NS 21 efforts continue to expand and bring results

Norfolk Southern's NS 21 efforts to improve productivity and reduce costs continue to generate substantial results.

"We have focused on our business processes and how we need to change them to take us into the 21st century," said Kathryn McQuade, senior vice president financial planning and member of the NS 21 steering committee. "Our focus is on changing our processes to be more efficient, improving communication and coordination, and eliminating redundant work and overcapacity in our system."

Since the analysis process began in October 2000, the company has realized $110 million in benefits, including $45 million in recurring cost savings. Results include reducing the number of facilities owned or operated, reducing the freight car and vehicle fleets, improving the quality and accuracy of day-to-day transactions with customers, improving EDI opportunities for small- and medium-sized customers and implementing strategic sourcing strategies for purchasing materials and services.

McQuade said the full implementation of NS' Thoroughbred Operating Plan has helped identify more opportunities to improve asset utilization and productivity.

"We now have a Track Structure and Density team that is matching our network under TOP to our existing track infrastructure to look for ways to control maintenance costs," she said. "Plus, the effort being coordinated through the TOP team to restructure our yard capacity to match our changing traffic patterns will provide us flexibility for the future."

McQuade said NS 21 also focuses on top line growth by looking at innovative ways to provide value-added services to grow the company's relationships and business with its customers.

The NS 21 process is refocused and moving forward with more ambitious targets for 2003 and 2004. Employees are encouraged to become involved and bring to their department heads any recommendations for cost savings or process improvements. Projects are coordinated by Karol Weigand, director NS 21.

Fourth-quarter and 2002 results reported

Norfolk Southern reported fourth-quarter net income of $129 million, or $0.33 per diluted share, up 12 percent compared with net income of $115 million, or $0.30 per diluted share, in the fourth quarter of 2001.

For the year, net income was $460 million, or $1.18 per diluted share, up 23 percent, compared to $375 million, or $0.97 per diluted share, in the same period a year earlier. Net income during 2001 included an after-tax gain of $13 million, or $0.03 per diluted share, from the 1998 sale of a

former motor carrier subsidiary.

"I am pleased with the substantial improvements in income and operations during the quarter and 2002 in a year filled with challenges for everyone in business," said David R. Goode, chairman, president and chief executive officer. "The value of service improvements is making itself apparent."

Railway operating revenues set record highs for both the fourth quarter and the year. In the quarter, revenues reached $1.58 billion, up 3 percent compared with the fourth quarter of 2001, and for the year, revenues of $6.27 billion rose 2 percent compared with the same period in 2001.

Fourth-quarter general merchandise revenues of $914 million reflected a 5 percent improvement compared to the fourth quarter of 2001. All market groups showed revenue gains compared to the same period of 2001, led by a 7 percent improvement in automotive. For the year, general merchandise revenues of $3.65 billion increased 3 percent compared with 2001 and set a record.

Intermodal revenues in the fourth quarter were $306 million, an increase of 5 percent compared to the fourth quarter of 2001. For the year, intermodal revenues of $1.18 billion were the highest of any year in Norfolk Southern's history and improved 5 percent compared with 2001. The revenue growth reflects the introduction of new services that enabled conversion of highway movements to rail as well as improvements in on-time reliability and service speed.

Coal revenues declined 2 percent in the fourth quarter to $361 million in the face of less demand for utility coal and decreased 5 percent for the year to $1.44 billion compared to strong 2001 results.

Railway operating expenses in the quarter were $1.3 billion, up 3 percent from the fourth quarter of 2001. For the year, railway operating expenses were $5.1 billion, down $51 million, or 1 percent, from 2001.

For the quarter, the railway operating ratio improved to 81.8 percent compared with 82.0 percent in the same period of 2001. For the year, the operating ratio improved to 81.5 percent, compared with 83.7 percent a year earlier.

"Our results show that Norfolk Southern is on course and headed in the right direction," Goode said.

Norfolk Southern Wins EPA Partnership Award

The U.S. Environmental Protection Agency presented its Partnership Award to Norfolk Southern for its efforts in providing rail emergency response, hazardous material awareness, and railroad equipment familiarization training to emergency responders throughout the country. One of 18 award winners, NS was recognized during EPA's Emergency Preparedness and Prevention Conference in Baltimore.

