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.

Oct 27, 2010, 16:01 ET from Norfolk Southern Corporation

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 Subsidiaries

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



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