Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, October 28, 1993 TAG: 9310280047
SECTION: BUSINESS PAGE: B-8 EDITION: METRO
SOURCE: GREG EDWARDS STAFF WRITER
DATELINE: LENGTH: Medium
Federal tax legislation enacted by Congress in August as part of President Clinton's deficit reduction package increased the corporate income-tax rate from 34 percent to 35 percent and made it retroactive to Jan. 1.
That increased NS' income tax for the first nine months of the year by $51.8 million - all of it recorded in the third quarter.
David Goode, NS chairman, president and chief executive officer, told a meeting of securities analysts in New York on Wednesday that net income for the quarter would have risen 1 percent over last year had the company not faced the higher tax bill.
"By any measure, the third quarter was a very challenging period," Goode told the analysts, citing Midwest floods that severely slowed and rerouted many trains, the continuing strike by coal miners, a weak coal-export market and the new tax law.
Damage caused by the flooding of the Mississippi River and its tributaries this summer cost the company $15 million: $12 million in damages to plants and equipment and $3 million in higher operating costs.
But the flooding had its brighter side for NS, whose employees "worked tirelessly" to restore damaged lines and service to the railroad's customers, Goode said. "If there is a silver lining that comes from the flooding, I think it's closer relations with many key customers and also closer relations with other railroads," he said.
Revenue from coal transport was down 9 percent in the quarter and 6 percent for the nine-month period that ended Sept. 30.
Shipments of coal to electric utilities and steel mills in the United states did "pretty well," but exports fell again during the period, said D. Henry Watts, executive vice president for marketing. NS operates a large export coal facility at Lamberts Point in Norfolk.
Bill Bales, vice president for coal marketing, said the company doesn't expect significant improvement in exports until 1995. Working in NS' favor then, Bales said, will be closing of mines in the United Kingdom, easing of environmental concerns in Italy, end to $150-a-ton subsidies by the German government of its coal industry and new contracts with the Japanese.
Also helping the coal business, which accounts for roughly one-third of NS' railway revenues, is the start in early October of Western coal shipments from Wyoming's Powder River Basin to Georgia Power, Watts said. They should account for 3.5 million tons of new business for NS next year.
Additionally, NS, which serves the low-sulfur coalfields of Central Appalachia, should benefit from implementation of federal Clean Air Act regulations next year, Watts said. Under the federal law, utilities can switch to cleaner-burning coal rather than install costly smokestack scrubbers.
While NS suffered at the hands of the tax man, it benefitted overall from changes in its accounting practices.
Significant factors in NS' third-quarter and nine-months earnings reports were:
An early-retirement program for salaried workers completed in September, which cost the company $42.2 million. Of 611 employees eligible, 378 chose to retire, which the company said will save $12 million annually, beginning in 1994.
The $50.3 cost of restructuring NS' North American Van Lines trucking unit, which involves selling two of the motor-carrier divisions, Commercial Transport and Tran-Star.
by CNB