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Press release from PR Newswire

Norfolk Southern Reports Third-Quarter 2011 Results

Wednesday, October 26, 2011

Norfolk Southern Reports Third-Quarter 2011 Results16:05 EDT Wednesday, October 26, 2011NORFOLK, 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.Connect with NShttp://www.nscorp.com/http://www.facebook.com/NorfolkSouthern http://www.flickr.com/photos/norfolksouthern http://www.twitter.com/nscorp  http://www.youtube.com/user/norfolksoutherncorp Norfolk Southern Corporation and SubsidiariesConsolidated Statements of Income (Unaudited)Three Months EndedNine Months EndedSeptember 30,September 30,2011201020112010(in millions, except per share amounts)Railway operating revenues:   Coal$899$709$2,608$2,034   General merchandise1,4391,2834,1913,765   Intermodal5514641,5761,325      Total railway operating revenues2,8892,4568,3757,124Railway operating expenses:   Compensation and benefits7366802,2402,049   Purchased services and rents4033771,1911,086   Fuel3852591,186771   Depreciation217204641612   Materials and other (note 1)210190704572      Total railway operating expenses1,9511,7105,9625,090      Income from railway operations9387462,4132,034Other income - net6081121118Interest expense on debt114113339347      Income before income taxes8847142,1951,805Provision for income taxes:   Current159143345539   Deferred171126414172      Total income taxes (note 2)330269759711      Net income$554$445$1,436$1,094Earnings per share (note 3):   Basic$1.61$1.21$4.09$2.95   Diluted$1.59$1.19$4.03$2.91Weighted average shares outstanding (note 4):   Basic343.2366.3349.8368.5   Diluted349.0371.6355.6373.8See accompanying notes to consolidated financial statements.Norfolk Southern Corporation and SubsidiariesConsolidated Balance Sheets(Unaudited)September 30,December 31,20112010($ in millions)AssetsCurrent assets:   Cash and cash equivalents$242$827   Short-term investments152283   Accounts receivable - net1,029807   Materials and supplies212169   Deferred income taxes160145   Other current assets30240      Total current assets1,8252,471Investments2,2402,193Properties less accumulated depreciation of $9,351 and      $9,262, respectively23,97823,231Other assets268304      Total assets$28,311$28,199Liabilities and stockholders' equityCurrent liabilities:   Accounts payable$1,329$1,181   Short-term debt-100   Income and other taxes221199   Other current liabilities331244   Current maturities of long-term debt55358      Total current liabilities1,9362,082Long-term debt6,7826,567Other liabilities1,7881,793Deferred income taxes7,5507,088      Total liabilities18,05617,530Stockholders' equity:   Common stock $1.00 per share par value, 1,350,000,000 shares      authorized; outstanding 336,106,217 and 357,362,604 shares,      respectively, net of treasury shares337358   Additional paid-in capital1,9121,892   Accumulated other comprehensive loss(753)(805)   Retained income8,7599,224       Total stockholders' equity10,25510,669       Total liabilities and stockholders' equity$28,311$28,199See accompanying notes to consolidated financial statements.Norfolk Southern Corporation and SubsidiariesConsolidated Statements of Cash Flows(Unaudited)Nine Months EndedSeptember 30,20112010($ in millions)Cash flows from operating activities:   Net income$1,436$1,094   Reconciliation of net income to net cash provided       by operating activities:         Depreciation646617         Deferred income taxes414172         Gains and losses on properties and investments(30)(38)         Changes in assets and liabilities affecting operations:            Accounts receivable(222)(142)            Materials and supplies(43)(15)            Other current assets6050            Current liabilities other than debt402254         Other - net101136               Net cash provided by operating activities2,7642,128Cash flows from investing activities:   Property additions(1,433)(907)   Property sales and other transactions7081   Investments, including short-term(88)(441)   Investment sales and other transactions246261               Net cash used in investing activities(1,205)(1,006)Cash flows from financing activities:   Dividends(432)(384)   Common stock issued - net9559   Purchase and retirement of common stock (note 4)(1,611)(437)   Proceeds from borrowings - net396250   Debt repayments(592)(477)               Net cash used in financing activities(2,144)(989)               Net increase (decrease) in cash and cash equivalents(585)133Cash and cash equivalents:   At beginning of year827996   At end of period$242$1,129Supplemental disclosure of cash flow information   Cash paid during the period for:      Interest (net of amounts capitalized)$296$296      Income taxes (net of refunds)$121$498See 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 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 CorporationFor further information: Norfolk Southern contacts: (Media) Frank Brown, +1-757-629-2710, fsbrown@nscorp.com or (Investors), Michael Hostutler, +1-757-629-2861, michael.hostutler@nscorp.com