THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Thursday, October 26, 1995 TAG: 9510260451
SECTION: BUSINESS PAGE: D3 EDITION: FINAL
SOURCE: BY CHRISTOPHER DINSMORE, STAFF WRITER
LENGTH: Medium: 89 lines
Norfolk Southern Corp. rolled to another quarter of record earnings despite the slowing economy by controlling costs and boosting revenues in some sectors.
The Norfolk-based railroad's earnings per share have been so strong this year that it has made more in the first nine months of 1995 than it has in every year except the past two.
The railroad said Tuesday it made a record $183.9 million, or $1.40 per share, in the quarter ended Sept. 30. That's a 9 percent increase from last year's third quarter, when it made $168.3 million, or $1.24 per share.
Third-quarter revenues nudged up 1 percent to $1.18 billion.
``The third quarter is often a challenging one for Norfolk Southern,'' said David R. Goode, its chairman, chief executive and president.
A railroad's fortunes typically track with the economy, which slowed in the past few quarters. Additionally, Norfolk Southern's third quarter is typically affected by the coal miner's annual summer holiday, which slows coal shipments, and by shutdowns of auto plants to change over for new model production, Goode said.
``Our earnings reflect continued revenue gains despite slow growth in the economy and a little sluggishness in our region,'' Goode said.
Norfolk Southern operates 14,500 miles of track in 20 states throughout the the Southeast and Midwest.
In the first nine months of 1995, Norfolk Southern has made $535.8 million, or $4.07 per share, up from last year's $491.7 million, or $3.59 per share. Year-to-date revenue was up 3 percent to $3.51 billion.
The railroad's ongoing success controlling its operating costs contributed to its earnings success, said Renee D. Weaver, railroad analyst for the Richmond brokerage Wheat First Butcher Singer.
All railroads have had great earnings success recently by finding new sources of revenue and hammering costs down, she said.
Goode said, ``Revenue improvements were enhanced by a relentless pursuit of operating efficiencies.''
Norfolk Southern saw revenue gains from increased movements of automobiles, steel and intermodal shipments, executives said.
The intermodal business, which gained 9 percent in the quarter and 13 percent so far this year, involves the transportation of truck trailers and shipping containers that can be hauled by and transferred between rail cars, cargo ships and trucks.
L.I. ``Ike'' Prillaman, the railroad's newly appointed executive vice president of marketing, attributes intermodal gains to new partnerships that have allowed Norfolk Southern to penetrate new markets, such as its connections to Miami via the Florida East Coast Railroad and to New York via Conrail Inc.'s line. Gains in new car and truck shipments can be attributed to the popularity of the models produced by the plants it serves, Prillaman said.
Revenues from coal shipments, once the railroad's backbone, slacked 2 percent compared to last year, due to coal stockpiles early this summer at many of the railroad's utility customers, Goode said.
Export coal, shipped through the railroad's terminal at Lambert's Point in Norfolk, picked up some of the slack, increasing 19 percent in the third quarter, Goode said. That's expected to continue.
And domestic utility coal stockpiles have come down, and orders are picking up in the fourth quarter, Goode said. ``If coal is really back, we should end the year well,'' he said.
With the economy slowly improving after the recent so-called ``soft landing,'' fourth-quarter results should be above last year's, Prillaman said.
Norfolk Southern will take a charge against fourth-quarter earnings to pay for an early retirement program announced in late September. So far, 246 of the 475 retirement offers have been accepted, Goode said. Workers have until Friday to accept the offer.
The railroad sees ``very fast pay-backs and ongoing savings from these programs,'' Goode said. The 246 acceptances so far represent an annual savings of $16 million.
One future stumbling block for Norfolk Southern could be the ongoing talks between the railroad industry and its unions. Talks are in the early stages, but the sides have met more than 120 times since last November.
``The industry is finding it tremendously difficult to move those talks along,'' Goode said.
To continue to grow, the railroad needs to provide high levels of service at a reasonable cost, Goode said. ``It's always hard to negotiate with the unions when times have been good,'' he said. ``But I would point out that times have been good recently because the industry has been so focused on productivity and keeping costs down.''
In trading on the New York Stock Exchange, Norfolk Southern's stock slipped 1 1/8 to 76 3/4 per share Wednesday. by CNB