PAGE ONE
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 1996
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
---------- ----------
Commission file numbers 1-743; 1-3744; 1-4793; 1,546-2
NORFOLK SOUTHERN RAILWAY COMPANY
- --------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Virginia 53-6002016
- ---------------------------------------- ----------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
Three Commercial Place
Norfolk, Virginia 23510-2191
- ---------------------------------------- ----------------------------
(Address of principal executive offices) Zip Code
Registrant's telephone number, including area code (804) 629-2682
-----------------------
No Change
- --------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. (X) Yes ( ) No
The number of shares outstanding of each of the registrant's classes of
Common Stock, as of the last practicable date:
Class Outstanding as of April 30, 1996
----- --------------------------------
Common Stock (par value $1.00) 16,668,997
<PAGE> PAGE 2
NORFOLK SOUTHERN RAILWAY COMPANY AND SUBSIDIARIES (NS RAIL)
INDEX
-----
Page
----
Part I. Financial Information:
Item 1. Financial Statements:
Consolidated Statements of Income
Three Months Ended March 31, 1996 and 1995 3
Consolidated Balance Sheets
March 31, 1996, and December 31, 1995 4
Consolidated Statements of Cash Flows
Three Months Ended March 31, 1996 and 1995 5
Notes to Consolidated Financial Statements 6-9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10-14
Part II. Other Information:
Item 1. Legal Proceedings 15
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
Index to Exhibits 17
<PAGE> PAGE 3
<TABLE>
PART I. FINANCIAL INFORMATION
-------------------------------
Item 1. Financial Statements.
- ------ --------------------
NORFOLK SOUTHERN RAILWAY COMPANY AND SUBSIDIARIES
(A Majority-Owned Subsidiary of Norfolk Southern Corporation)
Consolidated Statements of Income
(In millions of dollars)
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
-------------------
1996 1995
-------- --------
<S> <C> <C>
RAILWAY OPERATING REVENUES (Note 5):
Coal $ 323.8 $ 306.9
General merchandise 574.1 577.6
Intermodal 118.8 114.7
-------- --------
Railway operating revenues 1,016.7 999.2
-------- --------
RAILWAY OPERATING EXPENSES:
Compensation and benefits 377.3 375.3
Materials, services and rents 153.2 164.2
Depreciation 99.1 92.9
Diesel fuel 55.4 48.7
Casualties and other claims 34.7 32.2
Other 35.2 35.5
-------- --------
Railway operating expenses 754.9 748.8
-------- --------
Income from railway operations 261.8 250.4
Other income (expense):
Interest income 7.9 6.4
Interest expense on debt (8.2) (7.8)
Other - net (0.4) (1.6)
-------- --------
Other income (expense) (0.7) (3.0)
-------- --------
Income before income taxes 261.1 247.4
Provision for income taxes 98.0 94.1
-------- --------
NET INCOME $ 163.1 $ 153.3
======== ========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> PAGE 4
<TABLE>
Item 1. Financial Statements. (continued)
- ------ --------------------
NORFOLK SOUTHERN RAILWAY COMPANY AND SUBSIDIARIES
(A Majority-Owned Subsidiary of Norfolk Southern Corporation)
Consolidated Balance Sheets
(In millions of dollars)
(Unaudited)
<CAPTION>
March 31, December 31,
1996 1995
----------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 46.4 $ 49.3
Short-term investments 171.7 180.7
Accounts receivable - net 585.7 542.1
Materials and supplies 62.1 59.8
Deferred income taxes 102.7 98.8
Other current assets 92.6 92.1
--------- ---------
Total current assets 1,061.2 1,022.8
Due from NS (Note 3) 304.9 186.8
Investments 822.5 771.0
Properties less accumulated depreciation 8,851.7 8,750.4
Other assets 20.4 21.3
--------- ---------
TOTAL ASSETS $11,060.7 $10,752.3
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 27.2 $ 27.2
Accounts payable 578.5 567.2
Income and other taxes 251.5 179.4
Other current liabilities 125.2 124.3
