July 24, 2002
Norfolk Southern Reports Second-Quarter, First-Half Results
- Second-quarter 2002 net income and earnings per share rose 11 percent compared to the same period of 2001.
- The railway operating ratio improved by 2.5 percentage points.
- Railway operating expenses declined by $39 million, or 3 percent.
NEW YORK, NY - Norfolk Southern Corporation (NYSE: NSC) today reported second-quarter net income of $119 million, or $0.31 per diluted share, an increase of 11 percent, compared with net income of $107 million, or $0.28 per diluted share, in the second quarter of 2001.
"Second-quarter results demonstrate our commitment to continued improvement in net income, operating expenses and operating ratio," said David R. Goode, chairman, president and chief executive officer. "We expect to continue to build on that progress.
"We also were pleased with the growth in our intermodal and general merchandise business in the quarter, at the same time that coal was down for the period," Goode said.
For the first six months, net income was $205 million, or $0.53 per diluted share. For the comparable period of 2001, net income 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.
Second-quarter railway operating revenues were $1.6 billion, unchanged compared with second quarter 2001. For the first six months of 2002, operating revenues were $3.1 billion, down slightly compared with the same period a year earlier.
Intermodal revenues climbed seven percent in the second quarter to $295 million and improved three percent for the first six months to $565 million, reflecting increased demand for consumer products and traffic growth from the introduction of new services.
Second-quarter general merchandise revenues of $948 million were the highest of any quarter in Norfolk Southern's history and improved three percent compared to second quarter 2001. For the first six months, general merchandise revenues increased one percent to $1.82 billion compared with the year-earlier period. All general merchandise commodity groups reported revenue growth except the paper group. Automotive revenues, strengthened by continued strong domestic production, posted the largest gain, growing by $15 million, or six percent, during the quarter, and $29 million, or six percent, for the first six months.
Coal revenues declined 11 percent in the second quarter to $350 million compared with second quarter 2001. For the first six months, coal revenues of $709 million were down 10 percent compared with the first half of 2001. Slow-moving utility stockpiles and soft electricity production due to mild weather continued to weaken demand for utility coal.
Railway operating expenses were $1.27 billion for the quarter, down three percent compared to second quarter 2001, and $2.53 billion for the first six months, down four percent compared to the first half of last year. The decrease in operating expenses in both periods primarily reflects reductions in fuel costs and freight car rental charges.
"During the quarter, we also continued to benefit from our scheduled operating plan as Norfolk Southern achieved lower terminal dwell times and faster train speeds," Goode said.
For the quarter, the railway operating ratio improved 2.5 percentage points to 79.8 percent compared with 82.3 percent in the same period of 2001. This represents the best operating ratio since the Conrail integration in the second quarter of 1999. For the first six months, the operating ratio also improved 2.6 percentage points to 81.9 percent, compared with 84.5 during the same period of 2001.
Norfolk Southern Corporation (NYSE: NSC) is one of the nation's premier transportation companies. Its Norfolk Southern Railway subsidiary operates 21,500 route miles in 22 states, the District of Columbia and Ontario, serving every major container port in the eastern United States and providing superior connections to western rail carriers. NS operates the East's most extensive intermodal network and is the nation's largest rail carrier of automotive parts and finished vehicles. The corporation's Pocahontas Land Corp. subsidiary manages more than a million acres of natural resources, while its T-Cubed subsidiary installs and markets telecommunications facilities.
Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Income
(Unaudited)
($ millions except per share)
Three Months Ended
June 30,
------------------
2002 2001
---- ----
Railway operating revenues:
Coal $ 350 $ 395
General merchandise 948 922
Intermodal 295 275
-------- --------
TOTAL RAILWAY OPERATING REVENUES 1,593 1,592
-------- --------
Railway operating expenses:
Compensation and benefits 497 502
Materials, services and rents 364 377
Conrail rents and services 103 106
Depreciation 129 128
Diesel fuel 84 106
Casualties and other claims 37 40
Other 57 51
-------- --------
TOTAL RAILWAY OPERATING EXPENSES 1,271 1,310
-------- --------
Income from railway operations 322 282
Other income - net 2 24
Interest expense on debt (130) (139)
-------- --------
Income before income taxes 194 167
Provision for income taxes:
Current 33 20
Deferred 42 40
-------- --------
TOTAL INCOME TAXES 75 60
-------- --------
NET INCOME $ 119 $ 107
======== ========
Earnings per share:
Basic and diluted $ 0.31 $ 0.28
Average shares outstanding (000's) 388,261 385,022
See note 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,
------------------
2002 2001
---- ----
Railway operating revenues:
Coal $ 709 $ 788
General merchandise 1,817 1,793
Intermodal 565 551
-------- --------
TOTAL RAILWAY OPERATING REVENUES 3,091 3,132
-------- --------
Railway operating expenses:
Compensation and benefits 1,020 1,021
Materials, services and rents 703 749
Conrail rents and services 216 211
Depreciation 256 255
Diesel fuel 165 223
Casualties and other claims 72 77
Other 100 109
-------- --------
TOTAL RAILWAY OPERATING EXPENSES 2,532 2,645
-------- --------
Income from railway operations 559 487
Other income - net 36 51
Interest expense on debt (264) (280)
-------- --------
Income from continuing operations
before income taxes 331 258
Provision for income taxes:
Current 56 86
Deferred 70 4
-------- --------
TOTAL INCOME TAXES 126 90
-------- --------
Income from continuing operations 205 168
Discontinued operations -- gain on sale
of motor carrier, net of taxes (note 1) -- 13
-------- --------
NET INCOME $ 205 $ 181
======== ========
Earnings per share:
Income from continuing operations,
basic and diluted $ 0.53 $ 0.44
Net income, basic and diluted $ 0.53 $ 0.47
Average shares outstanding (000's) 387,712 384,756
See note to financial statements.
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Norfolk Southern Corporation and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
($ millions)
June 30, December 31,
2002 2001
---- ----
ASSETS
Current assets:
Cash and cash equivalents $ 94 $ 204
Accounts receivable - net 523 475
Due from Conrail 5 8
Materials and supplies 100 90
Deferred income taxes 166 162
Other current assets 70 108
-------- --------
Total current assets 958 1,047
Investment in Conrail 6,178 6,161
Properties less accumulated depreciation 11,305 11,208
Other assets 1,083 1,002
-------- --------
TOTAL ASSETS $ 19,524 $ 19,418
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 845 $ 848
Income and other taxes 277 312
Due to Conrail 77 373
Other current liabilities 213 248
Current maturities of long-term debt 106 605
-------- --------
Total current liabilities 1,518 2,386
Long-term debt 7,338 7,027
Other liabilities 1,047 1,089
Due to Conrail 398 --
Minority interests 45 45
Deferred income taxes 2,866 2,781
-------- --------
TOTAL LIABILITIES 13,212 13,328
-------- --------
Stockholders' equity:
Common stock $1.00 per share par value 410 407
Additional paid-in capital 469 423
Accumulated other comprehensive loss (41) (55)
Retained income 5,494 5,335
-------- --------
6,332 6,110
Less treasury stock at cost,
21,169,125 shares (20) (20)
-------- --------
TOTAL STOCKHOLDERS' EQUITY 6,312 6,090
-------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 19,524 $ 19,418
======== ========
See note to financial statements.
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Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
($ millions)
Six Months Ended
June 30,
-------------------
2002 2001
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 205 $ 181
Reconciliation of net income to net
cash provided by operating activities:
Depreciation 262 262
Deferred income taxes 70 4
Equity in earnings of Conrail (19) (26)
Gains on properties and investments (32) (26)
Income from discontinued operations (note 1) -- (13)
Changes in assets and liabilities
affecting operations:
Accounts receivable (48) (29)
Materials and supplies (10) (5)
Other current assets and due from Conrail 53 102
Current liabilities other than debt (34) (52)
Other - net (62) (88)
-------- --------
Net cash provided by operating activities 385 310
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions (345) (425)
Property sales and other transactions (3) 25
Investments, including short-term (44) (59)
Investment sales and other transactions 13 32
-------- --------
Net cash used for investing activities (379) (427)
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends (46) (46)
Common stock issued - net 36 13
Proceeds from borrowings 526 1,606
Debt repayments (632) (1,409)
-------- --------
Net cash provided by (used for)
financing activities (116) 164
-------- --------
Net increase (decrease) in cash and
cash equivalents (110) 47
CASH AND CASH EQUIVALENTS:
At beginning of year 204 --
-------- --------
At end of period $ 94 $ 47
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH-FLOW
INFORMATION
Cash paid during the period for:
Interest (net of amounts capitalized) $ 268 $ 285
Income taxes $ 38 $ 67
See note to financial statements.
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NOTES:
1. DISCONTINUED OPERATIONS -
First quarter 2001 included an additional after-tax gain of
$13 million, or 3 cents per share, related to the 1998 sale of NS'
motor carrier subsidiary, North American Van Lines, Inc. This
non-cash gain resulted from the expiration of certain indemnities
contained in the sales agreement.
Media Contact: Bob Fort, Norfolk, 757-629-2710