EPA's Mid-Atlantic region presents the partnership awards to companies, organizations, agencies or individuals demonstrating exceptional creativity or innovation in emergency preparedness, planning and response.

EPA also cited NS' participation as hosts of the 2002 "Whistle-Stop Tour." This six-day event traveled to six cities in four states, bringing specialized training tank cars and instructors, over-the-road equipment, and local emergency response equipment, as well as many other exhibitors, to a central location for hands-on

training with local responders and planners.

In addition to the Whistle Stop Tour, NS provided various rail emergency training programs to more than 4,000 emergency responders and participated in 12 emergency response drills. EPA recognized NS' commitment to education through its 10 full scholarships to the AAR-TTCI Emergency Response Training Facility in Pueblo, Colo., and through its distribution of more than 800 copies of the Association of American Railroads Emergency Handling of Hazardous Materials in Surface Transportation publication to county emergency managers systemwide.

NS Police, FRA, commuter line work to curb trespassing

A problem with trespassers near a Chicago area commuter rail station turned into an opportunity to educate station users about the dangers of trespassing on railroad property for Norfolk Southern's Chicago Safety Committee. Commuters at the South Shore Railroad's Hegewisch Station were parking in nearby neighborhoods, then crossing NS, CSX, IHB and South Shore (NICTD) tracks to get to the station. People also were seen climbing a fence at NS' Ford Ramp Support Yard to get to work at a nearby factory. The committee worked with the Federal Railroad Administration and NICTD to make commuters aware of the tragic potential of those actions.

Front row L to R - Dale Kelly, Tammy Wagner, Mike Huston, Bob Lewis, Russ Parks, Joe Krmpotich Back row L to R - Bob Meyer, Jeff Thomas, Robert Griffin, Reggie Seay, Mark Constable, Pat Costello

"These were very dangerous practices, and we wanted to be part of the effort to stop people from endangering themselves on railroad

property," said Bob Lewis, supervisory special agent. "Any time we can spread the word about the tragic consequences that can occur when people trespass on railroad property, we make our community safer."

Lewis said about 12,000 commuters use the station on their daily commute into Chicago. That's 28 percent of the NICTD's total ridership.

Chicago Safety Committee members, FRA and NICTD personnel were at the station for about three hours to greet morning commuters with information. Lewis said about 300 people received information about the dangers and potential consequences of trespassing on railroad property. Also, seven people were prevented from trespassing, averting potential tragedy.

Team members included Mark Constable, track supervisor; Pat Costello, carman; Reggie Seay, assistant track foreman; Russ Parks, senior general foreman mechanical; Joe Krmpotich, carman; Derick Mann, trainmaster and Mike Grace terminal superintendent. The FRA was represented by Tammy Wagner, regional crossing manager; Jim Craig, chief inspector; Jeff Thomas, safety and traffic control specialist and Bob Meyer; assistant crossing manager. From the NICTD were Dale Kelley, director safety and training; Robert Griffin, superintendent transportation and Cpl. Mike Huston, NICTD police.

"If we can prevent tragedy by being on site and making people understand how dangerous their actions are sometimes, we've made a tremendous contribution to the quality of life in our community," Grace said. Grace said the team returned in early February to reach morning and evening commuters, and plans other outreach activities in April and May.

NS goes "green" with soybeans

Norfolk Southern is turning to nature to reduce friction between rail car wheels and track. The company is using SoyTrak^TM, a biodegradable soybean lubricant, as an alternative to petroleum-based material for lubricating rails, to prevent wear and tear on NS' 31,300 miles of running and yard tracks.

The company's Research and Test Lab in Roanoke and the University of North Iowa's Ag-Based Industrial Lubricants program developed the new lubricant over the last three years. Formulated from U.S.-grown soybean oils and additives, SoyTrak is produced by Environmental Lubricants Manufacturing in Waverly, Iowa, and distributed through Portec Rail Products.

Summer- and winter-grade blends are in use, and an all-season blend is being developed. "SoyTrak dissolves in a matter of weeks after application, so it's beneficial for the environment," said Don Cregger, NS project engineer. "It's more efficient than other lubricants in reducing wear through its greater durability and capacity for reducing friction.

"In addition to the soybean-based lubricant's protective qualities, it deposits healthy nutrients back into the soil in a matter of weeks."

John M. Samuels, senior vice president operations planning and support, believes soy-based products are the wave of the future. "Soybean lubricants are better for the environment, competitively priced and very effective. They can increase the life of rail curves substantially."