Current maturities of long-term debt (Note 4) 81.8 79.7
--------- ---------
Total current liabilities 1,064.2 977.8
Long-term debt (Note 4) 555.2 494.7
Other liabilities 881.9 870.8
Minority interests 2.4 2.3
Deferred income taxes (Note 3) 2,795.7 2,761.3
--------- ---------
TOTAL LIABILITIES 5,299.4 5,106.9
--------- ---------
Stockholders' equity:
Serial preferred stock $50 stated value 54.8 54.8
Common stock $10 stated value 166.7 166.7
Other capital 525.5 525.5
Unrealized gain on marketable
securities 361.7 337.3
Retained income 4,652.6 4,561.1
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 5,761.3 5,645.4
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $11,060.7 $10,752.3
========= =========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> PAGE 5
<TABLE>
Item 1. Financial Statements. (continued)
- ------ --------------------
NORFOLK SOUTHERN RAILWAY COMPANY AND SUBSIDIARIES
(A Majority-Owned Subsidiary of Norfolk Southern Corporation)
Consolidated Statements of Cash Flows
(In millions of dollars)
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
---------------------
1996 1995
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 163.1 $ 153.3
Reconciliation of net income to net cash
provided by operating activities:
Special charge payments (6.0) (2.8)
Depreciation 100.5 93.2
Deferred income taxes 14.6 9.7
Nonoperating gains on property sales (0.6) (1.0)
Changes in assets and liabilities
affecting operations:
Accounts receivable (43.6) 10.1
Materials and supplies (2.3) (5.8)
Other current assets 8.7 6.9
Current liabilities other than debt 84.3 68.7
Other - net 13.2 16.3
------- -------
Net cash provided by operating activities 331.9 348.6
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions (Note 4) (142.3) (177.5)
Property sales and other transactions 5.8 15.0
Investment purchases (22.5) (23.7)
Investment sales and other transactions 12.7 18.3
Advances due from NS (118.1) (46.2)
Short-term investments - net 7.6 21.0
------- -------
Net cash used for investing activities (256.8) (193.1)
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends (71.6) (73.2)
Proceeds from long-term borrowings (Note 4) 5.6 7.6
Debt repayments (12.0) (18.8)
------- -------
Net cash used for financing activities (78.0) (84.4)
------- -------
Net increase (decrease) in cash and
cash equivalents (2.9) 71.1
CASH AND CASH EQUIVALENTS:*
At beginning of year 49.3 33.8
------- -------
At end of period $ 46.4 $ 104.9
======= =======
- ---------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest (net of amounts capitalized) $ 13.8 $ 13.2
Income taxes $ 2.8 $ 4.1
* Cash equivalents are highly liquid investments purchased three months or
less from maturity.
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> PAGE 6
Item 1. Financial Statements. (continued)
- ------ --------------------
NORFOLK SOUTHERN RAILWAY COMPANY AND SUBSIDIARIES
(A Majority-Owned Subsidiary of Norfolk Southern Corporation)
Notes to Consolidated Financial Statements
(All tables in millions of dollars)
1. In the opinion of Management, the accompanying unaudited interim
financial statements contain all adjustments (consisting of normal
recurring accruals) necessary to present fairly the financial
position as of March 31, 1996, and the results of operations and
cash flows for the three months ended March 31, 1996 and 1995.
While Management believes that the disclosures presented are
adequate to make the information not misleading, these consolidated
financial statements should be read in conjunction with the
financial statements and notes included in the Company's latest
Annual Report on Form 10-K.
2. Contingencies
There have been no significant changes since year-end 1995 in the
matters as discussed in Note 17, CONTINGENCIES, appearing in the
NS Rail Annual Report on Form 10-K for 1995, Notes to Consolidated
Financial Statements, beginning on page 61.
