NS, BNSF report disappointing results, while CSX improves

By Staff -- Logistics Management, 2/1/2001

In reaction to disappointing fourth-quarter operating results, Norfolk Southern Corp. plans to restructure the company, dropping 3,000 to 4,000 miles of underutilized or duplicate track over the next two years and eliminating 1,000 to 2,000 jobs over the next year. The job cuts will be in addition to the layoffs and early retirements that eliminated 3,500 jobs last year, bringing the company's payroll down to 33,000.

Those cutbacks were announced in tandem with the news that NS's fourth-quarter dividend would be 6 cents per share, compared with 20 cents per share in the previous quarter. "The dividend reduction was a difficult decision but a necessary component of our restructuring, which is part of a series of planned actions that Norfolk Southern is taking in response to the economic slowdown and changes in our transportation markets," says David R. Goode, Norfolk Southern chairman, president, and chief executive officer.

The company plans to dispose of 12,000 surplus freight cars and consolidate or dispose of up to 10 underused or redundant support facilities. It also will redesign its service network with the assistance of MultiModal Applied Systems, a consulting firm with a successful track record of helping railroads reduce operating costs while improving service levels.

Norfolk Southern Corp. of Norfolk, Va., owns Norfolk Southern Railway Co. It operates 22,000 miles of track in 22 states, the District of Columbia, and the province of Ontario.

Meanwhile, Burlington Northern Santa Fe Corp. of Fort Worth, Texas, the nation's second-largest railroad, reported lower fourth-quarter earnings. BNSF paid out 65 cents per share, down 6 percent from fourth-quarter 1999 earnings of 69 cents.

"Reduced traffic volume from a slowing economy, early winter weather that hampered some Midwestern rail operations, and sharply higher fuel prices [affected] BNSF's fourth-quarter earnings," says Matthew K. Rose, president and chief executive officer. He notes, however, that this gloomy picture was softened somewhat by cost containment that allowed the railroad to increase free cash flow by 66 percent to $431 million.

BNSF reported revenues of $2.34 billion for the fourth quarter, $51 million less than it took in during the fourth quarter of 1999. Operating expenses were $1.80 billion, up $8 million over the same period in 1999. Fuel costs rose by $75 million compared with the previous year, despite a 3-percent decrease in consumption, the company reported. BNSF operates 33,500 route miles covering 28 states and two Canadian provinces.

CSX Corp. of Richmond, Va., reported net income for the fourth quarter of $54 million and a dividend of 26 cents per share. In 1999, the company suffered a net loss of $25 million. CSX Corp. operates the largest rail network in the eastern half of the United States. It also provides intermodal, domestic container shipping, and global container terminal operation services.

Combined rail and intermodal revenues and operating income for the quarter were $1.8 billion and $205 million, respectively, both up slightly from 1999's figures. Cost reductions and pricing initiatives enabled the railroad to absorb a $55 million increase in fuel expenses in 2000 and offset lower revenue from weaker car loadings as the economy declined.

John W. Snow, CSX's chairman and chief executive officer, says railroad operations are improving, along with service reliability. "Despite this progress, earnings were constrained by soaring fuel prices and the sudden softening in key sectors, notably autos, chemicals, paper, and steel," he says. "Results for 2001 will rest heavily on how the overall economy performs."