NS Annual Report 2002
  
2002
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Financial Overview

Norfolk Southern’s financial results improved despite a difficult economic environment. Net income increased 23% as strong operating results led to a 15% gain in income from railway operations. Cash flow improved, which allowed NS to repay $303 million of debt (excluding borrowings from Conrail) and to reduce the amount of accounts receivable sold by $270 million. The quarterly dividend was increased midyear from 6 cents to 7 cents a share, a 17% increase.

Railway operating revenues were $6.3 billion, up 2% compared with 2001. General merchandise revenues increased $122 million or 3%, supported by a $76 million or 9% gain in automotive revenues. Intermodal revenues increased $58 million or 5%, on a 6% rise in traffic volume. Coal revenues were $80 million or 5% lower, as traffic was down 4%.

Railway operating expenses were $5.1 billion, down $51 million or 1%, despite a 1% increase in carloadings.

Income from railway operations was $1.2 billion, an increase of
$151 million or 15%, resulting from the $100 million gain in revenues and the $51 million decline in expenses.

The railway operating ratio improved to 81.5%, compared with 83.7% in 2001. The improvements reflected efficiency gains achieved after implementation of the Thoroughbred Operating Plan.

Net income for 2002 was $460 million or $1.18 per diluted share, up $85 million or 23%, compared with 2001.

Railway Operating Revenues Chart
Railway operating revenues increased by $100 million in 2002, primarily because of higher traffic volume.
Railway Operating Expenses
Railway operating expenses dropped
$51 million or 1%, despite slightly higher traffic volume.
Income From Railway Operations Chart
Income from railway operations increased $151 million or 15% in 2002, reflecting the improvement in revenues and expenses.
Railway Operating Ratio
The 2% increase in railway operating revenues, coupled with the 1% decline in railway operating expenses, produced a railway operating ratio of 81.5% in 2002, 2.2 percentage points better than that of 2001.
Net Income Chart
Net income increased $85 million or 23% in 2002, a result of the improvement in income from railway operations.
Earnings Per Share - Diluted Chart
Diluted earnings per share for 2002 were 22% higher than in 2001.

*2000 excludes work-force reduction costs of $165 million, which added 2.7 percentage points to the railway operating ratio, reduced net income by $101 million and reduced diluted earnings per share by 26 cents.