January 23, 2002
Norfolk Southern Reports Fourth-Quarter and 2001 Results
NEW YORK, N.Y. - Norfolk Southern Corporation (NYSE: NSC) today reported fourth-quarter net income of $115 million, or $0.30 per diluted share, compared with net income of $5 million, or $0.01 per diluted share, in the fourth quarter of 2000, which included a work-force reduction charge of $39 million, or $0.10 per diluted share. Fourth-quarter results include an after-tax gain of $12 million, or $0.03 per diluted share, from the sale of a real estate parcel.
For the year, net income from continuing operations was $362 million, or $0.94 per diluted share. Reported net income for the year was $375 million, or $0.97 per diluted share, which includes an after-tax gain of $13 million, or $0.03 per diluted share, related to the 1998 sale of Norfolk Southern's former motor carrier subsidiary, North American Van Lines, Inc. For the comparable period of 2000, income from continuing operations was $172 million, or $0.45 per diluted share, and included a work-force reduction charge of $101 million, or $0.26 per diluted share.
"I am encouraged with our progress in 2001 in light of a challenging economy that exerted considerable downward pressure on volumes throughout the year," said David R. Goode, chairman, president and chief executive officer. "The substantial improvements in income both for the quarter and the year reflect the results of our rigorous cost controls, increases in revenue yield and a continual focus on providing safe and reliable service."
In the fourth quarter, railway operating revenues were $1.53 billion, up slightly compared with the fourth quarter of 2000, despite a one percent, or 20,600-unit decrease in carloads. For the year, railway operating revenues were $6.2 billion, up slightly compared with the same period in 2000, on 3 percent, or 222,100 fewer carloads.
Coal revenues climbed five percent in the fourth quarter to $367 million and improved six percent for the year to $1.52 billion, reflecting strength in domestic utility shipments. General merchandise revenues of $871 million in the fourth quarter were unchanged compared to the same period of 2000, but declined two percent to $3.53 billion for the year. Merchandise volumes were down for nearly all commodity groups in both the quarter and the year due to a weak business environment that prevailed throughout the year. Intermodal revenues in the fourth quarter were $292 million, a decline of five percent compared to the fourth quarter of 2000. For the year, intermodal revenues of $1.12 billion were up slightly compared with 2000.
Railway operating expenses in the quarter were $1.3 billion, down seven percent from the fourth quarter of 2000, excluding the work-force reduction charge in that period. For the year, railway operating expenses were $5.2 billion, down four percent from 2000, excluding the work-force reduction charges.
For the quarter, the railway operating ratio improved to 82.0 percent compared with 88.2 percent in the same period of 2000, excluding the work-force reduction charge. For the year, the operating ratio improved to 83.7 percent, compared with 87.0 percent, excluding the work-force reduction charges, during the same period of 2000.
"In 2001 we laid the foundation for additional revenue growth by moving aggressively to strengthen operations, service quality and financial performance," Goode said. "As 2002 progresses, we are well positioned to handle increased business when the economy rebounds, and will continue to focus intensely on making service improvements that will enable Norfolk Southern to capitalize on its expanded network."
Norfolk Southern Corporation is a Virginia-based holding company with headquarters in Norfolk. It owns a major freight railroad, Norfolk Southern Railway Company, which operates approximately 21,500 miles of road in 22 states, the District of Columbia and the Province of Ontario.
Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Income
(Unaudited)
($ millions except per share)
Three Months Ended
December 31,
------------------
2001 2000
---- ----
Railway operating revenues:
Coal $ 367 $ 348
General merchandise 871 870
Intermodal 292 306
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TOTAL RAILWAY OPERATING REVENUES 1,530 1,524
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Railway operating expenses:
Compensation and benefits (note A) 515 556
Materials, services and rents 332 367
Conrail rents and services 97 114
Depreciation 130 126
Diesel fuel 96 139
Casualties and other claims 34 43
Other 51 63
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TOTAL RAILWAY OPERATING EXPENSES 1,255 1,408
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Income from railway operations 275 116
Other income - net 32 14
Interest expense on debt (136) (136)
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Income (loss) before income taxes 171 (6)
Provision (benefit) for income taxes:
Current 61 (11)
Deferred (5) --
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TOTAL INCOME TAXES 56 (11)
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NET INCOME $ 115 $ 5
======= =======
Earnings per share:
Basic and diluted $ 0.30 $ 0.01
Average shares outstanding (000's) 385,714 383,802
See notes to financial statements.