Goode named Virginia's 2003 Outstanding Industrialist

Virginia Gov. Mark Warner and the Virginia Science Museum named Norfolk Southern Chairman, President and Chief Executive Officer David R. Goode Virginia's 2003 Outstanding Industrialist. Warner said, "Under his leadership, the company has developed industry-leading technologies that promote safe and reliable railroad service for customers and communities. Goode led the company's efforts to develop technology and infrastructure that help divert freight traffic from crowded highways and onto rails. He championed the company's development of information systems to dramatically streamline railroad operations and improve transit times, including the development of the country's largest client-server application to manage the movement of railcars on the Norfolk Southern system. Goode also promoted the use of technology in the company's environmental efforts, ensuring the safety of the millions of carloads of freight the railroad carries each year."

Eaglebrook, Inc. names NS "Partner of the Year"

Following a year of outstanding service, Eaglebrook, Inc., has named Norfolk Southern its "Partner of the Year" for 2002. The aluminum and iron coagulant manufacturer awards its "Partner of the Year" title to the transportation company that best assists Eaglebrook in moving its products.

Bill Tilker, Eaglebrook's manager of logistics, says that his company has worked with NS for many years, but 2002's effort was particularly special.

"As a rail shipper, we look to Norfolk Southern as our partner. In this relationship, we hope to help one another as well as help the other be profitable. Following rate and transport negotiations, we decided that Norfolk Southern's partnership went above and beyond our expectations," said Tilker. Frank Moczulewski, NS national account manager for chemicals, says teamwork from MODALGISTICS(r) also helped win the award.

"MODALGISTICS' participation in this accomplishment can't be overlooked. In chemical marketing, we work on rail rates and service packages, but MODALGISTICS really got in there and showed the value-added benefits of NS' vast terminal network and other services," said Moczulewski.

"As a result of these joint negotiations, Eaglebrook awarded NS an extended multiyear transportation contract, for which we are very grateful."

NS Calendar Contest now open to negative and digital images

As you think about next year's Norfolk Southern calendar photo contest, you now have more format choices. Photographers now can submit negative, digital and larger format transparencies.

Digital images must be taken with a four megapixel or higher camera. Files from these cameras have the minimum resolution required to print satisfactory calendar images. Save the file as a TIFF image, uncompressed. Do not send in camera memory cards or JPEG-formatted files. Submit the image on a CD labeled with the entrant's name, location and telephone number. Images must not be e-mailed. Please include a "Read Me" text file or Word file that describes the photo and gives photographer information. When using digital, use the setting for the highest quality. Capturing your image to a TIFF format uses more storage space, but it gives the highest quality image. Always use the optical zoom to enlarge your scene rather than the digital zoom.

To submit a 35mm print, send in the negative strip along with a 4-by-6 inch print for judging. In addition to 35mm slides, photographers can submit larger format transparencies from medium format cameras, such as 6-by-4.5 mm, 6-by-6 mm, 6-by-7 mm or 6-by-9 mm.

Photographers can submit five images for judging beginning June 1. If you have questions, contact Rhonda Broom, manager advertising, in Norfolk at (757) 629-2706.

What are the judges looking for?

Here are a few tips to remember when taking photos.

• Photos in the calendar must represent all seasons and feature a range of commodities Norfolk Southern hauls: auto, coal, grain, wood, paper, chemicals, agricultural products, metals, consumer goods, intermodal and Triple Crown Services.
• Provide as much information as possible. As photos are eliminated in the final rounds of judging, these facts can make the difference.
• Use a polarizing filter to enhance a weak sky.
• Use a low ISO setting, such as 100, for both film and digital cameras. If the ISO speed is high, the final image will be grainy when enlarged.
• Cities can be difficult to photograph, but clean, attractive cityscapes are under represented in the calendar.
• Don't take any photo where safety - yours or anyone else's -- is in question.
• Look for areas and scenes never seen by our calendar users.
• Consider including people at work in your photos.
• Think about using colorful flowers or overhanging tree limbs in the foreground to frame the image.
• Disposable cameras will not take calendar-quality photos.
• Avoid using film that has been stored in a hot car for even a day. This will degrade your image.

If you have technical photography questions, contact Michael Bickham, imaging manager, Public Relations at (757) 629-2303.