Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, January 30, 1992 TAG: 9201300044
SECTION: BUSINESS PAGE: B-5 EDITION: METRO
SOURCE: DANIEL HOWES BUSINESS WRITER
DATELINE: LENGTH: Medium
NS ENDS AN `UP YEAR'
Norfolk Southern Corp.'s plan to trim future labor costs hit the bottom line Wednesday. The transportation company reported a $354.6 million loss for last year's fourth quarter, thanks to a $680 million charge to fund work-force reductions.But the nation's fourth-largest railroad ended the recession-battered year with net income of $29.7 million, or 20 cents per share, which would have been $527.4 million, or $3.57 per share, without the special one-time charge.
"All in all, we had a pretty good year," said John Turbyfill, chief financial officer.
Analysts greeted the news calmly, saying the only question was the size of Norfolk Southern's charge against earnings. "Everybody's had write-downs of that magnitude," said Jeffrey Medford, a transportation analyst with Wheat, First Securities in Richmond.
"The best investment railroads can make today is to take these charges, because the return is far better" than anything else they could do with that money, he said.
Norfolk Southern's common stock price rose 12 cents a share on Wednesday, closing at $56.50.
"We view the costs . . . as sound investments to strengthen the competitiveness of Norfolk Southern's rail carriers," the company's chairman, Arnold McKinnon, said in a statement.
Norfolk Southern said 625 employees - most of them brakemen - accepted the railroad's November and December offers, which will cost $450 million of the $680 million set aside. The reserve fund will cover separation payments, reserve workers - who will be paid 75 percent of their current salaries - and buyouts of a special productivity fund.
"You simply do not need three or four people on a train. It's a fact," said Graeme Anne Lidgerwood at First Boston Corp. in New York. "I think ultimately this will mean more business for the railroad. Over time this will mean more jobs" as the railroad becomes more competitive and eventually expands.
When the company said in the fall that it planned to take a charge against fourth-quarter earnings to pay for the labor reductions, it also said it might suspend its stock buy-back program. Wednesday, the company said the program would be continued but at a slower pace.
Norfolk Southern, like other railroads, is being forced to reduce costs and grow more efficient just to stay in the transportation business. Wednesday, the company acknowledged that it paid too much for North American Van Lines Inc. when it took a write-down on the "good will" it had been carrying on its books.
"We overestimated how much income we were going to get out of it," Turbyfill said in an interview. A statement released Wednesday said the $187 million expense was taken because of "reduced profit margins" in the "intensely competitive" trucking industry.
McKinnon said the North American write-down "does not reflect a lack of commitment to the business." Indeed, the company recently approved a $92 million capital budget for this year.
Norfolk Southern succeeded despite the lingering recession, having what Medford called "basically . . . an up year." The continuing slump in car sales pushed NS revenues for hauling auto-industry goods down 11 percent and its metals revenue down 10 percent.
Coal business slipped 6 percent in 1991 thanks to weak industrial demand for electricity and long stretches of mild weather that left domestic utility companies with large stockpiles. Exports also dipped, though company officials predicted improvement this year as some European subsidy programs abate.