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Press release from PR Newswire

Norfolk Southern Reports 2011 Fourth-Quarter and Full-Year Results

Tuesday, January 24, 2012

Norfolk Southern Reports 2011 Fourth-Quarter and Full-Year Results16:05 EST Tuesday, January 24, 2012NORFOLK, Va., Jan. 24, 2012 /PRNewswire/ -- For 2011 vs. 2010:NS set the following fourth-quarter records:Railway operating revenues reached $2.8 billion, up 17 percent.Net income increased 19 percent to $480 million.Diluted earnings per share rose 30 percent to $1.42.NS set the following records for the year:Railway operating revenues reached $11.2 billion, up 17 percent.Income from railway operations climbed 20 percent to $3.2 billion.Net income was $1.9 billion, up 28 percent.Diluted earnings per share increased 36 percent to $5.45.Norfolk Southern Corporation (NYSE: NSC) today reported record fourth-quarter net income of $480 million, 19 percent higher compared with $402 million for the same quarter of 2010. Diluted earnings per share were a record $1.42, up 30 percent compared with the $1.09 per diluted share earned in the same period a year earlier. For 2011, net income increased to an all-time record $1.9 billion, 28 percent higher compared with $1.5 billion for 2010.  Diluted earnings per share for the year increased 36 percent, or $1.45, to a record $5.45, compared with 2010. "Norfolk Southern achieved all-time records for revenues, operating income, net income, and earnings per share during 2011, and set fourth-quarter records for revenues, net income, and earnings per share," said Norfolk Southern CEO Wick Moorman. "In 2012 we will remain committed to enhancing our service product, maintaining the safety and quality of our rail network, improving operational efficiency, and supporting growth.""Our strong capital program of $2.4 billion will include substantial investments along our Crescent Corridor, a public-private partnership to create a high-capacity, truck-competitive intermodal freight rail route between the Gulf Coast and Northeast," Moorman said. "As part of this program of projects, we plan to open intermodal terminals in Alabama, Pennsylvania, and Tennessee later in the year. Facilities such as these relieve congested freight lines and highways, and are proven centers for creating jobs and economic development."Railway operating revenues increased to $2.8 billion, a fourth-quarter record, up 17 percent compared with the same period a year earlier. For 2011, railway operating revenues set an all-time record $11.2 billion, 17 percent higher compared with 2010. The improvements were the result of increases in revenue per unit of 11 percent for the quarter and 12 percent for the year and higher volumes that were up 6 percent for the quarter and 5 percent for the year. General merchandise revenues rose to $1.4 billion, up 13 percent compared with fourth-quarter 2010. For 2011, general merchandise revenues increased to $5.6 billion, 12 percent higher compared with 2010. Traffic volume increased 1 percent in the quarter and was even for the year compared with the same periods of 2010. Coal revenues in the fourth quarter were $850 million, up 24 percent compared with the same period last year. For 2011, coal revenues were $3.5 billion, 27 percent higher compared with 2010. Traffic volume increased 3 percent in the quarter and 4 percent for the year compared with the same periods of 2010.Intermodal revenues were $554 million, up 18 percent compared with fourth-quarter 2010. For the year, intermodal revenues were $2.1 billion, up 19 percent compared with 2010. Traffic volume increased by 11 percent in the quarter and 10 percent for 2011 compared with the same periods of 2010. Railway operating expenses were $2 billion for the fourth quarter, 14 percent higher compared with the same period a year earlier. For 2011, railway operating expenses were $8 billion, up 16 percent compared with 2010. The increases were primarily driven by fuel expenses, which rose by $95 million in the fourth quarter and $510 million for the year, and higher costs associated with increased traffic volumes.Income from railway operations increased 25 percent for the quarter to $800 million and improved 20 percent to a record $3.2 billion for the year, compared with the same periods of 2010. Fourth-quarter 2011 results included $11 million in deferred income tax benefits attributable to state tax law changes.  The year included $68 million of favorable, non-recurring income tax benefits.The fourth-quarter railway operating ratio improved by 2 percent to 71.4 percent compared with the same period last year.  