January 29, 2003
Norfolk Southern Reports Fourth-Quarter and 2002 Results
- Net income climbed 12 percent in the fourth quarter and 23 percent for the year.
- Earnings per share increased 10 percent to $0.33 per diluted share in the fourth quarter and 22 percent to $1.18 per diluted share for the year.
- Railway operating revenues set records for the fourth quarter and the full year.
NEW YORK, N.Y. - Norfolk Southern Corporation (NYSE: NSC) today reported fourth-quarter net income of $129 million, or $0.33 per diluted share, up 12 percent compared with net income of $115 million, or $0.30 per diluted share, in the fourth quarter of 2001.
For the year, net income was $460 million, or $1.18 per diluted share, up 23 percent, compared to $375 million, or $0.97 per diluted share, in the same period a year earlier. Net income during 2001 included an after-tax gain of $13 million, or $0.03 per diluted share, from the 1998 sale of a former motor carrier subsidiary.
"I am pleased with the substantial improvements in income and operations during the quarter and 2002 in a year filled with challenges for everyone in business," said David R. Goode, chairman, president and chief executive officer. "The value of service improvements is making itself apparent."
Railway operating revenues set record highs for both the fourth quarter and the year. In the quarter, revenues reached $1.58 billion, up three percent compared with the fourth quarter of 2001, and for the year, revenues of $6.27 billion rose two percent compared with the same period in 2001.
Fourth-quarter general merchandise revenues of $914 million reflected a five percent improvement compared to the fourth quarter of 2001. All market groups showed revenue gains compared to the same period of 2001, led by a seven percent improvement in automotive. For the year, general merchandise revenues of $3.65 billion increased three percent compared with 2001 and set a record.
Intermodal revenues in the fourth quarter were $306 million, an increase of five percent compared to the fourth quarter of 2001. For the year, intermodal revenues of $1.18 billion were the highest of any year in Norfolk Southern's history and improved five percent compared with 2001. The revenue growth reflects the introduction of new services that enabled conversion of highway movements to rail as well as improvements in on-time reliability and service speed.
Coal revenues declined two percent in the fourth quarter to $361 million in the face of less demand for utility coal and decreased five percent for the year to $1.44 billion compared to strong 2001 results.
Railway operating expenses in the quarter were $1.3 billion, up three percent from the fourth quarter of 2001. For the year, railway operating expenses were $5.1 billion, down $51 million, or one percent, from 2001.
For the quarter, the railway operating ratio improved to 81.8 percent compared with 82.0 percent in the same period of 2001. For the year, the operating ratio improved to 81.5 percent, compared with 83.7 percent a year earlier.
"Our results show that Norfolk Southern is on course and headed in the right direction," Goode said.
Norfolk Southern Corporation (NYSE: NSC) is one of the nation's premier transportation companies. Its Norfolk Southern Railway subsidiary operates 21,500 route miles in 22 states, the District of Columbia and Ontario, serving every major container port in the eastern United States and providing superior connections to western rail carriers. NS operates the East's most extensive intermodal network and is the nation's largest rail carrier of automotive parts and finished vehicles.
Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Income
(Unaudited)
($ millions except per share)
Three Months Ended
December 31,
------------------
2002 2001
---- ----
Railway operating revenues:
Coal $ 361 $ 367
General merchandise 914 871
Intermodal 306 292
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TOTAL RAILWAY OPERATING REVENUES 1,581 1,530
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Railway operating expenses:
Compensation and benefits 513 515
Materials, services and rents 368 332
Conrail rents and services 96 97
Depreciation 130 130
Diesel fuel 96 96
Casualties and other claims 42 34
Other 48 51
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TOTAL RAILWAY OPERATING EXPENSES 1,293 1,255
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Income from railway operations 288 275
Other income - net 26 32
Interest expense on debt (128) (136)
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Income before income taxes 186 171
Provision (benefit) for income taxes:
Current 18 61
Deferred 39 (5)
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TOTAL INCOME TAXES 57 56
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NET INCOME $ 129 $ 115
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Earnings per share:
Basic and diluted $ 0.33 $ 0.30
Average shares outstanding (000's) 388,876 385,714
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,
-----------------------
2002 2001
---- ----
Railway operating revenues:
Coal $ 1,441 $ 1,521
General merchandise 3,648 3,526
Intermodal 1,181 1,123
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TOTAL RAILWAY OPERATING REVENUES 6,270 6,170
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Railway operating expenses:
Compensation and benefits 2,022 2,014
Materials, services and rents 1,457 1,444
Conrail rents and services 412 421
Depreciation 515 514
Diesel fuel 342 412
Casualties and other claims 171 143
Other 193 215
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TOTAL RAILWAY OPERATING EXPENSES 5,112 5,163
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Income from railway operations 1,158 1,007
Other income - net 66 99
Interest expense on debt (518) (553)
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Income from continuing operations
before income taxes 706 553
Provision for income taxes:
Current 68 147
Deferred 178 44
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TOTAL INCOME TAXES 246 191
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Income from continuing operations 460 362
Discontinued operations - gain on
sale of motor carrier,
net of taxes (note 1) -- 13
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NET INCOME $ 460 $ 375
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Earnings per share:
Income from continuing operations,
basic and diluted $ 1.18 $ 0.94
Net income, basic and diluted $ 1.18 $ 0.97
Average shares outstanding (000's) 388,213 385,158
See notes to financial statements.
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Norfolk Southern Corporation and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
($ millions)
As of December 31,
-----------------
2002 2001
---- ----
ASSETS
Current assets:
Cash and cash equivalents $ 184 $ 204
Accounts receivable - net (note 2) 683 475
Due from Conrail 6 8
Materials and supplies 97 90
Deferred income taxes 187 162
Other current assets 142 108
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Total current assets 1,299 1,047
Investment in Conrail 6,178 6,161
Properties less accumulated depreciation 11,370 11,208
Other assets 1,109 1,002
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TOTAL ASSETS $ 19,956 $ 19,418
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 908 $ 848
Income and other taxes 269 312
Due to Conrail 86 373
Other current liabilities 232 248
Current maturities of long-term debt 358 605
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Total current liabilities 1,853 2,386
Long-term debt 7,006 7,027
Other liabilities 1,029 1,089
Due to Conrail 513 --
Minority interests 45 45
Deferred income taxes 3,010 2,781
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TOTAL LIABILITIES 13,456 13,328
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Stockholders' equity:
Common stock $1.00 per share par value 410 407
Additional paid-in capital 481 423
Accumulated other comprehensive loss (65) (55)
Retained income 5,694 5,335
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6,520 6,110
Less treasury stock at cost,
21,169,125 shares (20) (20)
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TOTAL STOCKHOLDERS' EQUITY 6,500 6,090
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TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 19,956 $ 19,418
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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)
------------------
2002 2001
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 460 $ 375
Reconciliation of net income to
net cash provided by operating activities:
Depreciation 529 527
Deferred income taxes 178 44
Equity in earnings of Conrail (54) (44)
Gains on properties and investments (47) (59)
Income from discontinued operations (note 1) -- (13)
Changes in assets and liabilities
affecting operations:
Accounts receivable (note 2) (208) (74)
Materials and supplies (7) 1
Other current assets and due from Conrail 1 46
Current liabilities other than debt 35 (27)
Other - net (84) (122)
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Net cash provided by operating activities 803 654
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions (689) (746)
Property sales and other transactions 31 156
Investments, including short-term (78) (99)
Investment sales and other transactions 63 88
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Net cash used for investing activities (673) (601)
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends (101) (93)
Common stock issued - net 42 14
Proceeds from borrowings 672 1,995
Debt repayments (763) (1,765)
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Net cash provided by (used for)
financing activities (150) 151
------- -------
Net increase (decrease) in cash and
cash equivalents (20) 204
CASH AND CASH EQUIVALENTS:
At beginning of year 204 --
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At end of year $ 184 $ 204
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SUPPLEMENTAL DISCLOSURES OF CASH-FLOW
INFORMATION
Cash paid during the year for:
Interest (net of amounts capitalized) $ 525 $ 550
Income taxes $ 54 $ 74
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 $30 million at
December 31, 2002, and $300 million at December 31, 2001.
Media Contact: Bob Fort, Norfolk, 757-629-2710
Investor Contact: Leanne McGruder, Norfolk, 757-629-2861
