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Rail News: Rail Industry Trends

First-half 2001 an all-around good six months for NS, Wolf says


Norfolk Southern Corp. turned the corner on its financial decline in first-half 2001, improving its earnings per share despite a weak economy, said Vice Chairman and Chief Financial Officer Henry Wolf during an Aug. 22 presentation at the Merrill Lynch European Rail Conference in London, according to a prepared statement.

NS' first-half operating revenue of $3.1 billion increased 1 percent — or $32 million — compared with first-half 2000, while first-half net income of $168 million rose 29 percent compared with first-half 2000's $130 million, excluding a workforce reduction charge (NS lowered its headcount from 35,996 employees in January 2000 to 31,117 workers in June 2001, mostly through early retirement, attrition and furloughs).

And the company's six-month 84.5 operating ratio compares favorably with first-half 2000's 86.9, said Wolf.

However, first-half carloads dropped 3 percent — or 93,000 units — compared with a similar period last year, with about 69,000 units of the carload decline occurring in the second quarter.

As for operating metrics, NS' June figures improved in all areas compared with mid-2000: cars-on-line hovered around 200,000, dropping 7.9 percent; average train speed rose to more than 22 mph, increasing 11.4 percent; and average terminal-dwell time of about 22 hours improved 6.7 percent.

Wolf believes many of NS' performance improvements are tied to "NS 21," the railroad's ongoing initiative aimed at improving business processes to boost customer service and reduce costs.

"To date, NS 21 has resulted in $42 million in cash savings, some of which are non-recurring cash proceeds while others are continuing reductions in expenses or capital requirements," he said.

Through the year's first half, NS 21 teams acquired sales commitments to dispose of 10,000 rail cars, yielding $33 million; cut the number of locomotives used daily by 352; negotiated sales and leases, or began abandonment procedures aimed at eliminating 955 miles of NS' lines (more than 200 miles have been eliminated to date); and closed four facilities, sold two shops and continued to pursue plans to close the Hollidaysburg, Pa. car shop Oct. 1.

NS in second-half 2001 plans to continue rolling out a strategic sourcing initiative through NS 21, designed to reduce the railroad's $2.2 billion purchasing budget.

"Within the next four weeks, we will launch the next wave of strategic sourcing targets, which include locomotive and freight-car material; telecommunications, materials and services; purchasing card costs; and electric utility costs," said Wolf, adding that NS plans to announce a second phase of NS 21 programs by year-end.