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Norfolk Southern reports second-quarter earnings
For 2012 vs. 2011, Norfolk Southern achieved the following second-quarter records:
- Railway operating revenues were $2.9 billion.
- Income from operations improved 7 percent to $934 million.
- Diluted earnings per share increased 3 percent to $1.60.
- Railway operating ratio improved 2 percentage points to 67.5 percent.

NORFOLK, Va., July 24, 2012 /PRNewswire/ -- For the second quarter of 2012, Norfolk Southern (NYSE: NSC) reported net income of $524 million, 6 percent lower than $557 million for the second quarter 2011. Diluted earnings per share were an all-time record $1.60, up 3 percent compared with $1.56 per diluted share in the same period last year. Second-quarter 2011 net income included favorable, non-recurring income tax-related benefits totaling $63 million or $0.18 per diluted share.

"In the second quarter, Norfolk Southern continued to deliver outstanding results. Our income from operations, diluted earnings per share and improved operating ratio all set records, despite the slow economic recovery and softness in our coal franchise," said CEO Wick Moorman. "Our railroad continues to operate extremely well, and that enables us to control costs and operate efficiently while providing high levels of service for our customers."

Railway operating revenues of $2.9 billion were essentially flat in the second quarter compared to 2011. General merchandise revenues improved 9 percent to $1.6 billion. Coal revenues declined 15 percent to $755 million. Intermodal revenues improved 4 percent to $563 million.

Railway operating expenses for the second quarter fell 3 percent to $1.9 billion, compared with 2011.

Income from railway operations for the second quarter was $934 million, up 7 percent compared with the same period last year.

The second-quarter railway operating ratio improved 2 percentage points to an all-time record 67.5 percent, compared with 2011.

Norfolk Southern Corporation is one of the nation's premier transportation companies. Its Norfolk Southern Railway subsidiary operates approximately 20,000 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

 

Six Months Ended

 

June 30,

 

June 30,

 

2012

 

2011

 

2012

 

2011

 

(in millions, except per share amounts)

                       

Railway operating revenues:

                     

Coal

$

755

  

$

893

  

$

1,521

  

$

1,709

General merchandise

  

1,556

    

1,433

    

3,052

    

2,752

Intermodal

  

563

    

540

    

1,090

    

1,025

    Total railway operating revenues

  

2,874

    

2,866

    

5,663

    

5,486
                       

Railway operating expenses:

                     

Compensation and benefits

  

724

    

739

    

1,510

    

1,504

Purchased services and rents

  

392

    

405

    

783

    

788

Fuel

  

390

    

412

    

803

    

801

Depreciation

  

229

    

213

    

453

    

424

Materials and other (note 1)

  

205

    

222

    

435

    

494

Total railway operating expenses

  

1,940

    

1,991

    

3,984

    

4,011
                       

Income from railway operations

 

934

    

875

    

1,679

    

1,475
                       

Other income – net

  

31

    

34

    

60

    

61

Interest expense on debt

  

122

    

113

    

242

    

225
                       

Income before income taxes

  

843

    

796

    

1,497

    

1,311
                       

Provision for income taxes:

                      

Current

  

269

    

108

    

425

    

186

Deferred

  

50

    

131

    

138

    

243

    Total income taxes (note 2)

  

319

    

239

    

563

    

429
                       

Net income

$

524

  

$

557

  

$

934

  

$

882
                       

Earnings per share (note 3):

                      

Basic

$

1.62

  

$

1.58

  

$

2.86

  

$

2.49

Diluted

  

1.60

    

1.56

    

2.82

    

2.45
                       

Weighted average shares outstanding (note 4):

                      

Basic

  

322.7

    

351.0

    

325.5

    

353.1

Diluted

  

327.5

    

357.3

    

330.2

    

358.9
                       

See accompanying notes.

                     

 

 

Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Comprehensive Income
(Unaudited)

       
 

Three Months Ended

 

Six Months Ended

 

June 30,

 

June 30,

 

2012

 

2011

 

2012

 

2011

 

($ in millions)

                       

Net income

$

524

  

$

557

  

$

934

  

$

882

Other comprehensive income, before tax:

                      

Pension and other postretirement benefits

  

32

    

29

    

64

    

57

Other comprehensive loss of equity investees

  

-

    

-

    

(4)

    

-

Other comprehensive income, before tax

  

32

    

29

    

60

    

57

Income tax expense related to items of other   

                     

comprehensive income

  

(13)

    

(13)

    

(25)

    

(22)

Other comprehensive income, net of tax

  

19

    

16

    

35

    

35
                       

Total comprehensive income

$

543

  

$

573

  

$

969

  

$

917
                       

See accompanying notes.

