Norfolk Southern Reports First-Quarter 2010 Results

For first-quarter 2010 vs. first-quarter 2009:

-- Railway operating revenues increased 15 percent to $2.2 billion.

-- Income from railway operations rose 45 percent to $555 million.

-- Net income increased 45 percent to $257 million.

-- Diluted earnings per share rose 45 percent to $0.68.

-- The railway operating ratio improved by 5.1 percentage points to 75.2 percent.

News provided by

Norfolk Southern Corporation

Apr 27, 2010, 04:01 ET

NORFOLK, Va., April 27 /PRNewswire-FirstCall/ -- For the first quarter of 2010, Norfolk Southern Corporation (NYSE: NSC) reported net income of $257 million, or $0.68 per diluted share, 45 percent higher compared with $177 million, or $0.47 per diluted share, for the first quarter of 2009.

First-quarter 2010 results were impacted by a $27 million, or $0.07 per diluted share, deferred tax charge resulting from the enactment of recent healthcare legislation, which, effective in 2013, eliminates the tax deduction available for prescription drug expenses reimbursed under the Medicare Part D retiree drug subsidy program.

"Norfolk Southern delivered strong financial performance during the first quarter, reflecting positive trends in the economy," said Norfolk Southern CEO Wick Moorman. "Demand for rail transportation continues to grow in most sectors of our business. We remain confident that many of the cost efficiencies we have achieved will remain in place as we continue to invest in key projects and new business opportunities."

First-quarter railway operating revenues improved 15 percent to $2.2 billion, compared with the first-quarter of 2009, primarily as the result of a 9 percent increase in traffic volume.

General merchandise revenues were $1.2 billion, 23 percent higher compared with the same period last year. Coal revenues increased 4 percent to $629 million compared with first-quarter 2009 results. Intermodal revenues were $410 million, up 12 percent compared with the first quarter of last year.

Railway operating expenses for the quarter were $1.7 billion, up 8 percent compared with first-quarter 2009, primarily a result of higher fuel expenses, which rose by $95 million or 60 percent, largely related to increased prices.

Income from railway operations for the quarter improved by 45 percent to $555 million compared with the same period of 2009.

The railway operating ratio improved by 5.1 percentage points to a post-Conrail transaction first-quarter record of 75.2 percent, compared with 80.3 percent in first 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 March 31,
	2010				2009
	($ in millions, except earnings per share)

Railway operating revenues:
Coal	$	629	$	602
General Merchandise		1,199		975
Intermodal		410		366
Total railway operating revenues		2,238		1,943

Railway operating expenses:
Compensation and benefits		699		639
Purchased services and rents		335		355
Fuel		254		159
Depreciation		204		207
Materials and other		191		200
Total railway operating expenses		1,683		1,560

Income from railway operations		555		383

Other income – net		20		17
Interest expense on debt		119		117

Income before income taxes		456		283

Provision for income taxes:
Current		159		90
Deferred (note 1)		40		16
Total income taxes		199		106

Net income	$	257	$	177

Earnings per share (note 2):
Basic	$	0.69	$	0.48
Diluted	$	0.68	$	0.47

Weighted average shares outstanding (millions) (note 2):
Basic		369.5		366.2
Diluted		374.9		371.1

Norfolk Southern Corporation and Subsidiaries Consolidated Balance Sheets (Unaudited)
	March 31,		December 31,
	2010		2009
	($ in millions)
Assets
Current assets:
Cash and cash equivalents	$	1,161	$	996
Short-term investments		225		90
Accounts receivable – net		867		766
Materials and supplies		180		164
Deferred income taxes		145		142
Other current assets		68		88
Total current assets		2,646		2,246

Investments		2,166		2,164

Properties less accumulated depreciation		22,697		22,643

Other assets		221		316
Total assets	$	27,730	$	27,369

Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	987	$	974
Short-term debt		-		100
Income and other taxes		252		109
Other current liabilities		306		232
Current maturities of long-term debt		648		374
Total current liabilities		2,193		1,789

Long-term debt		6,379		6,679

Other liabilities		1,794		1,801

Deferred income taxes		6,800		6,747
Total liabilities		17,166		17,016

Stockholders' equity:
Common stock $1.00 per share par value, 1,350,000,000 shares
authorized; outstanding 370,055,972 and 369,019,990 shares,
respectively, net of treasury shares		371		370
Additional paid-in capital		1,871		1,809
Accumulated other comprehensive loss		(834)		(853)
Retained income		9,156		9,027
Total stockholders' equity		10,564		10,353

Total liabilities and stockholders' equity	$	27,730	$	27,369

Norfolk Southern Corporation and Subsidiaries Consolidated Statements of Cash Flows (Unaudited)
	Three Months Ended March 31,
	2010		2009
	($ in millions)
Cash flows from operating activities:
Net income	$	257	$	177
Reconciliation of net income to net cash provided
by operating activities:
Depreciation		206		209
Deferred income taxes		40		16
Gains and losses on properties		(1)		(2)
Changes in assets and liabilities affecting operations:
Accounts receivable		(101)		39
Materials and supplies		(16)		3
Other current assets		17		35
Current liabilities other than debt		209		(107)
Other – net		147		(16)
Net cash provided by operating activities		758		354

Cash flows from investing activities:
Property additions		(256)		(243)
Property sales and other transactions		-		1
Investments, including short-term		(155)		-
Investment sales and other transactions		51		(2)
Net cash used in investing activities		(360)		(244)

Cash flows from financing activities:
Dividends		(126)		(125)
Common stock issued – net		21		6
Proceeds from borrowings		-		500
Debt repayments		(128)		(225)
Net cash provided by (used in) financing activities		(233)		156

Net increase in cash and cash equivalents		165		266

Cash and cash equivalents:
At beginning of year		996		618

At end of period	$	1,161	$	884

Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest (net of amounts capitalized)	$	50	$	49
Income taxes (net of refunds)	$	-	$	23
.

See accompanying notes to consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:

1. 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 enacted and 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 a result, NS recorded a $27 million charge to deferred tax expense.

2. 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 first quarters of 2010 and 2009 reflects a $2 million reduction from net income for the effect of dividend equivalent payments made to holders of stock options. In addition, for the first quarters 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 reduction from net income, in both periods, for dividend equivalent payments

SOURCE Norfolk Southern Corporation