For 2011, the railway operating ratio improved by 1 percent to 71.2 percent compared with 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 NS http://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 EndedYears EndedDecember 31,December 31,2011201020112010(in millions, except per share amounts)Railway operating revenues:   Coal$850$685$3,458$2,719   General merchandise1,3931,2365,5845,001   Intermodal5544712,1301,796      Total railway operating revenues2,7972,39211,1729,516Railway operating expenses:   Compensation and benefits7346592,9742,708   Purchased services and rents4193911,6101,477   Fuel4033081,5891,079   Depreciation221207862819   Materials and other (note 1)220185924757      Total railway operating expenses1,9971,7507,9596,840         Income from railway operations8006423,2132,676Other income ? net3935160153Interest expense on debt116115455462         Income before income taxes7235622,9182,367Provision for income taxes:   Current13020475559   Deferred 113140527312      Total income taxes (note 2)2431601,002871         Net income$480$402$1,916$1,496Earnings per share (note 3):      Basic$1.44$1.11$5.52$4.06      Diluted$1.42$1.09$5.45$4.00Weighted average shares outstanding (note 4):      Basic332.8360.7345.5366.5      Diluted338.6365.7351.3371.8See accompanying notes to consolidated financial statements.Norfolk Southern Corporation and SubsidiariesConsolidated Balance Sheets(Unaudited)As of December 31,20112010($ in millions)AssetsCurrent assets:   Cash and cash equivalents$276$827   Short-term investments25283   Accounts receivable ? net 1,022807   Materials and supplies209169   Deferred income taxes143145   Other current assets76240      Total current assets1,7512,471Investments2,2342,193Properties less accumulated depreciation of  $9,464 and $9,262, respectively24,46923,231Other assets84304      Total assets$28,538$28,199Liabilities and stockholders' equityCurrent liabilities:   Accounts payable$1,092$1,181   Short-term debt100100   Income and other taxes207199   Other current liabilities252244   Current maturities of long-term debt50358      Total current liabilities1,7012,082Long-term debt7,3906,567Other liabilities2,0501,793Deferred income taxes7,4867,088      Total liabilities18,62717,530Stockholders' equity:Common stock $1.00 per share par value, 1,350,000,000 shares authorized;  outstanding 330,386,089 and 357,362,604  shares, respectively, net of treasury shares332358Additional paid-in capital1,9121,892Accumulated other comprehensive loss(1,026)(805)Retained income8,6939,224      Total stockholders' equity9,91110,669      Total liabilities and stockholders' equity$28,538$28,199See accompanying notes to consolidated financial statements.Norfolk Southern Corporation and SubsidiariesConsolidated Statements of Cash Flows(Unaudited)Years Ended December 31,20112010($ in millions)Cash flows from operating activities:   Net income$1,916$1,496   Reconciliation of net income to net cash provided      by operating activities:         Depreciation869826         Deferred income taxes527312         Gains and losses on properties and investments(32)(42)         Changes in assets and liabilities affecting operations:               Accounts receivable(215)(41)               Materials and supplies(40)(5)               Other current assets14(1)               Current liabilities other than debt68126         Other ? net 12043                  Net cash provided by operating activities3,2272,714Cash flows from investing activities:   Property additions(2,160)(1,470)   Property sales and other transactions8497   Investments, including short-term(135)(504)   Investment sales and other transactions439421                  Net cash used in investing activities(1,772)(1,456)Cash flows from financing activities:   Dividends(576)(514)   Common stock issued ? net 12089   Purchase and retirement of common stock (note 4)(2,051)(863)   Proceeds from borrowings ? net1,101350   Debt repayments(600)(489)                 Net cash used in financing activities(2,006)(1,427)                 Net decrease in cash and cash equivalents(551)(169)Cash and cash equivalents:   At beginning of year827996   At end of year$276$827Supplemental disclosure of cash flow information   Cash paid during the year for:      Interest (net of amounts capitalized)$435$453      Income taxes (net of refunds)$289$602See 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 charge for the receivables associated with the contested portion of the claim and a $15 million charge for other receivables affected by the ruling for which recovery is no longer probable.2.   INCOME TAXESDuring 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 fourth quarter of 2010, NS recognized a $34 million non-recurring benefit resulting from a change in estimate for 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.  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 reflects reductions for the effect of dividend equivalent payments made to holders of stock options and restricted stock units as follows:  for the fourth quarter, $3 million in 2011 and $2 million in 2010; and for the year, $9 million in 2011 and     $8 million in 2010.For diluted earnings per share, income available to common stockholders reflects reductions for the effect of dividend equivalent payments made to holders of stock options and restricted units as follows:  for the fourth quarter, less than $1 million in 2011 and $2 million in 2010; and for the year $2 million for 2011 and $8 million for 2010.  4.  STOCK REPURCHASE PROGRAM    During 2011, NS repurchased and retired 30.2 million shares of Common Stock at a cost of $2.1 billion and 14.7 million shares at a cost of $863 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 109.6 million shares at a total cost of $6.2 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)