NORFOLK, Va., Oct. 26, 2011 /PRNewswire/ --

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

• Income from railway operations improved 26 percent to $938 million.
• Net income increased 24 percent to $554 million.
• Diluted earnings per share rose 34 percent to $1.59.
• The railway operating ratio improved by 2.1 percentage points to 67.5 percent.

Norfolk Southern Corporation (NYSE: NSC) today reported record third-quarter net income of $554 million, 24 percent higher compared with $445 million for the same period of 2010. Diluted earnings per share were a record $1.59, up 34 percent, compared with $1.19 per share in the third quarter of 2010.

"Norfolk Southern produced another outstanding quarter, setting all-time records for income from operations and earnings per share, while also establishing third-quarter records for net income and operating ratio," said Norfolk Southern CEO Wick Moorman. "We continue to see modest improvement in most of our business groups, and we remain focused on the long-term enhancement of our franchise."

Railway operating revenues of $2.9 billion rose 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 third-quarter 2010 results. Coal revenues increased 27 percent, to $899 million, compared with the same period last year. Intermodal revenues were $551 million, 19 percent higher compared with the third quarter of 2010.

Railway operating expenses for the quarter were $2.0 billion, 14 percent higher compared with the same period of 2010, primarily due to increased fuel expenses, which rose by $126 million, and compensation and benefits costs.

Income from railway operations climbed 26 percent to an all-time record $938 million compared with the same period last year.

The railway operating ratio improved by 2.1 percentage points to a third-quarter record 67.5 percent compared with 69.6 percent during third-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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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 third quarters of 2011 and 2010 reflects $2 million each in reductions and $6 million for the first nine months of both 2011 and 2010 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 less than $1 million for the third quarter of 2011, $2 million for the third quarter of 2010, $2 million for the first nine months of 2011, and $6 million for the first nine months of 2010 for the effect of dividend equivalent payments made to holders of stock options.

4. STOCK REPURCHASE PROGRAM

      NS repurchased and retired 23.8 million shares of Common Stock in the first nine months of 2011, at a cost of $1.6 billion and 7.8 million shares at a cost of $437 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 103.2 million shares at a total cost of $5.7 billion.

SOURCE Norfolk Southern Corporation