Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: THURSDAY, July 27, 1995                   TAG: 9507270057
SECTION: BUSINESS                    PAGE: B-8   EDITION: METRO 
SOURCE: GREG EDWARDS STAFF WRITER
DATELINE:                                 LENGTH: Medium

NS REPORTS RECORD EARNINGS, BUT STILL PLANS TO REDUCE FLEET

The Norfolk-based transportation company reported records in its second-quarter and first-half net income and earnings per share of common stock. Record low operating ratios of 72.1 percent and 73.5 percent also were achieved for the quarter and first half of 1995. An operating ratio reflects the percentage of revenue that is spent on company expenses.

Wednesday's reports mean that for 10 consecutive quarters, the company has earned higher net income than the year before, Hank Wolf, NS executive vice president for finance, told a gathering of securities analysts in New York. "Since the beginning of 1994, Norfolk Southern has reported record income for four of the last six quarters," he said.

Wolf acknowledged the robust economy's role in producing the results, but said NS thinks the company's efforts in increasing revenues and at the same time improving productivity and efficiency enabled NS to set the records.

NS Chairman, President and Chief Executive Officer David Goode said that revenue per carload was up because of better prices made possible by strong business and demand on capacity.

Still, NS has plans to reduce its freight car fleet by 17,000 during the next 18 months, including the auction of 9,500 cars this fall. NS thinks it can reduce its fleet and improve efficiency, Goode said.

The company thinks it can get better use out of its equipment by reducing the time it takes for repairs, Goode said.

Efforts to improve equipment usage played a role in the closing of repair shops in South Carolina and Tennessee this month, as the company seeks to improve car repairs at centralized facilities, Goode said. The underuse of shops in Spartanburg and Knoxville were the major reason for their closing, said Don Mayberry, NS vice president in charge of the mechanical department.

The expense of transferring workers from those shops showed up in the quarterly expenses. Of the 330 affected workers, 76, including 9 supervisors, transferred to Roanoke, where employment in the maintenance department now stands at 1,225 - more than third of total NS employment in the Roanoke Valley.

NS plans to start repairing closed hoppers, such as those used in grain shipments, at its Roanoke shops, in addition to rebuilding coal cars.

Although revenue from NS coal traffic was down 3 percent for the second quarter, solid gains in merchandise freight, even in the face of declines in industrial production, helped the company exceed $1 billion in quarterly revenue for only the second time in its history, Goode said. "Lackluster coal traffic does not necessarily equate to weak financial results," Goode said.

He noted that Norfolk Southern's North American Van Lines subsidiary performed well in the quarter, increasing revenue 6 percent and operating income 12 percent to $6.4 million.

On the rail side, coal traffic suffered from the large stockpiles accumulated by electric utilities during the mild weather that began last winter and continued through June, Goode said. One positive sign for coal is that export shipments, which have been depressed for many months, started recovering late in the quarter. The railroad expects modest gains over the next few months, said Bill Bales, NS vice president for coal marketing.

The railroad's biggest gain in its merchandise traffic was in intermodal shipments, which move by a combination of train, truck and ship. They were up $13 million, or 12 percent. The penetration of new markets and new partnerships with other shippers have helped achieve the results, Bales said. For instance, the company initiated its Northeast-Southeast intermodal partnership with Conrail in May and last September began a new coast-to-coast partnership with Conrail and Union Pacific.

NS revenue from auto shipments was up $9 million or 8 percent, and from paper and forest products was up $3 million or 3 percent. Revenue from chemical shipments was down $3 million or 2 percent. Chemicals and coal were the only two commodity groups showing declines.