October 24, 2001
Norfolk Southern Reports Third-Quarter 2001 Results
NEW YORK, N.Y. - Norfolk Southern Corporation (NYSE: NSC) today reported third-quarter net income of $79 million, or $0.20 per diluted share, compared with net income of $99 million, or $0.26 per diluted share, in the third quarter of 2000, which included a gain of $46 million, or $0.12 per diluted share, from the sale of timber properties.
"An improvement in revenue yield and effective cost controls allowed us to improve operating income by 16 percent in the third quarter, although continued weakness in the U.S. economy impacted carloadings," said David R. Goode, chairman, president and chief executive officer.
For the first nine months, net income was $260 million, or $0.67 per diluted share, and included an after-tax gain of $13 million, or $0.03 per share, related to the 1998 sale of Norfolk Southern's former trucking subsidiary, North American Van Lines, Inc. This compares with reported net income for the first nine months of 2000 of $167 million, or $0.44 per diluted share, which included a work-force reduction charge and gains on the sale of timber rights and certain interests in oil and natural gas properties.
Railway operating revenues for the quarter were $1.51 billion, down two percent, and for the first nine months were $4.64 billion, unchanged compared to the same period last year.
Coal revenues improved one percent in the third quarter and climbed six percent in the first nine months, reflecting increased utility shipments. The slow economy affected general merchandise revenues, which declined two percent in the quarter and three percent in the nine-month period. Automotive revenues showed the greatest decline during both periods due to soft sales and related production cutbacks. The economy also impacted intermodal revenues, which declined five percent in the quarter but were two percent ahead of last year for the first nine months.
Railway operating expenses for the quarter were $1.26 billion, a reduction of five percent and for the first nine months were $3.90 billion, down three percent, excluding last year's work-force reduction charge.
"With the opening of our southeastern intermodal hub at Austell, Ga., near Atlanta, we are introducing new freight service to the Northeast, Southwest and Northwest," Goode said. "We also are establishing coast-to-coast train services with western carriers, offering certain guaranteed on-time deliveries and making strides in reducing transit times. Our strategy will be to continue to focus on tightly controlling costs while we continue to launch new services to meet our customers' needs."
The railway operating ratio for the quarter improved to 83.8 percent compared to 86.3 percent for the same period of 2000. For the first nine months, the operating ratio improved to 84.2 percent compared with 88.8 percent in 2000. Excluding the work-force reduction charge, last year's nine-month operating ratio was 86.7 percent.
Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Income
(Unaudited)
($ millions except per share)
Three Months Ended
September 30,
------------------
2001 2000
---- ----
Railway operating revenues:
Coal $ 366 $ 363
General merchandise 862 878
Intermodal 280 294
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TOTAL RAILWAY OPERATING REVENUES 1,508 1,535
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Railway operating expenses:
Compensation and benefits 478 507
Materials, services and rents 363 360
Conrail rents and services 113 119
Depreciation 129 126
Diesel fuel 93 118
Casualties and other claims 32 33
Other 55 61
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TOTAL RAILWAY OPERATING EXPENSES 1,263 1,324
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Income from railway operations 245 211
Other income - net (note B) 16 81
Interest expense on debt (137) (136)
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Income before income taxes 124 156
Provision for income taxes:
Current -- 47
Deferred 45 10
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TOTAL INCOME TAXES 45 57
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NET INCOME $ 79 $ 99
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Earnings per share:
Basic and diluted $ 0.20 $ 0.26
Average shares outstanding (000's) 385,406 383,471
See notes to financial statements.
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Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Income
(Unaudited)
($ millions except per share)
Nine Months Ended
September 30,
------------------
2001 2000
---- ----
Railway operating revenues:
Coal $ 1,154 $ 1,087
General merchandise 2,655 2,735
Intermodal 831 813
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TOTAL RAILWAY OPERATING REVENUES 4,640 4,635
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Railway operating expenses:
Compensation and benefits (note C) 1,499 1,678
Materials, services and rents 1,112 1,078
Conrail rents and services 324 364
Depreciation 384 377
Diesel fuel 316 339
Casualties and other claims 109 99
Other 164 183
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TOTAL RAILWAY OPERATING EXPENSES 3,908 4,118
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Income from railway operations 732 517
Other income - net (note B) 67 154
Interest expense on debt (417) (415)
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Income from continuing operations
before income taxes 382 256
Provision for income taxes:
Current 86 87
Deferred 49 2
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TOTAL INCOME TAXES 135 89
------- -------
Income from continuing operations 247 167
Discontinued operations -- gain on sale
of motor carrier, net of taxes (note A) 13 --
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NET INCOME $ 260 $ 167
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Earnings per share:
Income from continuing operations,
basic and diluted $ 0.64 $ 0.44
Net income, basic and diluted $ 0.67 $ 0.44
Average shares outstanding (000's) 384,972 383,210
See notes to financial statements.