                     

 

 

 
 
 

Norfolk Southern Corporation and Subsidiaries
Consolidated Balance Sheets
(Unaudited)

       
 

June 30,

 

December 31,

 

2012

 

2011

 

($ in millions)

Assets

             

Current assets:

              

Cash and cash equivalents

  

$

356

    

$

276

Short-term investments

    

15

      

25

Accounts receivable - net

    

1,086

      

1,022

Materials and supplies

    

242

      

209

Deferred income taxes

    

133

      

143

Other current assets

    

52

      

76

Total current assets

    

1,884

      

1,751
               

Investments

    

2,278

      

2,234

Properties less accumulated depreciation of $9,738 and

              

$9,464, respectively

    

24,968

      

24,469

Other assets

    

61

      

84
               

Total assets

 

$

29,191

    

$

28,538
               

Liabilities and stockholders' equity

             

Current liabilities:

              

Accounts payable

  

$

1,126

    

$

1,092

Short-term debt

    

-

      

100

Income and other taxes

    

322

      

207

Other current liabilities

    

299

      

252

Current maturities of long-term debt

    

27

      

50

Total current liabilities

    

1,774

      

1,701
               

Long-term debt

    

7,972

      

7,390

Other liabilities

    

2,028

      

2,050

Deferred income taxes

    

7,639

      

7,486

Total liabilities

   

19,413

      

18,627
               

Stockholders' equity:

              

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

              

authorized; outstanding 319,516,715 and 330,386,089 shares,

              

respectively, net of treasury shares

    

321

      

332

Additional paid-in capital

    

1,904

      

1,912

Accumulated other comprehensive loss

    

(991)

      

(1,026)

Retained income

    

8,544

      

8,693

Total stockholders' equity

   

9,778

      

9,911
               

Total liabilities and stockholders' equity

 

$

29,191

    

$

28,538
               

See accompanying notes.

             

 

 

 

 

Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)

   
 

Six Months Ended

 

June 30,

 

2012

 

2011

 

($ in millions)

Cash flows from operating activities:

         

Net income

$

934

  

$

882

Reconciliation of net income to net cash provided by operating activities:

          

Depreciation

  

456

    

428

Deferred income taxes

  

138

    

243

Gains and losses on properties

  

(2)

    

-

Changes in assets and liabilities affecting operations:

          

Accounts receivable

  

(64)

    

(184)

Materials and supplies

  

(33)

    

(32)

Other current assets

  

23

    

36

Current liabilities other than debt

  

162

    

221

Other – net

  

49

    

106

Net cash provided by operating activities

  

1,663

    

1,700
           

Cash flows from investing activities:

         

Property additions

  

(968)

    

(888)

Property sales and other transactions

  

15

    

20

Investments, including short-term

  

(12)

    

(67)

Investment sales and other transactions

  

33

    

134

Net cash used in investing activities

  

(932)

    

(801)
           

Cash flows from financing activities:

         

Dividends

  

(308)

    

(283)

Common stock issued – net

  

47

    

69

Purchase and retirement of common stock (note 4)

  

(850)

    

(792)

Proceeds from borrowings – net

  

696

    

396

Debt repayments

  

(236)

    

(438)

Net cash used in financing activities

  

(651)

    

(1,048)
           

Net increase (decrease) in cash and cash equivalents

  

80

    

(149)
           

Cash and cash equivalents:

         

At beginning of year

  

276

    

827
           

At end of period

$

356

  

$

678
           

Supplemental disclosures of cash flow information:

         

Cash paid during the period for:

          

Interest (net of amounts capitalized)

$

232

  

$

219

Income taxes (net of refunds)

  

264

    

45
           

See accompanying notes.

         

 

 

 

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:

1. MATERIALS AND OTHER
During the first quarter of 2011, NS received an unfavorable ruling for an arbitration claim with an insurance carrier, and was denied recovery of the contested portion ($43 million) of the claim.  As a result, NS recorded a $43 million charge for the receivables associated with the contested portion of the claim and a $15 million charge for other receivables affected by the ruling for which recovery was no longer probable. 

2. INCOME TAXES
During the second quarter of 2011, the Internal Revenue Service completed its examination of NS' 2008 tax return and review of certain claims for refund for prior years that resulted in a decrease in income tax expense of $40 million.  Also during the second quarter of 2011, three states enacted tax law changes that decreased deferred income tax expense by $19 million. 

3. EARNINGS PER SHARE
For basic earnings per share, income available to common stockholders reflects reductions for the effect of dividend equivalent payments made to holders of stock options and restricted stock units as follows:  for the second quarter, $2 million in 2012 and 2011; and for the first six months, $4 million for 2012 and 2011.       

For diluted earnings per share, income available to common stockholders reflects reductions for the effect of dividend equivalent payments made to holders of stock options and restricted stock units as follows:  for the second quarter, less than $1 million in 2012 and 2011; and for the first six months, $2 million for 2012 and 2011.

4. STOCK REPURCHASE PROGRAM
NS repurchased and retired 12.3 million shares of Common Stock in the first six months of 2012, at a cost of $850 million, and 11.6 million shares at a cost of $792 million for the same period of 2011.  The timing and volume of purchases is guided by management's assessment of market conditions and other pertinent factors.  Any near-term share repurchases are expected to be made with internally generated cash, cash on hand, or proceeds from borrowings.  Since the beginning of 2006, NS has repurchased and retired 121.9 million shares at a total cost of $7.1 billion.

SOURCE Norfolk Southern Corporation

For further information: Media, Frank Brown, +1-757-629-2710, fsbrown@nscorp.com, or Investors, Michael Hostutler, +1-757-629-2861, michael.hostutler@nscorp.com