An update of the status of certain legal proceedings is included in
Part II, Item 1, "Legal Proceedings," of this Form 10-Q Report.
3. Related Parties
GENERAL
-------
Norfolk Southern Corporation (NS) is the parent holding company of
NS Rail. The costs of functions performed by NS are allocated to
NS Rail. Rail operations are coordinated at the holding company
level by the NS Executive Vice President-Operations.
<TABLE>
INTERCOMPANY ACCOUNTS
---------------------
<CAPTION>
March 31, 1996 December 31, 1995
------------------ -------------------
Average Average
Interest Interest
Balance Rate Balance Rate
------- -------- ------- --------
<S> <C> <C> <C> <C>
Due from NS:
Advances $ 527.9 3.8% $ 407.1 3.4%
Due to NS:
Notes and advances 223.0 6.6% 220.3 6.6%
------- -------
Due from NS - net $ 304.9 $ 186.8
======= =======
</TABLE>
Interest is applied to certain advances at the average NS yield on
short-term investments and to the notes at specified rates.
<PAGE> PAGE 7
Item 1. Financial Statements. (continued)
- ------ --------------------
NORFOLK SOUTHERN RAILWAY COMPANY AND SUBSIDIARIES
(A Majority-Owned Subsidiary of Norfolk Southern Corporation)
Notes to Consolidated Financial Statements
(All tables in millions of dollars)
3. Related Parties (continued)
INTERCOMPANY FEDERAL INCOME TAX ACCOUNTS
----------------------------------------
In accordance with the NS Tax Allocation Agreement, intercompany
federal income tax accounts are recorded between companies in the NS
consolidated group. At March 31, 1996, and December 31, 1995,
NS Rail had intercompany federal income tax payables (which are
included in "Deferred income taxes" in the Consolidated Balance
Sheets) of $254.7 million.
CASH REQUIRED FOR NS STOCK PURCHASE PROGRAM AND NS DEBT
-------------------------------------------------------
In January 1996, the NS Board of Directors authorized the purchase
and retirement of up to 30 million shares of NS Common Stock. NS
completed its purchases (65 million shares) under the 1987 and 1989
authorizations on March 8, 1996. The new share program is expected
to be completed by the end of the year 2000. Purchases under the
programs have been made with internally generated cash and through
issuances of debt by NS. Since the first purchases in December 1987
through March 31, 1996, NS has purchased and retired 65,317,300
shares of its common stock at a cost of $3.0 billion. Future
purchases are dependent on market conditions, the economy, cash
needs and alternative investment opportunities.
Consistent with earlier purchases, a significant portion of the
funding for future NS stock purchases, either in the form of direct
cash or cash used for debt service, will come from NS Rail through
intercompany advances or dividends to NS. Cash required to service
NS debt, which may be issued as well for general corporate purposes,
will come principally from NS Rail.
4. Capital Lease Obligations
During the first quarters of 1996 and 1995, NS Rail entered into
capital leases covering new locomotives. The related capital lease
obligations totaling $74.4 million in 1996 and $104.5 million in
1995 were reflected in the Consolidated Balance Sheets as debt and,
because they were non-cash transactions, were excluded from the
Consolidated Statements of Cash Flows. The lease obligations carry
stated interest rates between 6.20 percent and 6.75 percent for
those entered into in the first quarter of 1996, and between
8.23 percent and 8.60 percent for those entered into in 1995. All
were converted to variable rate obligations using interest rate
swap agreements. The interest rates on these obligations are based
on the six-month London Interbank Offered Rate and are reset every
six months with realized gains or losses accounted for as an
adjustment of interest expense over the terms of the leases. As a
result, NS Rail is exposed to the market risk associated with
<PAGE> PAGE 8
Item 1. Financial Statements. (continued)
- ------ --------------------
NORFOLK SOUTHERN RAILWAY COMPANY AND SUBSIDIARIES
(A Majority-Owned Subsidiary of Norfolk Southern Corporation)
Notes to Consolidated Financial Statements
(All tables in millions of dollars)
4. Capital Lease Obligations (continued)
fluctuations in interest rates. To date, the effects of the rate
fluctuations have been favorable. Counterparties to the interest
rate swap agreements are major financial institutions believed by
Management to be credit-worthy. NS Rail's use of interest rate
swaps has been limited to those discussed above.
