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Norfolk Southern Reports Third-Quarter 2010 Results
For third-quarter 2010 vs. third-quarter 2009:
- Railway operating revenues increased 19 percent to $2.5 billion.
- Income from railway operations improved 33 percent to $746 million.
- Net income increased 47 percent to $445 million.
- Diluted earnings per share rose 47 percent to $1.19.
- The railway operating ratio improved by 3.2 percentage points to 69.6 percent.

NORFOLK, Va., Oct. 27 /PRNewswire-FirstCall/ --Norfolk Southern Corporation (NYSE: NSC) today reported third-quarter 2010 net income of $445 million, an increase of 47 percent, compared with $303 million for third-quarter 2009.  Diluted earnings per share were $1.19, up 47 percent, compared with $0.81 per share in the third quarter of 2009.

“Norfolk Southern delivered strong financial results as we experienced a fifth consecutive quarter of increased volumes,” said CEO Wick Moorman.  “We continue to see an economy characterized by slow growth, but growth nonetheless.  We remain confident that our focus on strengthening service, controlling costs, and investing in our rail infrastructure and equipment will drive long-term shareholder value.”

Third-quarter railway operating revenues improved 19 percent to $2.5 billion, compared with the third quarter of 2009, primarily as the result of a 15 percent increase in traffic volume.

General merchandise revenues were $1.3 billion, 16 percent higher compared with third-quarter 2009 results.  Coal revenues increased 24 percent, to $709 million, compared with the same period last year. Intermodal revenues were $464 million, 19 percent higher compared with the third quarter of 2009.

Railway operating expenses for the third quarter were $1.7 billion, an increase of 14 percent over the same period of 2009.

The railway operating ratio improved by 3.2 percentage points to 69.6 percent, compared with 72.8 percent during third-quarter 2009.

Norfolk Southern Corporation (NYSE: NSC) is one of the nation’s premier transportation companies.  Its Norfolk Southern Railway subsidiary operates approximately 21,000 route miles in 22 states and the District of Columbia, serves every major container port in the eastern United States, and provides efficient connections to other rail carriers.  Norfolk Southern operates the most extensive intermodal network in the East and is a major transporter of coal and industrial products.

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Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Income

(Unaudited)

 
 

Three Months Ended

Nine Months Ended

 
 

September 30,

September 30,

 
 

2010

2009

2010

2009

 
 

(in millions, except per share amounts)

 
                   

Railway operating revenues:

                  

   Coal

$

709

$

571

$

2,034

$

1,684

  

   General merchandise

  

1,283

  

1,103

  

3,765

  

3,056

  

   Intermodal

  

464

  

389

  

1,325

  

1,123

  

      Total railway operating revenues

 

2,456

 

2,063

 

7,124

 

5,863

 
                   

Railway operating expenses:

                  

   Compensation and benefits

  

680

  

598

  

2,049

  

1,788

  

   Purchased services and rents

  

377

  

352

  

1,086

  

1,041

  

   Fuel

  

259

  

192

  

771

  

504

  

   Depreciation

  

204

  

210

  

612

  

624

  

   Materials and other (note 1)

  

190

  

149

  

572

  

493

  

      Total railway operating expenses

 

1,710

 

1,501

 

5,090

 

4,450

 
                   

         Income from railway operations

  

746

  

562

  

2,034

  

1,413

  
                   

Other income – net

  

81

  

37

  

118

  

90

  

Interest expense on debt

  

113

  

118

  

347

  

348

  
                   

            Income before income taxes

  

714

  

481

  

1,805

  

1,155

  
                   

Provision for income taxes:

                  

   Current

  

143

  

80

  

539

  

255

  

   Deferred (note 2)

  

126

  

98

  

172

  

173

  

      Total income taxes

  

269

  

178

  

711

  

428

  
                   

            Net income

$

445

$

303

$

1,094

$

727

 
                   

Earnings per share (note 3):

                  

       Basic

$

1.21

$

0.82

$

2.95

$

1.97

  

       Diluted

$

1.19

$

0.81

$

2.91

$

1.94

  
                   

Weighted average shares outstanding (notes 3 & 4):

                  

   Basic

  

366.3

  

367.3

  

368.5

  

366.8

  

   Diluted

  

371.6

  

372.5

  

373.8

  

371.7

  
                   

See accompanying notes to consolidated financial statements.

 
   
                       

 

Norfolk Southern Corporation and Subsi diaries

Consolidated Balance Sheets

(Unaudited)

 
 

September 30,

December 31,

 
 

2010

2009

 
 

($ in millions)

 
           

Assets

         

Current assets:

          

   Cash and cash equivalents

$

1,129

$

996

  

   Short-term investments

  

229

  

90

  

   Accounts receivable – net

  

908

  

766

  

   Materials and supplies

  

179

  

164

  

   Deferred income taxes

  

153

  

142

  

   Other current assets

  

35

  

88

  

      Total current assets

  

2,633

  

2,246

  
           

Investments

  

2,307

  

2,164

  
           

Properties less accumulated depreciation

  

22,893

  

22,643

  
           

Other assets

  

229

  

316

  
           

      Total assets

$

28,062

$

27,369

 
           