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Norfolk Southern Corporation and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
($ millions)
September 30, December 31,
2001 2000
---- ----
ASSETS
Current assets:
Cash and cash equivalents $ 134 $ --
Short-term investments -- 2
Accounts receivable - net 456 411
Due from Conrail 6 31
Materials and supplies 89 91
Deferred income taxes 170 182
Other current assets 38 132
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Total current assets 893 849
Investment in Conrail 6,188 6,154
Properties less accumulated depreciation 11,276 11,105
Other assets 1,028 868
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TOTAL ASSETS $19,385 $18,976
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 869 $ 925
Income and other taxes 259 251
Notes and accounts payable to Conrail 351 155
Other current liabilities 300 259
Current maturities of long-term debt 604 297
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Total current liabilities 2,383 1,887
Long-term debt 7,064 7,339
Other liabilities 1,079 1,131
Minority interests 45 50
Deferred income taxes 2,781 2,745
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TOTAL LIABILITIES 13,352 13,152
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Stockholders' equity:
Common stock $1.00 per share par value 407 405
Additional paid-in capital 416 392
Accumulated other comprehensive income (14) (6)
Retained income 5,244 5,053
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6,053 5,844
Less treasury stock at cost,
21,363,974 shares (20) (20)
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TOTAL STOCKHOLDERS' EQUITY 6,033 5,824
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TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $19,385 $18,976
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See notes to financial statements.
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Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
($ millions)
Nine Months Ended
September 30,
-------------------
2001 2000
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 260 $ 167
Reconciliation of net income to net
cash provided by operating activities:
Depreciation 395 387
Deferred income taxes 49 2
Equity in earnings of Conrail (31) (13)
Gains on properties and investments (27) (141)
Income from discontinued operations (note A) (13) --
Changes in assets and liabilities
affecting operations:
Accounts receivable (note D) (55) 388
Materials and supplies 2 (16)
Other current assets and due from Conrail 117 130
Current liabilities other than debt -- 303
Other - net (120) 16
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Net cash provided by operating activities 577 1,223
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions (594) (508)
Property sales and other transactions 38 116
Investments, including short-term (81) (64)
Investment sales and other transactions 35 43
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Net cash used for investing activities (602) (413)
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends (69) (230)
Common stock issued - net 14 1
Proceeds from borrowings 1,940 875
Debt repayments (1,726) (1,342)
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Net cash provided by (used for)
financing activities 159 (696)
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Net increase in cash and
cash equivalents 134 114
CASH AND CASH EQUIVALENTS:
At beginning of year -- 37
------- -------
At end of period $ 134 $ 151
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SUPPLEMENTAL DISCLOSURES OF CASH-FLOW
INFORMATION
Cash paid during the period for:
Interest (net of amounts capitalized) $ 360 $ 335
Income taxes $ 71 $ 6
See notes to financial statements.
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NOTES TO FINANCIAL STATEMENTS:
A. 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.
B. SALE OF TIMBER RIGHTS IN 2000 -
During third quarter 2000, several NS subsidiaries sold timber rights
for $93 million. The sales resulted in a pre-tax gain of $73 million
which increased net income by $46 million, or 12 cents per diluted share.
C. WORK-FORCE REDUCTION CHARGE IN 2000 -
First quarter 2000 "Compensation and benefits" expenses included a
$101 million work-force reduction charge, which reduced net income by
$62 million, or 16 cents per share. Reductions in non-union personnel
were achieved primarily through a voluntary early retirement program,
while union personnel reductions resulted primarily from furloughs.
The voluntary early retirement program was 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 NS' overfunded pension
plan.
D. 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
exceeds the amount sold. NS services and collects the receivables
on behalf of the buyers; payments collected from sold receivables are
reinvested in new accounts receivables on behalf of the buyers.
At September 30, 2001, and December 31, 2000, accounts receivable of
$395 million and $388 million, respectively, had been sold under this
arrangement and, accordingly, are not included in "Accounts receivable -
net" on the balance sheets. The fees associated with the sales are
included in "Other income - net."
Media Contact: Bob Fort, Norfolk, 757-629-2710