5. Reclassification of Railway Revenues
Beginning in 1996, revenues previously reported as "Other railway
revenues" (principally switching and demurrage) are included in each
of the respective commodity groups. 1995 revenues have been
reclassified to conform with the current presentation.
<TABLE>
6. Norfolk and Western Railway Company and Subsidiaries (NW)--
Summarized Consolidated Financial Information
SUMMARIZED CONSOLIDATED STATEMENTS OF INCOME
--------------------------------------------
<CAPTION>
Three Months Ended
March 31,
------------------
1996 1995
-------- --------
(Unaudited)
<S> <C> <C>
Railway operating revenues $ 483.2 $ 474.5
Railway operating expenses 364.6 365.0
------- -------
Income from operations 118.6 109.5
Other - net 11.2 6.0
------- -------
Income before income taxes 129.8 115.5
Provision for income taxes 48.2 43.4
------- -------
Net income $ 81.6 $ 72.1
======= =======
</TABLE>
<PAGE> PAGE 9
Item 1. Financial Statements. (continued)
- ------ --------------------
NORFOLK SOUTHERN RAILWAY COMPANY AND SUBSIDIARIES
(A Majority-Owned Subsidiary of Norfolk Southern Corporation)
Notes to Consolidated Financial Statements
(All tables in millions of dollars)
6. Norfolk and Western Railway Company and Subsidiaries (NW)--
Summarized Consolidated Financial Information (continued)
<TABLE>
SUMMARIZED CONSOLIDATED BALANCE SHEETS
--------------------------------------
<CAPTION>
March 31, December 31,
1996 1995
------------ ------------
(Unaudited)
<S> <C> <C>
Assets
Current assets $ 360.1 $ 298.3
Noncurrent assets 4,850.1 4,778.2
-------- --------
Total assets $5,210.2 $5,076.5
======== ========
Liabilities and stockholder's equity
Current liabilities $ 283.1 $ 246.2
Noncurrent liabilities 1,616.5 1,603.9
Stockholder's equity 3,310.6 3,226.4
-------- --------
Total liabilities and
stockholder's equity $5,210.2 $5,076.5
======== ========
</TABLE>
<PAGE> PAGE 10
Item 2. Management's Discussion and Analysis of Financial Condition
- ------ -----------------------------------------------------------
and Results of Operations.
-------------------------
NORFOLK SOUTHERN RAILWAY COMPANY AND SUBSIDIARIES
(A Majority-Owned Subsidiary of Norfolk Southern Corporation)
Management's Discussion and Analysis of Financial Condition
and Results of Operations
RESULTS OF OPERATIONS
Net Income
- ----------
"Net income" for the first quarter was $163.1 million, the highest for
any quarter in NS Rail's history and $9.8 million, or 6 percent, above
first-quarter 1995. Contributing to the 1996 first-quarter record was a
$11.4 million, or 5 percent, increase in "Income from railway
operations."
