October 23, 2002
Norfolk Southern Reports Third-Quarter 2002 Results
- Net income rose 59 percent.
- Railway operating revenues increased by $90 million, or six percent.
- Intermodal revenues reached an all-time high of $310 million.
- The railway operating ratio improved by 3.3 percentage points.
- Earnings per share increased to $0.32 per diluted share.
NEW YORK, N.Y. - Norfolk Southern Corporation (NYSE: NSC) today reported third-quarter net income of $126 million, or $0.32 per diluted share, an increase of 59 percent, compared with net income of $79 million, or $0.20 per diluted share, in the third quarter of 2001.
"We are encouraged with our results and another quarter of year-over-year improvement in our financial performance," said Henry C. Wolf, Norfolk Southern vice chairman and chief financial officer. "We will continue to take steps to improve our service consistency and reliability while at the same time grow our revenue base and achieve greater productivity."
For the first nine months, net income increased 27 percent to $331 million, or $0.85 per diluted share, compared with net income of $260 million, or $0.67 per diluted share, in the same period a year earlier. Net income during the first nine months of 2001 included an after-tax gain of $13 million, or $0.03 per share from the 1998 sale of a former trucking subsidiary.
Third-quarter railway operating revenues rose six percent to $1.60 billion compared with third quarter 2001. Year-to-date railway operating revenues of $4.69 billion were up one percent compared to the same period a year earlier.
Third-quarter general merchandise revenues of $917 million improved six percent compared to the same period of 2001. All market groups reported increases, led by automotive and metals. For the first nine months, general merchandise revenues increased three percent to $2.73 billion compared with the year-earlier period.
Intermodal revenues of $310 million were the highest of any quarter in Norfolk Southern's history and climbed 11 percent compared to the third quarter of 2001. For the first nine months, intermodal revenues rose five percent to $875 million compared with the same period of 2001. The revenue growth reflects increases in both international and domestic business, particularly converting traffic from the highway.
Coal revenues improved one percent to $371 million in the quarter compared to a weak third quarter of 2001 but declined six percent to $1.08 billion in year-over-year performance.
Railway operating expenses for the quarter increased two percent to $1.29 billion compared to the third quarter 2001 but decreased two percent to $3.82 billion for the first nine months compared to the same period a year earlier.
For the quarter, the railway operating ratio improved 3.3 percentage points to 80.5 percent compared with 83.8 percent for the same period of 2001. For the first nine months, the operating ratio improved 2.8 percentage points to 81.4 percent compared with 84.2 percent during the same period of 2001.
Norfolk Southern Corporation is one of America's leading transportation companies. Its Norfolk Southern Railway Company subsidiary operates approximately 21,500 miles of road in 22 states, the District of Columbia and the province of Ontario, serving every major container port in the eastern United States and providing superior connections to western rail carriers. NS operates the East's most extensive intermodal network and is the nation's largest rail carrier of automotive parts and finished vehicles.
Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Income
(Unaudited)
($ millions except per share)
Three Months Ended
Sept. 30,
------------------
2002 2001
---- ----
Railway operating revenues:
Coal $ 371 $ 366
General merchandise 917 862
Intermodal 310 280
-------- --------
TOTAL RAILWAY OPERATING REVENUES 1,598 1,508
-------- --------
Railway operating expenses:
Compensation and benefits 489 478
Materials, services and rents 386 363
Conrail rents and services 100 113
Depreciation 129 129
Diesel fuel 81 93
Casualties and other claims 57 32
Other 45 55
-------- --------
TOTAL RAILWAY OPERATING EXPENSES 1,287 1,263
-------- --------
Income from railway operations 311 245
Other income - net 4 16
Interest expense on debt (126) (137)
-------- --------
Income before income taxes 189 124
Provision for income taxes:
Current (6) --
Deferred 69 45
-------- --------
TOTAL INCOME TAXES 63 45
-------- --------
NET INCOME $ 126 $ 79
======== ========
Earnings per share:
Basic and diluted $ 0.32 $ 0.20
Average shares outstanding (000's) 388,550 385,406
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
Sept. 30,
------------------
2002 2001
---- ----
Railway operating revenues:
Coal $ 1,080 $ 1,154
General merchandise 2,734 2,655
Intermodal 875 831
-------- --------
TOTAL RAILWAY OPERATING REVENUES 4,689 4,640
-------- --------
Railway operating expenses:
Compensation and benefits 1,509 1,499
Materials, services and rents 1,089 1,112
Conrail rents and services 316 324
Depreciation 385 384
Diesel fuel 246 316
Casualties and other claims 129 109
Other 145 164
-------- --------
TOTAL RAILWAY OPERATING EXPENSES 3,819 3,908
-------- --------
Income from railway operations 870 732
Other income - net 40 67
Interest expense on debt (390) (417)
-------- --------
Income from continuing operations
before income taxes 520 382
Provision for income taxes:
Current 50 86
Deferred 139 49
-------- --------
TOTAL INCOME TAXES 189 135
-------- --------
Income from continuing operations 331 247
Discontinued operations -- gain on sale
of motor carrier, net of taxes (note 1) -- 13
-------- --------
NET INCOME $ 331 $ 260
======== ========
Earnings per share:
Income from continuing operations,
basic and diluted $ 0.85 $ 0.64
Net income, basic and diluted $ 0.85 $ 0.67
Average shares outstanding (000's) 387,992 384,972
See notes to financial statements.