Liabilities and stockholders' equity

         

Current liabilities:

          

   Accounts payable

$

1,131

$

974

  

   Short-term debt

  

-

  

100

  

   Income and other taxes

  

116

  

109

  

   Other current liabilities

  

347

  

232

  

   Current maturities of long-term debt

  

361

  

374

  

      Total current liabilities

  

1,955

  

1,789

  
           

Long-term debt

  

6,574

  

6,679

  
           

Other liabilities

  

1,784

  

1,801

  
           

Deferred income taxes

  

6,960

  

6,747

  

      Total liabilities

 

17,273

 

17,016

 
           

Stockholders' equity:

          

   Common stock $1.00 per share par value, 1,350,000,000 shares

          

      authorized; outstanding 363,372,120 and 369,019,990 shares,

          

      respectively, net of treasury shares

  

364

  

370

  

   Additional paid-in capital

  

1,890

  

1,809

  

   Accumulated other comprehensive loss

  

(804)

  

(853)

  

   Retained income

  

9,339

  

9,027

  

      Total stockholders' equity

 

10,789

 

10,353

 
           

      Total liabilities and stockholders' equity

$

28,062

$

27,369

 
           

See accompanying notes to consolidated financial statements.

 
   
           

 

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

 
 

Nine Months Ended

 
 

September 30,

 
 

2010

2009

 
 

($ in millions)

 
           

Cash flows from operating activities:

         

   Net income

$

1,094

$

727

  

   Reconciliation of net income to net cash provided

          

      by operating activities:

          

         Depreciation

  

617

  

630

  

         Deferred income taxes

  

172

  

173

  

         Gains and losses on properties

  

(38)

  

(13)

  

         Changes in assets and liabilities affecting operations:

          

            Accounts receivable

  

(142)

  

(26)

  

            Materials and supplies

  

(15)

  

22

  

            Other current assets

  

50

  

111

  

            Current liabilities other than debt

  

254

  

(184)

  

         Other – net

  

136

  

(65)

  

               Net cash provided by operating activities

  

2,128

  

1,375

  
           

Cash flows from investing activities:

         

   Property additions

  

(907)

  

(919)

  

   Property sales and other transactions

  

81

  

61

  

   Investments, including short-term

  

(441)

  

(119)

  

   Investment sales and other transactions

  

261

  

10

  

               Net cash used in investing activities

  

(1,006)

  

(967)

  
           

Cash flows from financing activities:

         

   Dividends

  

(384)

  

(374)

  

   Common stock issued – net

  

59

  

32

  

   Purchase and retirement of common stock (note 4)

  

(437)

  

-

  

   Proceeds from borrowings – net

 

250

  

990

  

   Debt repayments

  

(477)

  

(675)

  

               Net cash used in financing activities

  

(989)

  

(27)

  
           

               Net increase in cash and cash equivalents

  

133

  

381

  
           

Cash and cash equivalents:

         

   At beginning of year

  

996

  

618

  
           

   At end of period

$

1,129

$

999

  
           

Supplemental disclosure of cash flow information

         

   Cash paid during the period for:

          

      Interest (net of amounts capitalized)

$

296

$

288

  

      Income taxes (net of refunds)

$

498

$

234

  
           

See accompanying notes to consolidated financial statements.

 
   
         

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:

1. MATERIALS AND OTHER

Second quarter 2009 includes a $21 million favorable adjustment related to settlement of a multi-year state tax dispute.

2. DEFERRED TAXES

During the first quarter of 2010, the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 were signed into law.  Provisions of these Acts eliminate, after 2012, the tax deduction available for reimbursed prescription drug expenses under the Medicare Part D retiree drug subsidy program.  As required by the Financial Accounting Standards Board Accounting Standards Codification (ASC) 740, "Income Taxes," NS recorded a $27 million charge to deferred tax expense.

3. EARNINGS PER SHARE

As required under the provisions of ASC 260-10, "Earnings Per Share," for basic earnings per share, income available to common stockholders for the third quarters of 2010 and 2009 reflects a $2 million reduction and for the first nine months of 2010 and 2009 a $6 million reduction from net income for the effect of dividend equivalent payments made to holders of stock options.  In addition, for the third quarters and first nine months of 2010 and 2009, diluted earnings per share were calculated under the more dilutive two-class method (as compared to the treasury stock method) and income available to common stockholders reflects a $2 million and $6 million reduction, respectively, from net income for dividend equivalent payments.

4. STOCK REPURCHASE PROGRAM

In July 2010, NS' Board of Directors amended NS' share repurchase program, increasing the authorized amount of share repurchases from 75 million to 125 million and lengthening the term of the program from December 31, 2010 to December 31, 2014.  During the first nine months of 2010, NS purchased and retired 7.8 million shares of common stock at a cost of $437 million.  Since inception of the share repurchase program, NS has repurchased and retired 72.5 million shares at a total cost of $3.7 billion.

SOURCE Norfolk Southern Corporation

For further information: Media, Frank Brown, +1-757-629-2710, fsbrown@nscorp.com, or Investors, Leanne Marilley, +1-757-629-2861, leanne.marilley@nscorp.com, both of Norfolk Southern Corporation