<TABLE>
Railway Operating Revenues
- --------------------------
First-quarter "Railway operating revenues" were $1.02 billion, a
$17.5 million, or 2 percent, increase, compared with the same period last
year, and a quarterly record. The increase in operating revenues was due
to:
<CAPTION>
First Quarter
1996 vs. 1995
Increase (Decrease)
------------------
(In millions of dollars)
<S> <C>
Traffic volume (carloads) $ (16.4)
Revenue per unit 33.9
-------
$ 17.5
=======
</TABLE>
<TABLE>
The principal revenue commodity groups and carloads were as follows (see
Note 5 on page 8 for a discussion of revenue reclassifications):
<CAPTION>
Revenues Carloads
1996 1995 1996 1995
---- ---- ---- ----
($ in millions) (in thousands)
<S> <C> <C> <C> <C>
Coal $ 323.8 $ 306.9 319.6 318.4
Paper/forest 129.7 133.5 109.8 116.0
Chemicals 140.4 140.6 95.5 95.3
Automotive 118.3 119.7 83.8 86.7
Agriculture 101.6 97.2 93.1 98.5
Metals/construction 84.1 86.6 83.8 90.0
-------- -------- ------- -------
General merchandise 574.1 577.6 466.0 486.5
Intermodal 118.8 114.7 319.2 306.9
-------- -------- ------- -------
Total $1,016.7 $ 999.2 1,104.8 1,111.8
======== ======== ======= =======
</TABLE>
<PAGE> PAGE 11
Item 2. Management's Discussion and Analysis of Financial Condition
- ------ -----------------------------------------------------------
and Results of Operations. (continued)
-------------------------
Coal
- ----
First-quarter coal revenues increased $16.9 million, or 6 percent,
compared with the same period last year primarily due to an increase in
export coal volume. Total coal carloads were slightly ahead of last
year, led by export coal, which has a significantly longer haul. This
increase, combined with a strengthened industrial coal market, more than
offset the declines in the utility and domestic steel sectors, which are
shorter-haul traffic. While utility traffic was down early in the
quarter (due to the effect of the severe winter weather), March traffic
volume showed improvement, and continuing high demand for utility coal is
expected as customers rebuild their stockpiles.
For the remainder of the year, the encouraging volume trends in both the
export and the domestic utility markets are expected to continue.
General merchandise
- -------------------
First-quarter general merchandise revenues decreased $3.5 million, or
1 percent, compared with the same period last year as carloadings were
down or even in all of the general merchandise market groups. Soft
market conditions and severe winter weather early in the quarter were
primarily responsible for the unfavorable comparisons. Automotive
revenues, which had been up for the first two months of the year, ended
the quarter down $1.4 million, or 1 percent, due to the effects of the
16-day GM strike.
Looking ahead, if the weather normalizes and the GM strike does not
resume, general merchandise revenues are expected to strengthen. In
addition, several major automotive plants, which had been down for
retooling in 1995, have resumed production.
Intermodal
- ----------
First-quarter intermodal revenues increased $4.1 million, or 4 percent,
compared with the same period last year. Carloadings rose 4 percent,
with most of the improvement related to container business.
For the remainder of the year, we expect to see solid intermodal traffic
growth, but at about half the 1995 growth rate.
Railway Operating Expenses
- --------------------------
First-quarter "Railway operating expenses" were $754.9 million, a
$6.1 million, or 1 percent, increase compared with the same period last
year.
<PAGE> PAGE 12
Item 2. Management's Discussion and Analysis of Financial Condition
- ------ -----------------------------------------------------------
and Results of Operations. (continued)
-------------------------
The largest increase was in "Diesel fuel," up $6.7 million, or
14 percent. This was almost entirely due to price per gallon, which was
nearly 7 cents higher than in the first quarter of 1995. Diesel fuel
prices averaged about 63 cents per gallon in the first quarter, and
reached 65 cents per gallon in March, the highest level since 1991
when fuel prices were impacted by the Persian Gulf crisis. For the
years 1994 and 1995, diesel fuel prices averaged about 57 cents
per gallon.
"Depreciation" increased $6.2 million, or 7 percent, due to additional
investment in plant and equipment, coupled with higher overall
depreciation rates resulting from a recent depreciation study.
Regulations established by the former Interstate Commerce Commission and
currently monitored by the Surface Transportation Board of the U.S.
Department of Transportation (DOT) require periodic formal studies of
ultimate service lives for all railroad assets. Resulting service life
estimates are subject to review and approval by the DOT.
