DATE: Friday, April 25, 1997                TAG: 9704250654

SECTION: BUSINESS                PAGE: D1   EDITION: FINAL 

SOURCE: BY CHRISTOPHER DINSMORE, STAFF WRITER 

                                            LENGTH:   62 lines

CSX EARNINGS SLOW SLIGHTLY FOR FIRST QUARTER

CSX Corp.'s effort to merge with Conrail slowed its first-quarter earnings, but not enough to stop an increase in those earnings.

The Richmond-based transportation conglomerate reported a $151 million first-quarter profit on Thursday, an increase from $146 million last year. On a per-share basis, earnings rose a penny to 70 cents.

CSX would have made $167 million, or 77 cents a share, in the quarter were it not for $24 million in costs associated with its effort to take over Conrail Inc.

Conrail Inc. nearly doubled its first-quarter profit, it announced Wednesday.

Conrail made $61 million in the quarter ended March 31 and would have made even more were it not for $22 million in costs related to its now changed plans to merge with CSX. It had made $31 million in the quarter ended March 31, 1996.

On a per-share basis, earnings rose to 71 cents a share from 35 cents a share.

The railroad's revenue rose 1.9 percent to $906 million. Freight volume rose 4.9 percent in the quarter, led by gains in intermodal and automotive business.

CSX originally planned to buy Conrail on its own, but Norfolk Southern Corp. bulled its way in. After a five-month bidding war, CSX and its Norfolk-based rival agreed to split Conrail's Northeastern freight rail network.

In earnings announced Wednesday, Norfolk Southern took a $77.2 million charge associated with the Conrail fight. The fray depressed its quarterly earnings 24 percent to $127.8 million.

CSX is buying 42 percent of Conrail for $4.3 billion, while Norfolk Southern is acquiring the balance for $5.9 billion.

``We're very happy with how this situation turned out,'' said CSX Chairman John W. Snow. ``We've got the parts of Conrail that fit with us and will enable us to provide both east-west service and develop the north-south business.''

The deal must still be approved by federal regulators in a process that will likely take until at least early next year.

CSX's rail unit buoyed the company's first-quarter profit. CSX is more than just the nation's third-largest railroad. The company also owns Sea-Land Service Inc., one of the world's largest ocean shipping lines, and American Commercial Lines Inc., the nation's largest inland barge line.

However, those two units had a tough quarter.

``Rail earnings were very strong, more than offsetting the effects of rate pressure in key ocean container trade lanes and extreme flooding conditions on the inland waterways that hurt Sea-Land and our barge company,'' Snow said.

The railroad's improvement came from increased margins between revenue and costs.

CSX's total quarterly revenue rose 2.1 percent to $2.57 billion, from $2.51 billion.

Like Norfolk Southern, CSX has high expectations for the Conrail takeover, which will make its railroad the largest in the East with $7.1 billion in annual revenues and 23,000 miles of routes connecting all the major markets in the East.

Within three years of the takeover, CSX expects to squeeze out $165 million in annual expense savings and increase traffic by at least $75 million a year, said Alvin R. ``Pete'' Carpenter, chief executive of CSX's rail unit.

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