NORFOLK, Va., April 27, 2011 /PRNewswire/ --

For 2011 vs. 2010, Norfolk Southern achieved the following first-quarter records:

• Railway operating revenues increased 17 percent to $2.6 billion.
• Income from railway operations improved 8 percent to $600 million.
• Diluted earnings per share rose 32 percent to $0.90.

For the first quarter of 2011, Norfolk Southern Corporation (NYSE: NSC) reported net income of $325 million, or $0.90 per diluted share, 26 percent higher than $257 million, or $0.68 per diluted share, for the first quarter of 2010.

First-quarter 2011 results included a $58 million non-cash charge associated with an unfavorable insurance arbitration ruling that reduced net income by $36 million, or $0.10 per diluted share. For the same period of 2010, results were impacted by a $27 million, or $0.07 per diluted share, deferred tax charge resulting from the enactment of healthcare legislation.

"Norfolk Southern delivered an excellent financial performance during the quarter, reflecting the strong market for freight rail transportation and the value of our service product," said CEO Wick Moorman. "We see continuing opportunities for growth in almost every segment of our business, and we're optimistic about our prospects for the balance of 2011."

First-quarter railway operating revenues improved 17 percent to $2.6 billion, compared with the first quarter of 2010, as the result of 8 percent increases in revenue per unit and traffic volume.

General merchandise revenues were $1.3 billion, 10 percent higher compared with the same period last year. Coal revenues increased 30 percent to $816 million compared with first-quarter 2010 results. Intermodal revenues were $485 million, up 18 percent compared with the first quarter of last year.

Railway operating expenses for the quarter were $2.0 billion, up 20 percent compared with first-quarter 2010. The increase was largely due to higher fuel costs, which rose by $135 million or 53 percent, primarily as the result of increased prices as well as the effects of an unfavorable arbitration ruling and higher traffic volumes.

Income from railway operations for the quarter improved 8 percent to $600 million compared with the same period of 2010.

The railway operating ratio was 77.1 percent, compared with 75.2 percent in first- quarter 2010.

Norfolk Southern Corporation (NYSE: NSC) 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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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 that failed to respond to insurance claims submitted by NS, related to the January 6, 2005 derailment in Graniteville, SC.  As a result, NS recorded a $43 million expense for the receivables associated with the contested portion of the claim and a $15 million expense for other receivables affected by the ruling for which recovery is no longer probable.

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 the Acts eliminated, 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 in the first quarter of 2010.

3. EARNINGS PER SHARE    

For basic earnings per share, income available to common stockholders for the first quarters of 2011 and 2010 reflects $2 million in reductions from net income for the effect of dividend equivalent payments made to holders of stock options and restricted stock units.  In addition, for the first quarters of 2011 and 2010, 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 $2 million in reductions from net income, in both periods, for dividend equivalent payments made to holders of stock options.

4. STOCK REPURCHASE PROGRAM    

NS repurchased and retired 5.3 million shares of Common Stock in the first quarter of 2011, at a cost of $343 million.  There were no shares repurchased under this program in the first quarter of 2010.  The timing and volume of purchases is guided by management's assessment of market conditions and other pertinent facts.  Any near-term share repurchases are expected to be made with internally generated cash, cash on hand, or proceeds from borrowings.  Since 2005, NS has repurchased and retired 84.7 million shares at a total cost of $4.5 billion.

SOURCE Norfolk Southern Corporation