"Casualties and other claims" were up $2.5 million, or 8 percent. This
increase was attributable to an accrual for a specific environmental
remediation site.
The only large decline was in "Materials, services and rents" which was
down $11.0 million, or 7 percent. This favorable experience stems
largely from: (1) lower locomotive maintenance costs resulting from
older locomotives being replaced with new units; (2) NS Rail's benchmark
maintenance procedures which consistently produce more gross ton miles
per dollar of locomotive maintenance cost than any other major U.S.
railroad; and (3) lower freight car maintenance costs, reflecting fewer
cars in the fleet and the reengineering of freight car maintenance
practices.
<TABLE>
FINANCIAL CONDITION AND LIQUIDITY
<CAPTION>
March 31, 1996 December 31, 1995
-------------- -----------------
(Dollars in millions)
<S> <C> <C>
Cash and short-term investments $218.1 $230.0
Debt to total capitalization 10.3% 9.6%
</TABLE>
<PAGE> PAGE 13
Item 2. Management's Discussion and Analysis of Financial Condition
- ------ -----------------------------------------------------------
and Results of Operations. (continued)
-------------------------
CASH PROVIDED BY OPERATING ACTIVITIES is NS Rail's principal source of
liquidity and was sufficient to cover cash outflows for dividends, debt
repayments and capital spending (see Consolidated Statements of Cash
Flows on page 5). The use of cash in accounts receivable was primarily
attributable to higher freight receivables, commensurate with the
increase in operating revenues.
CASH USED FOR INVESTING ACTIVITIES was affected principally by capital
spending for property additions, which included $23 million and
$30 million in 1996 and 1995, respectively, related to locomotives under
capital leases (see Note 4). The increase in cash used for "Advances
due from NS," in part, reflects higher amounts related to NS' stock
purchase program compared with first-quarter 1995 (see Note 3).
"Investment purchases" consists primarily of premium payments related to
corporate-owned life insurance (COLI), while "Investment sales and other
transactions" principally reflects borrowing on COLI.
CASH USED FOR FINANCING ACTIVITIES includes "Proceeds from long-term
borrowings" which represents amounts received in connection with capital
lease transactions (see Note 4).
As discussed in Note 3, NS has issued a significant amount of long-term
debt in recent years. Funds to service this debt are expected to come
primarily from NS Rail, NS' principal subsidiary.
LABOR NEGOTIATIONS
In May 1996, arbitrators selected by the National Carriers Conference
Committee (Committee) and the United Transportation Union (UTU), which
represents the largest number of employees in the railroad industry,
imposed a five-year contract on the parties, the terms of which are
identical to those in the agreement that had been negotiated by the
Committee and the UTU leadership and thereafter rejected by the
UTU rank and file. Negotiations with other rail unions are continuing.
NEW ACCOUNTING PRONOUNCEMENT
Effective January 1, 1996, NS Rail adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed Of" (SFAS 121).
This standard establishes the accounting and reporting requirements for
recognizing and measuring impairment of long-lived assets to be either
held and used or held for disposal. SFAS 121 did not have a material
effect on NS Rail's financial statements.
<PAGE> PAGE 14
Item 2. Management's Discussion and Analysis of Financial Condition
- ------ -----------------------------------------------------------
and Results of Operations. (continued)
-------------------------
ENVIRONMENTAL MATTERS
During 1995, the EPA alleged that The Alabama Great Southern Railroad
Company ("AGS"), a subsidiary of NS Rail, was responsible, along with
several other entities believed to be financially solvent, for past and
future clean-up and monitoring costs at the Bayou Bonfouca NPL Superfund
site located in Slidell, Louisiana. The site was owned by the parent of
an AGS predecessor from 1882 until 1902. Bridge timbers used in the 1882
construction of the predecessor's bridge across Lake Pontchartrain were
treated at the site. The United States and the state of Louisiana filed
suit to recover all costs incurred (estimated in the complaint at around
$100 million) and unspecified amounts to be incurred. Defendants in that
suit include AGS and some--but not all--the entities the EPA earlier
identified as potentially responsible parties. AGS believes it never
owned, operated or had any other culpable connection to the site and
denies responsibility; however, because the amount of liability, if any,
that ultimately may be assessed against NS Rail or AGS cannot be
estimated reliably at this time, the materiality of such amount to NS
Rail's financial position, results of operation or liquidity in a
particular quarter or year cannot be evaluated.
