Shareholders of the Chessie System attending its annual meeting here today were treated to a glowing report of the railroad's recent performance and an enthusiastic outlook for its future, a contrast to the dismal financial reports about many of the nation's railroads.
"Your physically strong Chessie System is well-positioned to take advantage of the coming good years for railroads," John T. Collinson, president of the Chessie System Railroads, told 400 shareholders. "The outlook for coal traffic is particularly bright, but I am optimistic about the outlook for all aspects of Chessie's business, not only through 1980 but well beyond that."
Collinson's predictions were based in part on solid recent achievements. Chessie's record-breaking 1979 profits of $120.5 million were followed by a record-breaking 1980 first quarter when earnings were $20.3 million, a 118 percent increase over the 1979 first quarter.
Because of the recent performance, Chessie's directors today voted to increase the quarterly dividend rate by 10.3 percent to $2.56 a share annually, effective with the second-quarter dividends. The last increase was in October, 1976.
Besides Chessie's recent earnings, Hays Tom Watkins, chairman and president of Chessie System, cited the company's general financial strength and favorable long-range outlook -- despite the current economic downturn -- for the directors' decision to raise the dividend.
In his report to shareholders, Collinson said a continuing high level of coal traffic on Chessie lines reflected an important shift in the overseas market. Although Chessie had been a leading coal-exporting railroad for a long time, its exports have been of metallurgical coal. Now, however, there is a growing demand overseas for steam coal, he said.
In 1979, Chessie dumped about 200,000 tons of steam coal into ships from its piers at Baltimore and Newport News, Collinson said. In the first quarter of 1980, half again as much coal of all types was dumped from Chessie's export terminals compared with the first quarter of 1979, he added.
The steam coal market has been expanding in the United States as well because of the twin impact of oil import declines and cutbacks in nuclear power expansion, Collinson said. In the past few months, Chessie has been shipping steam coal through Baltimore bound for a generating station in New England, he said, and Chessie expects to ship increasing amount as more utilities convert to coal.
The Chessie System's principal subsidiaries are the Chesapeake & Ohio, and Western Maryland Railroads. Its other divisions also own the Greenbrier resort in White Sulphur Springs, a corporate aircraft management services company and many thousands of acres of coal-rich land in West Virginia and Kentucky being developed under lease.
While its nonrail subsidiaries also are doing well, Watkins said the railroad business gives Chessie its principal source of earnings and will continue to do so.
Sporting a tie on which the words "Chessie System" and "Family Lines" continually intersected, Watkins said Chessie's proposed merger with the Seaboard Coast Lines Industries presents the greatest potential for growth of earnings.
Seaboard's Family Lines System includes the Seaboard Coast Line and the Louisville & Nashville railroads, among others. Its rail lines stretch from Florida to Lake Michigan and from the Midwest to the Atlantic Seaboard.
"This merger of two strong railroad systems will give Chessie the opportunity to have access to the fastest-growing business area of the nation -- the southeast -- and Seabard access to the industrial heartland's of the nation," Watkins said.
Attending the Chessie meeting was Prime F. Osborn III, Seaboard's chairman, who would become chairman of the merged company which would be called CFX Corp., if approved by the Interstate Commerce Commission. A decision from the ICC is due by the end of October.