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Norfolk Southern Corporation and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
($ millions)
Sept. 30, Dec. 31,
2002 2001
---- ----
ASSETS
Current assets:
Cash and cash equivalents $ 132 $ 204
Accounts receivable - net (note 2) 685 475
Due from Conrail 4 8
Materials and supplies 91 90
Deferred income taxes 167 162
Other current assets 65 108
-------- --------
Total current assets 1,144 1,047
Investment in Conrail 6,190 6,161
Properties less accumulated depreciation 11,332 11,208
Other assets 1,128 1,002
-------- --------
TOTAL ASSETS $ 19,794 $ 19,418
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 886 $ 848
Income and other taxes 250 312
Due to Conrail 84 373
Other current liabilities 259 248
Current maturities of long-term debt 356 605
-------- --------
Total current liabilities 1,835 2,386
Long-term debt 7,027 7,027
Other liabilities 1,057 1,089
Due to Conrail 463 --
Minority interests 45 45
Deferred income taxes 2,942 2,781
-------- --------
TOTAL LIABILITIES 13,369 13,328
-------- --------
Stockholders' equity:
Common stock $1.00 per share par value 410 407
Additional paid-in capital 475 423
Accumulated other comprehensive loss (33) (55)
Retained income 5,593 5,335
-------- --------
6,445 6,110
Less treasury stock at cost,
21,169,125 shares (20) (20)
-------- --------
TOTAL STOCKHOLDERS' EQUITY 6,425 6,090
-------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 19,794 $ 19,418
======== ========
See notes to financial statements.
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Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
($ millions)
Nine Months Ended
Sept. 30,
-------------------
2002 2001
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 331 $ 260
Reconciliation of net income to net
cash provided by operating activities:
Depreciation 395 395
Deferred income taxes 139 49
Equity in earnings of Conrail (32) (31)
Gains on properties and investments (35) (27)
Income from discontinued operations (note 1) -- (13)
Changes in assets and liabilities
affecting operations:
Accounts receivable (note 2) (209) (55)
Materials and supplies (1) 2
Other current assets and due from Conrail 75 117
Current liabilities other than debt 21 --
Other - net (62) (120)
-------- --------
Net cash provided by operating activities 622 577
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions (517) (594)
Property sales and other transactions 15 38
Investments, including short-term (58) (81)
Investment sales and other transactions 15 35
-------- --------
Net cash used for investing activities (545) (602)
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends (74) (69)
Common stock issued - net 39 14
Proceeds from borrowings 609 1,940
Debt repayments (723) (1,726)
-------- --------
Net cash provided by (used for)
financing activities (149) 159
-------- --------
Net increase (decrease) in cash and
cash equivalents (72) 134
CASH AND CASH EQUIVALENTS:
At beginning of year 204 --
-------- --------
At end of period $ 132 $ 134
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH-FLOW
INFORMATION
Cash paid during the period for:
Interest (net of amounts capitalized) $ 348 $ 360
Income taxes $ 49 $ 71
See notes to financial statements.
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NOTES TO FINANCIAL STATEMENTS:
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.
2. SALES OF ACCOUNTS RECEIVABLE -
A bankruptcy-remote special purpose subsidiary of NS sells without
recourse undivided ownership interests in a pool of accounts
receivable. Accounts receivable sold under this arrangement, and
therefore not included in "Accounts receivable - net" on the
Consolidated Balance Sheets, were $100 million at Sept. 30, 2002,
and $300 million at Dec. 31, 2001.
Media Contact: Bob Fort, Norfolk, 757-629-2710
