Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, July 28, 1994 TAG: 9407300029
SECTION: BUSINESS PAGE: B10 EDITION: METRO
SOURCE: GREG EDWARDS STAFF WRITER
DATELINE: LENGTH: Medium
The Norfolk-based transportation company also reported that its earnings per share for those time frames set records.
Record railway operating revenues combined with smaller increases in operating expenses led to the record profits, NS Chairman David Goode said.
Net income in the quarter was $178.5 million, up 15 percent from last year. Earnings per share in the quarter were $1.30, an increase of 17 percent above the same period of 1993.
For the first half of the year, NS reported net income of $323.4 million. Discounting accounting changes that increased last year's first-half income, that amounted to a 10 percent increase. Earnings per share for the first six months were $2.35.
"Norfolk Southern's strong second-quarter results reflected a combination of solid gains in merchandise traffic and somewhat more modest growth in coal traffic," Goode told a briefing in New York for securities analysts. Revenues from merchandise freight rose about 5 percent from a year earlier, while coal revenues were up 2 percent, Goode said.
Actual carloadings of merchandise freight were up 7 percent from last year.
"Our results support the claim that rail traffic growth is not just a function of a cyclical economy, but a basic shift by industries toward the rail mode," said Henry Watts, executive vice president for marketing. He said the growth in carloadings outpaced the economy.
Watts reported that all rail freight merchandise categories but one experienced ``solid traffic growth'' during the quarter. The transport of metals and construction materials jumped 15 percent, intermodal shipments - those that travel part way by truck - were up 12 percent, and chemical shipments were up 10 percent.
Down by 7 percent were shipments of new automobiles from plants on NS lines. A major reason for the decline, Watts said, was the shutdown of some auto plants for retooling to produce new models.
However, new Toyota and BMW plants, both served by NS lines, will be coming into production and should offset the lost traffic. Opening those car factories means NS shipments will be 50 percent higher than before, he said.
The volume of coal shipments on the NS improved by 6 percent during the second quarter compared with the same period last year, Watts said. The growth was attributable to shipments of coal to electric utilities, as shipments to steel plants and export markets remained weak.
Bill Bales, vice president for coal marketing, said NS does not expect much change in its export business for the rest of the year. As coal supplies tighten up, markets should return to normal in the next year or two, he said.
The lower percentage increase in freight revenues compared with the increase in carloadings was caused by the fact that some of the new business involves shorter hauls that pay less, Watts said.
"The important story" that NS has found in its record quarter, Goode said, is that the company was able to increase its revenue while controlling expenses even as the amount of traffic increased.
The company has begun to see results from its efforts to increase the use of its locomotives and freight cars, Goode said.
Steve Tobias, vice president of operations, said the company had improved the utilization of its locomotives by 7 percent during the first half of the year. Goode added that the company still hopes to improve on the current locomotive use of 54 percent.
The job cuts that NS has made over the past two or three years - early retirements and agreements the company has made with labor unions to reduce the size of rail crews to two people - are beginning to bear fruit, Goode said.
NS employees have faced the challenge of dealing with increased business without letting the size of the company's physical assets and its labor force creep back up, the chairman said.
The largest expense increase for NS during the quarter was in the area of casualties and other claims, which were up $7.7 million or 26 percent.
A single rail car leak in Chattanooga, Tenn., cost $5 million to clean up, and repairing damage caused by flooding in Georgia will total about $6 million, Goode said.
North American Van Lines, an NS motor carrier subsidiary, made a profit of $5.7 million for the quarter compared with a loss last year.
NS operating ratios for the quarter and first six months were also records. The ratio, which weighs rail operating expenses against income, was 72.7 percent in the second quarter compared with 73.9 percent last year. For the first six months it was 74.4 percent versus 75.8 percent last year.
The company's common stock, trading on the New York Stock Exchange, closed Wednesday at $64 a share, down 62 1/2 cents from Tuesday.
by CNB