<PAGE> PAGE 15
PART II. OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings.
- ------ -----------------
North Carolina - Fiber Optic Cable. In October 1995, two
individuals, on behalf of themselves and all others similarly situated,
instituted an action in the United States District Court for the Western
District of North Carolina against Sprint Communications Company, L. P.
and Norfolk Southern Railway Company (NSR). Plaintiffs allege they
sustained RICO, conversion and trespass damages in the amount of
$100 million (trebled) as a result of the defendants' installing, pursuant
to an agreement, fiber optic cable on property in which the plaintiffs
further allege that NSR's only property right was an easement for
railway operations.
On April 16, 1996, the court granted the defendants' motions to
dismiss the RICO and conversion claims, and it allowed the parties to
submit additional evidence concerning a statute of limitations defense to
the conspiracy to trespass claim. Management, after consulting with its
legal counsel, is of the option that (1) the court's rulings on the
motions to dismiss should be sustained, (2) NSR has meritorious
defenses to the conspiracy to trespass claim, and (3) if the conspiracy to
trespass claim is allowed to proceed and the defendants are found liable,
the amount of damages that reasonably could be awarded will not materially
affect the consolidated financial position of NS Rail.
Because, following the court's April 16, 1996, ruling, the amount
of damages to which NSR could be subject is immaterial in amount,
Management anticipates this is the last report concerning the proceeding.
The matter has been previously reported by Norfolk Southern Railway
Company in Part I, Item 3, of its Annual Report on Form 10-K for the year
ended December 31, 1995.
Item 6. Exhibits and Reports on Form 8-K.
- ------ --------------------------------
(a) Exhibits:
Financial Data Schedule
(b) Reports on Form 8-K:
No reports on Form 8-K were filed for the three months ended
March 31, 1996.
<PAGE> PAGE 16
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
NORFOLK SOUTHERN RAILWAY COMPANY
------------------------------------------
(Registrant)
Date: May 10, 1996 /s/ Sandra T. Pierce
------------------- ------------------------------------------
Sandra T. Pierce
Corporate Secretary (Signature)
Date: May 10, 1996 /s/ John P. Rathbone
------------------- ------------------------------------------
John P. Rathbone
Vice President and Controller
(Principal Accounting Officer) (Signature)
<PAGE> PAGE 17
INDEX TO EXHIBITS
-----------------
Electronic
Submission
Exhibit
Number Description Page Number
- ----------- ----------------------------------------- -----------
27 Financial Data Schedule
(This exhibit is required to be submitted
electronically pursuant to the rules
and regulations of the Securities and
Exchange Commission and shall not
be deemed filed for purposes of
Section 11 of the Securities Act of 1933
or Section 18 of the Securities Exchange
Act of 1934.) 18
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> $ 46
<SECURITIES> 172
<RECEIVABLES> 589
<ALLOWANCES> 3
<INVENTORY> 62
<CURRENT-ASSETS> 1,061
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<BONDS> 555
<COMMON> 167
0
55
<OTHER-SE> 5,540
<TOTAL-LIABILITY-AND-EQUITY> 11,061
<SALES> 0
<TOTAL-REVENUES> 1,017
<CGS> 0
<TOTAL-COSTS> 755
<OTHER-EXPENSES> (7)
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<INCOME-TAX> 98
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<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 163
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
