News Releases
Norfolk Southern Reports Second-Quarter 2011 Results
For second-quarter 2011 vs. 2010:
-- Net income increased 42 percent to a record $557 million.
-- Diluted earnings per share rose 50 percent to a record $1.56.
-- Railway operating revenues increased 18 percent to $2.9 billion, a second-quarter record.
-- Income from railway operations improved 19 percent to $875 million, a second-quarter record.
-- The railway operating ratio improved to 69.5 percent, a second-quarter record.

NORFOLK, Va., July 26, 2011 /PRNewswire/ -- Norfolk Southern Corporation (NYSE: NSC) today reported record second-quarter net income of $557 million, 42 percent higher compared with $392 million during the same quarter of 2010. Diluted earnings per share were a record $1.56, up 50 percent compared with $1.04 per diluted share earned in the same period last year. These results reflect favorable, non-recurring income tax-related benefits totaling $63 million, or $0.18 per share.

"Norfolk Southern delivered excellent financial results in the second quarter, setting all-time records for net income and earnings per share, as well as second-quarter records for revenues, operating income and operating ratio," said CEO Wick Moorman. "We're seeing opportunities in the global economy, and we are moving forward with initiatives to drive business growth, productivity, and efficiency across our company."

Railway operating revenues increased to $2.9 billion, a second-quarter record, up 18 percent compared with the same period of 2010, primarily as the result of a 14 percent increase in revenue per unit.

General merchandise revenues were $1.4 billion, 12 percent higher compared with second-quarter 2010 results. Coal revenues increased 28 percent to $893 million compared with the same period last year. Intermodal revenues were $540 million, 20 percent higher compared with the second quarter of 2010.

Railway operating expenses for the quarter were $2.0 billion, 17 percent higher compared with the same period of 2010, primarily due to increased fuel expenses and compensation and benefits costs.

Income from railway operations set a second-quarter record, climbing 19 percent to $875 million compared with the same period last year.

The railway operating ratio improved to 69.5 percent, a second-quarter record, compared with 69.8 percent during second-quarter 2010.

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,



2011



2010



2011



2010



(in millions, except per share amounts)













Railway operating revenues:












   Coal

$

893


$

696


$

1,709


$

1,325

   General merchandise


1,433



1,283



2,752



2,482

   Intermodal


540



451



1,025



861

      Total railway operating revenues


2,866



2,430



5,486



4,668













Railway operating expenses:












   Compensation and benefits


739



670



1,504



1,369

   Purchased services and rents


405



374



788



709

   Fuel


412



258



801



512

   Depreciation


213



204



424



408

   Materials and other (note 1)


222



191



494



382

      Total railway operating expenses


1,991



1,697



4,011



3,380













       Income from railway operations


875



733



1,475



1,288













Other income - net


34



17



61



37

Interest expense on debt


113



115



225



234













      Income before income taxes


796



635



1,311



1,091













Provision for income taxes:












   Current


108



237



186



396

   Deferred


131



6



243



46

      Total income taxes (note 2)


239



243



429



442













       Net income

$

557


$

392


$

882


$

649













Earnings per share (note 3):












   Basic

$

1.58


$

1.06


$

2.49


$

1.74

   Diluted

$

1.56


$

1.04


$

2.45


$

1.72













Weighted average shares outstanding (notes 3 & 4):












   Basic


351.0



369.7



353.1



369.6

   Diluted


357.3



375.1



358.9



375.0













See accompanying notes to consolidated financial statements.



Norfolk Southern Corporation and Subsidiaries
Consolidated Balance Sheets
(Unaudited)









June 30,


December 31,



2011


2010



($ in millions)

Assets







Current assets:







   Cash and cash equivalents


$

678


$

827

   Short-term investments



228



283

   Accounts receivable - net



991



807

   Materials and supplies



201



169

   Deferred income taxes



163



145

   Other current assets



54



240

      Total current assets



2,315



2,471








Investments



2,235



2,193








Properties less accumulated depreciation of $9,217 and







      $9,262, respectively



23,671



23,231








Other assets



257



304








       Total assets


$

28,478


$

28,199








Liabilities and stockholders’ equity







Current liabilities:







   Accounts payable


$

1,254


$

1,181

   Short-term debt



-



100

   Income and other taxes



160



199

   Other current liabilities



284



244

   Current maturities of long-term debt



55



358

      Total current liabilities



1,753



2,082








Long-term debt



6,931



6,567








Other liabilities



1,795



1,793








Deferred income taxes



7,372



7,088

      Total liabilities



17,851



17,530








Stockholders’ equity:







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







      authorized; outstanding 347,773,580 and 357,362,604 shares,







      respectively, net of treasury shares



349



358

   Additional paid-in capital



1,951



1,892

   Accumulated other comprehensive loss



(770)



(805)

   Retained income



9,097



9,224

       Total stockholders’ equity



10,627



10,669








       Total liabilities and stockholders’ equity


$

28,478


$

28,199


See accompanying notes to consolidated financial statements.



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








Six Months Ended




June 30,




2011



2010




($ in millions)








Cash flows from operating activities:







   Net income


$

882


$

649

   Reconciliation of net income to net cash provided







      by operating activities:







         Depreciation



428



411

         Deferred income taxes



243



46

         Gains and losses on properties and investments



-



(3)

         Changes in assets and liabilities affecting operations:







            Accounts receivable



(184)



(126)

            Materials and supplies



(32)



(15)

            Other current assets



36



36

            Current liabilities other than debt



221



236

         Other - net



106



148

               Net cash provided by operating activities



1,700



1,382








Cash flows from investing activities:







   Property additions



(888)



(569)

   Property sales and other transactions



20



21

   Investments, including short-term



(67)



(260)

   Investment sales and other transactions



134



77

               Net cash used in investing activities



(801)



(731)








Cash flows from financing activities:







   Dividends



(283)



(252)

   Common stock issued - net



69



42

   Purchase and retirement of common stock (note 4)



(792)



(114)

   Proceeds from borrowings - net



396



-

   Debt repayments



(438)



(468)

               Net cash used in financing activities



(1,048)



(792)








               Net decrease in cash and cash equivalents



(149)



(141)








Cash and cash equivalents:







   At beginning of year



827



996








   At end of period


$

678


$

855








Supplemental disclosure of cash flow information







   Cash paid during the period for:







      Interest (net of amounts capitalized)


$

219


$

232

      Income taxes (net of refunds)


$

45


$

253








See accompanying notes to consolidated financial statements.



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. INCOME TAXES

During the second quarter of 2011, the Internal Revenue Service (IRS) 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, three states enacted tax law changes that decreased deferred income tax expense by $19 million.

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.  Accordingly, 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 and second quarters of 2011 and 2010 reflects $2 million each in reductions from net income for the effect of dividend equivalent payments made to holders of stock options and restricted stock units.  

For diluted earnings per share, income available to common stockholders reflects reductions of $2 million for the first quarter of 2011, less than $1 million for the second quarter of 2011, $2 million for both the first and second quarters of 2010, $2 million for the first six months of 2011, and $4 million for the first six months of 2010 for the effect of dividend equivalent payments made to holders of stock options.

4. STOCK REPURCHASE PROGRAM

NS repurchased and retired 11.6 million shares of Common Stock in the first six months of 2011, at a cost of $792 million and 2.0 million shares at a cost of $114 million for the same period of 2010.  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 2005, NS has repurchased and retired 91.0 million shares at a total cost of $4.9 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, both of Norfolk Southern