THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Thursday, July 25, 1996 TAG: 9607250401
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY CHRISTOPHER DINSMORE, STAFF WRITER
LENGTH: 65 lines
Automakers have built eight of their past 11 major U.S. auto assembly plants on rail lines owned by Norfolk Southern Corp., and the railroad has begun to reap rewards from the auto industry's shift to the Southeast.
Led by a 12.5 percent gain in revenues from its automotive business, Norfolk Southern on Wednesday reported yet another quarter of record earnings. The railroad's cost cutting helped allay the impact of a 21 percent surge in diesel fuel costs during the quarter ended June 30.
``By virtually any measure, 1996 has been by far the best year in our history, and we fully expect it to end that way,'' said David R. Goode, the company's chairman, chief executive and president.
``The economy looks good,'' he added. ``We see no serious near-term threats to continued growth.''
The Norfolk-based railroad made $199.5 million in the second quarter, a 10 percent gain on $181.2 million it made in the same period a year ago. Per share earnings rose to $1.57 from $1.38.
So far this year, Norfolk Southern has earned $367.6 million, or $2.88 a share. That's up from $351.9 million, or $2.67 a share, in 1995's first half.
Norfolk Southern's revenues grew 2 percent to $1.22 billion in the second quarter and $2.38 billion for the first half of 1996.
Besides growth in the automotive business, the revenue gains were driven by the railroad's coal market, which grew by $10 million in the quarter and $27 million in the half. Coal accounts for nearly a third of Norfolk Southern's rail revenues.
The railroad got a $15 million revenue boost from the automotive market.
``This is particularly satisfying because our revenues grew more rapidly than U.S. production,'' said L.I. ``Ike'' Prillaman, the railroad's executive vice president-marketing.
Results from hauling for the auto industry should continue to grow as all the plants on Norfolk Southern rail lines will be in full production during the third quarter, Prillaman said.
A $10 million gain in the railroad's chemicals, metals and construction shipments was offset by a similar slide in its paper business, reflecting that industry's declining production.
Intermodal revenue was also down, falling 3 percent to $116.4 million in the quarter as the railroad focused on moving containers rather than trailers. Moving containers provides more profit, but less revenue, Prillaman said.
Despite rising fuel costs, Norfolk Southern kept its overhead in check. Railway expenses rose only 1 percent even as diesel fuel prices increased by more than 9 cents a gallon during the period, adding $10 million to the railroad's overhead.
But the added fuel costs were mitigated by lower labor costs due to last year's early retirement program and the closing of two car-repair shops. Maintenance costs were also lower thanks to new locomotives and a smaller, better utilized fleet of cars.
Lower taxes also helped the railroad boost its income. Besides adjustments from a favorable audit of its returns for 1990, 1991 and 1992, the company earned tax credits from its ownership of several oil and gas producing properties. It bought those properties last year and the tax credits will flow until 2002.
Even the railroad's once troubled trucking unit posted good results in the second quarter. North American Van Lines posted a 64 percent gain in operating income, contributing $10.5 million to Norfolk Southern's coffers.
Norfolk Southern's stock rose 1/2 to $81 1/8 a share in trading Wednesday on the New York Stock Exchange.
Its second quarter earnings slightly exceeded the $1.55 per share consensus estimate of rail stock analysts. by CNB