The volume of containers at the Norfolk International Terminal intermodal facility illustrates the growth of international shipping. NS' expanded system is well positioned to handle this market segment, with new access to the ports of New York/New Jersey, Baltimore and Philadelphia. Those ports have a combined tonnage of 105 million tons of cargo annually. NS now serves every major East Coast port and provides customers with transportation links to global markets. (Click image for larger version.)

Financial Overview

Financial results in 1999 reflect the difficulties encountered in the commencement of operations in the Northern Region, a sharp drop in export coal traffic volume and a large increase in diesel fuel costs. On June 1, NS began operations in the new Northern Region, and as a result, railroad route-miles operated and railroad employees increased by about 50%. However, service problems resulted in some customers using other modes of transportation.

Net income for 1999 was $239 million, or 63 cents per diluted share, down 62% compared with income from continuing operations in 1998.

"Our challenges now are to continue the recent improvements in operating efficiency, recapture diverted business and reduce the added costs we have faced in the second half of the year," said Hank Wolf, NS vice chairman and chief financial officer. "Continuous improvement in operating efficiency and customer service are the keys to restoring the financial performance that our stockholders expect."

Railway operating revenues were $5.2 billion, up $1.0 billion, or 23%, compared with 1998, reflecting the operations in the Northern Region. General merchandise revenues increased $620 million, or 26%. Intermodal revenues increased $291 million, or 54%. Coal revenues increased $63 million, or only 5%, as the effects of the Northern Region traffic were largely offset by a sharp decline in export coal volume.

Revenues for each of the general merchandise commodity groups increased, principally as a result of the expanded operations. Metals and construction revenues increased $189 million, or 51%. Automotive revenues increased $174 million, or 31%. Chemicals revenues increased $146 million, or 25%. Agriculture, consumer products and government revenues increased $70 million, or 18%. Paper, clay and forest products revenues increased $41 million, or 8%.

Railway operating expenses were $4.5 billion, up $1.3 billion, or 41%, compared with 1998, which reflected costs associated with the commencement of operating on the Northern Region and congestion-related costs following the June 1 transition. The railway operating ratio was 86.2%, compared with 75.1% in 1998, reflecting the revenue diversions and congestion-related costs experienced following the commencement of operations on the Northern Region. Dividends

Total dividends paid in 1999 were $304 million, and dividends per share were 80 cents. Based on year-end prices, stockholders received a dividend yield of 3.9% in 1999, compared with an average of 1.1% for all S&P 500 stocks.

Since 1983, NS' first full year after consolidation of Norfolk and Western and Southern railways, the annual dividend has grown at a compound annual rate of 6.1%, well above the average inflation rate of 3.3%.