
in "Accounts receivable, net" on the Consolidated Balance Sheets, were
$402 million at June 30, 2001, and $388 million at Dec. 31, 2000. The fees
associated with the sale, which are based on the buyers' financing costs,
are included in "Other income - net."
Media Contact: Bob Fort, Norfolk, 757-629-2710