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Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Income
(Unaudited)
($ millions except per share)
Years Ended December 31,
-----------------------
2001 2000
---- ----
Railway operating revenues:
Coal $ 1,521 $ 1,435
General merchandise 3,526 3,605
Intermodal 1,123 1,119
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TOTAL RAILWAY OPERATING REVENUES 6,170 6,159
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Railway operating expenses:
Compensation and benefits (note A) 2,014 2,234
Materials, services and rents 1,444 1,445
Conrail rents and services 421 478
Depreciation 514 503
Diesel fuel 412 478
Casualties and other claims 143 142
Other 215 246
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TOTAL RAILWAY OPERATING EXPENSES 5,163 5,526
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Income from railway operations 1,007 633
Other income - net (note B) 99 168
Interest expense on debt (553) (551)
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Income from continuing operations
before income taxes 553 250
Provision for income taxes:
Current 147 76
Deferred 44 2
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TOTAL INCOME TAXES 191 78
------- -------
Income from continuing operations 362 172
Discontinued operations - gain on
sale of motor carrier,
net of taxes (note C) 13 --
------- -------
NET INCOME $ 375 $ 172
======= =======
Earnings per share:
Income from continuing operations,
basic and diluted $ 0.94 $ 0.45
Net income, basic and diluted $ 0.97 $ 0.45
Average shares outstanding (000's) 385,158 383,358
See notes to financial statements.
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Norfolk Southern Corporation and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
($ millions)
As of December 31,
-----------------
2001 2000
---- ----
ASSETS
Current assets:
Cash and cash equivalents $ 204 $ --
Short-term investments -- 2
Accounts receivable - net 475 411
Due from Conrail 8 31
Materials and supplies 90 91
Deferred income taxes 162 182
Other current assets 108 132
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Total current assets 1,047 849
Investment in Conrail 6,161 6,154
Properties less accumulated depreciation 11,208 11,105
Other assets 1,002 868
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TOTAL ASSETS $ 19,418 $ 18,976
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 848 $ 925
Income and other taxes 312 251
Notes and accounts payable to Conrail 373 155
Other current liabilities 248 259
Current maturities of long-term debt 605 297
------- -------
Total current liabilities 2,386 1,887
Long-term debt 7,027 7,339
Other liabilities 1,089 1,131
Minority interests 45 50
Deferred income taxes 2,781 2,745
------- -------
TOTAL LIABILITIES 13,328 13,152
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Stockholders' equity:
Common stock $1.00 per share par value 407 405
Additional paid-in capital 423 392
Accumulated other comprehensive loss (55) (6)
Retained income 5,335 5,053
------- -------
6,110 5,844
Less treasury stock at cost,
21,169,125 shares and 21,363,974
shares, respectively (20) (20)
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TOTAL STOCKHOLDERS' EQUITY 6,090 5,824
------- -------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 19,418 $ 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)
Years Ended December 31,
($ millions)
------------------
2001 2000
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 375 $ 172
Reconciliation of net income to
net cash provided by operating activities:
Depreciation 527 517
Deferred income taxes 44 2
Equity in earnings of Conrail (44) (21)
Gains on properties and investments (59) (160)
Income from discontinued operations (note C) (13) --
Changes in assets and liabilities
affecting operations:
Accounts receivable (note D) (74) 446
Materials and supplies 1 9
Other current assets and due from Conrail 46 60
Current liabilities other than debt (27) 220
Other - net (122) 97
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Net cash provided by operating activities 654 1,342
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions (746) (731)
Property sales and other transactions 156 137
Investments, including short-term (99) (77)
Investment sales and other transactions 88 90
------- -------
Net cash used for investing activities (601) (581)
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends (93) (306)
Common stock issued - net 14 2
Proceeds from borrowings 1,995 1,055
Debt repayments (1,765) (1,549)
------- -------
Net cash provided by (used for)
financing activities 151 (798)
------- -------
Net increase (decrease) in cash and
cash equivalents 204 (37)
CASH AND CASH EQUIVALENTS:
At beginning of year -- 37
------- -------
At end of year $ 204 $ --
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SUPPLEMENTAL DISCLOSURES OF CASH-FLOW
INFORMATION
Cash paid during the year for:
Interest (net of amounts capitalized) $ 550 $ 543
Income taxes $ 74 $ 5
See notes to financial statements.
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NOTES TO FINANCIAL STATEMENTS:
- WORK-FORCE REDUCTION CHARGES IN 2000 -
"Compensation and benefits" expenses in 2000 included work-force
reduction charges of $64 million in the fourth quarter and $165
million for the year, which reduced net income and diluted
earnings per share by $39 million or 10 cents per share for the
fourth quarter and $101 million or 26 cents per share for the year.
Reductions in non-union personnel were achieved primarily through
voluntary early retirement programs, while union personnel
reductions resulted primarily from furloughs. The voluntary
early retirement programs were accepted by 919 of the 1,180
eligible employees in February and 370 of the 846 eligible in
December. The principal incentives in these programs were
enhanced pension benefits, most of which are being paid from
NS' overfunded pension plan.
- SALE OF TIMBER RIGHTS AND OIL AND GAS INTERESTS IN 2000 -
During the third and the second quarters of 2000, several NS
subsidiaries sold timber rights and certain interests in oil and
gas properties. These sales resulted in pre-tax gains totaling
$101 million which increased net income by $63 million, or
16 cents per diluted share.
- 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.
- 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 December 31, 2001, and December 31, 2000, accounts receivable
of $300 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"
on the income statements.
Media Contact: Bob Fort, Norfolk, 757-629-2710
