 David R. Goode Chairman, President and Chief Executive Officer |
Thousands of our people dedicated their talents to intensive preparation for operation of the new Norfolk Southern. At the same time, they maintained a clear focus to provide the transportation services our customers and the public demand. These dual efforts required extraordinary concentration and execution.
As I look back on 1998, I'm proud of the Norfolk Southern family. Our people continue to work daily to realize our vision to "be the safest, most customer-focused and successful transportation company in the world."
Preparation for the Conrail transaction
The consolidation of two companies always is complicated. But creating a new Norfolk Southern in this transaction was even more challenging. Integrating a part of the Conrail network and a substantial portion of its workforce has been NS' greatest challenge.
Proper preparation has required substantial investments -- in assets; in people and training; in tools and physical plant; and in systems - to assure both compatibility and our ability to implement successfully a sophisticated operating plan.
Those investments have a short-term but significant impact on our bottom line. Including the sale of North American Van Lines, net income in 1998 was $734 million, up only slightly from last year. Results from continuing operations reflect the added costs of preparing for Conrail. We believe the sacrifices we are making will enable us to realize unparalleled, long-term opportunities. Moreover, we continue to believe that making these early investments is essential to our success.
For as great as the challenge of our preparation has been, the potential of our new network is even greater. That's why we stayed the course and will continue to do so.
The new Norfolk Southern is a transportation dream. The system covers the right markets with the capacity to grow and serve customers better in the future. Our success depends entirely on our ability to deliver precision transportation service. I have no doubt our people, including the great Conrail people who are joining the team, know how to do that. Ultimately, our investments will benefit stockholders, employees, shippers, and the public who depend on a safe, reliable transportation system.
With the approach of June 1, 1999, the date on which we will operate the new Norfolk Southern, we are nearing the time when hard work and everyone's confidence in the importance and value of this transaction will be rewarded. We remain committed to a strategy of growth through continuous improvement in the quality of our service and extended market reach. The principles of Thoroughbred Quality and dedication to customer satisfaction will open the doors to growth for the best transportation system in the business.
Focus on 'getting the work done'
Even as we planned in detail for the new Norfolk Southern, NS people never lost sight of the daily need to meet customer expectations. In 1998, we experienced numerous challenges in achieving the levels of service that our customers expect and that we expect of ourselves. The important thing is that we recognized the need to improve our customer service and responded accordingly.
To provide better service, we added line capacity, locomotives, equipment, and terminals. We refined the automotive mixing center network. We also redesigned our intermodal network. We invested in the most modern technology in transportation. These enhancements - some of which affected 1998's financial results - addressed current needs, while also taking into account our plans for the future NS system.
Challenging though the year was, our employees' unwavering focus allowed NS to record many accomplishments. In no area were the results more important than in employee safety. In 1998, we received our ninth consecutive E.H. Harriman Gold Medal award, an unprecedented accomplishment. We again set the industry standard, while preparing to join the strong safety culture of Conrail with the great tradition of NS to establish a new industry standard for world-class safety.
In addition to being a source of great pride, our safety performance confirms that, even in difficult times, we can stretch to amazing heights when we work as a team. We continue to believe that safety and Thoroughbred Quality can combine to set industry service standards.
A significant milestone was reached in service during the year when we achieved ISO 9002 certification. Our continued focus on Thoroughbred Quality is evidence of our people's dedication.
The result: a stronger company
As a result of our preparation for the Conrail integration and our daily focus on fundamentals, Norfolk Southern entered 1999 a much stronger company. Our rail transportation system is primed for its future. We will deliver unsurpassed service and see the financial benefits that follow.
The portion of Conrail we will soon operate to create the new Norfolk Southern makes two excellent rail systems better. We have the equipment to handle growth and the best information and transportation systems in the business.
To these physical resources, we add our most important asset: an exemplary group of people - from both NS and Conrail. We will rededicate ourselves to the principles of teamwork and continuous improvement so all our team can contribute to the success of the company. We will combine the best from our rich cultures to create the finest team in the business and an even stronger Thoroughbred of Transportation.
The combination of our strategies, the investments we have made in our people, as well as in other resources, and the unwavering commitment of Norfolk Southern people will make the Thoroughbred a winner. I have confidence that all who care about and believe in Norfolk Southern can look forward eagerly and optimistically to its future.
January 26, 1999
David R. Goode
Chairman, President,
and Chief Executive
Officer