1998 was an exceptional year for NS. Employees hauled a record 4.8 million carloads of freight safely. Net income increased 2% over 1997.

Earnings were affected positively by the sale of North American Van Lines but were under pressure in 1998 from costs to prepare for the Conrail transaction, a weak Asian economy, a softening domestic market, and nationwide rail service disruptions early in the year.

While handling record carloads, NS employees also planned for the biggest event in the company's history: operating a large portion of Conrail's routes and assets as integral parts of the NS rail system, beginning on June 1, 1999.

In 1998, NS achieved ISO 9002 certification - a globally recognized quality standard.

1998 was a countdown year - a countdown to growth. On July 23, the Surface Transportation Board issued a written order giving NS and CSX permission to operate portions of Conrail. It took effect 30 days later, and the two railroads set their sights on preparing for Day One.

To plan for the transaction, NS established some 130 implementation teams and subteams to coordinate both internally and with counterparts at Conrail and CSX, which will operate other portions of Conrail.

By year's end, NS had signed agreements with or was awaiting ratification from 16 of 19 labor organizations affected by the Conrail transaction.

NS opened three additional merchandise sales offices: in Baltimore; in Buffalo, N.Y.; and in San Francisco to meet customer needs anticipated in connection with the Conrail transaction.

NS also established Coal Marketing and Corporate Affairs offices in Philadelphia.

Meanwhile, NS people were at work around the clock to serve customers safely and efficiently.

Among the year's highlights:

• NS took top honors in the E.H. Harriman Memorial Safety Awards for an unprecedented ninth consecutive year for having the safest employees in 1997 among the major railroads. NS in 1997 had 0.92 reportable injuries for every 200,000 employee-hours worked.
• The rail industry's top individual safety award, the Harold F. Hammond Award, was presented to NS employee Jeff "J.C." Layne, a boilermaker at Chattanooga, Tenn.
• NS achieved ISO 9002 certification - a globally recognized quality standard - for its rail transportation services group.
• NS made three presentations of its Thoroughbred Award, the highest honor given an employee. Conductor Robert Mohr and Locomotive Engineer Rod Lindley were cited for saving the life of a 19-month-old girl who wandered into their train's path in Lafayette, Ind. James C. White, a roadway equipment repairman, received the award for containing a fire that threatened to destroy the Wheelersburg, Ohio, coal-loading facility where he works.

Outside recognitions received:

• "America's Most Admired Railroad." NS was recognized in FORTUNE®'s 17th annual Corporate Reputations Survey, in the magazine's March 1, 1999, issue, making this the fifth time in six years that NS has been first in the railroad category;
• Chrysler's Gold Pentastar Award;
• Eastman Chemical Co.'s Innovation Award; and
• A citation from the Smithsonian Institution and Computerworld magazine for innovative application of technology associated with NS' Strategic Intermodal Management System.

Among business happenings:

• The new Ford mixing center network contributed to a 15% revenue increase in automotive traffic.
• NS and Kansas City Southern opened a joint intermodal facility at Port Arthur, Texas.
• NS and Guilford Rail System launched a competitive new intermodal service for New England.

In other activities:

• NS continued to address Y2K readiness to assure that essential business functions operate normally through the millennium change and beyond.