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Press release from PR Newswire

Norfolk Southern reports third-quarter 2012 results

Tuesday, October 23, 2012

Norfolk Southern reports third-quarter 2012 results16:05 EDT Tuesday, October 23, 2012- Railway operating revenues were $2.7 billion. - Income from railway operations was $731 million. - Net income totaled $402 million. - Diluted earnings per share were $1.24. - The railway operating ratio equaled 72.9 percent.NORFOLK, Va., Oct. 23, 2012 /PRNewswire/ -- For the third quarter of 2012, Norfolk Southern (NYSE: NSC) reported net income of $402 million, or $1.24 per diluted share, 27 percent lower compared with $554 million, or $1.59 per diluted share, in the third quarter of 2011."Third-quarter results reflect weak market conditions, which resulted in declines in our coal and merchandise shipments," said Norfolk Southern CEO Wick Moorman. "We remain focused on controlling costs while continuing to provide high service levels for our customers and invest in projects that will support future growth."Railway operating revenues totaled $2.7 billion, down 7 percent compared with third-quarter 2011, primarily as the result of volume declines in coal and merchandise and lower revenues from fuel surcharges. Third-quarter 2012 fuel surcharge revenues were impacted by a $21 million unfavorable lag effect, while third-quarter 2011 fuel surcharge revenues included a favorable lag effect of $52 million.General merchandise revenues were $1.4 billion, 1 percent lower than third-quarter 2011 results. Coal revenues fell 22 percent, to $701 million, compared with the same period last year. Intermodal revenues were $567 million, 3 percent higher compared with the third quarter of 2011.Railway operating expenses for the third quarter increased 1 percent to $2.0 billion, compared with 2011.Income from railway operations was $731 million, 22 percent lower compared with the same period last year.The third-quarter railway operating ratio increased to 72.9 percent compared with 67.5 percent during the third quarter of 2011.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 30,2012201120122011(in millions, except per share amounts)Railway operating revenues:Coal$701$899$2,222$2,608General merchandise1,4251,4394,4774,191Intermodal5675511,6571,576    Total railway operating revenues2,6932,8898,3568,375Railway operating expenses:Compensation and benefits7247362,2342,240Purchased services and rents4034031,1861,191Fuel3793851,1821,186Depreciation230217683641Materials and other (note 1)226210661704Total railway operating expenses1,9621,9515,9465,962Income from railway operations7319382,4102,413Other income ? net336093121Interest expense on debt124114366339Income before income taxes6408842,1372,195Provision for income taxes:Current97159522345Deferred141171279414    Total income taxes (note 2)238330801759Net income$402$554$1,336$1,436Earnings per share (note 3):Basic$1.26$1.61$4.12$4.09Diluted1.241.594.074.03Weighted average shares outstanding (note 4):Basic317.7343.2322.9349.8Diluted321.8349.0327.4355.6See accompanying notes.  Norfolk Southern Corporation and SubsidiariesConsolidated Statements of Comprehensive Income(Unaudited)Three Months EndedNine Months EndedSeptember 30,September 30,2012201120122011($ in millions)Net income$402$554$1,336$1,436Other comprehensive income, before tax:Pension and other postretirement benefits33289785Other comprehensive loss of equity investees--(4)-Other comprehensive income, before tax33289385Income tax expense related to items of other    comprehensive income(13)(11)(38)(33)Other comprehensive income, net of tax20175552Total comprehensive income$422$571$1,391$1,488See accompanying notes.  Norfolk Southern Corporation and SubsidiariesConsolidated Balance Sheets(Unaudited)September 30,December 31,20122011($ in millions)AssetsCurrent assets:Cash and cash equivalents$693$276Short-term investments1525Accounts receivable - net1,0781,022Materials and supplies236209Deferred income taxes144143Other current assets3376Total current assets2,1991,751Investments2,3152,234Properties less accumulated depreciation of $9,859 and$9,464, respectively25,26024,469Other assets6684Total assets$29,840$28,538Liabilities and stockholders' equityCurrent liabilities:Accounts payable$1,260$1,092Short-term debt-100Income and other taxes150207Other current liabilities362252Current maturities of long-term debt5250Total current liabilities1,8241,701Long-term debt8,4287,390Other liabilities2,0182,050Deferred income taxes7,8037,486Total liabilities20,07318,627Stockholders' equity:Common stock $1.00 per share par value, 1,350,000,000 sharesauthorized; outstanding 316,043,185 and 330,386,089 shares,respectively, net of treasury shares317332Additional paid-in capital1,9091,912Accumulated other comprehensive loss(971)(1,026)Retained income8,5128,693Total stockholders' equity9,7679,911Total liabilities and stockholders' equity$29,840$28,538See accompanying notes.    Norfolk Southern Corporation and SubsidiariesConsolidated Statements of Cash Flows(Unaudited)Nine Months EndedSeptember 30,20122011($ in millions)Cash flows from operating activities:Net income$1,336$1,436Reconciliation of net income to net cash provided by operating activities:Depreciation688646Deferred income taxes279414Gains and losses on properties and investments(4)(30)Changes in assets and liabilities affecting operations:Accounts receivable(56)(222)Materials and supplies(27)(43)Other current assets4360Current liabilities other than debt183402Other ? net34101Net cash provided by operating activities2,4762,764Cash flows from investing activities:Property additions(1,522)(1,433)Property sales and other transactions4770Investments, including short-term(14)(88)Investment sales and other transactions37246Net cash used in investing activities(1,452)(1,205)Cash flows from financing activities:Dividends(467)(432)Common stock issued ? net7795Purchase and retirement of common stock (note 4)(1,150)(1,611)Proceeds from borrowings ? net1,291396Debt repayments(358)(592)Net cash used in financing activities(607)(2,144)Net increase (decrease) in cash and cash equivalents417(585)Cash and cash equivalents:At beginning of year276827At end of period$693$242Supplemental disclosures of cash flow information:Cash paid during the period for:Interest (net of amounts capitalized)$297$296Income taxes (net of refunds)536121See accompanying notes.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:MATERIALS AND OTHER  During the first quarter of 2011, NS received an unfavorable ruling for an arbitration claim with an insurance carrier, and was denied recovery of the contested portion ($43 million) of the claim.  As a result, NS recorded a $43 million charge during the first quarter of 2011 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 was no longer probable.  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 of 2011, three states enacted tax law changes that decreased deferred income tax expense by $19 million.  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 third quarter, $3 million in 2012 and $2 million in 2011; and for the first nine months, $7 million in 2012 and $6 million in 2011.       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 stock units as follows:  for the third quarter, $1 million in 2012 and less than $1 million in 2011; and for the first nine months, $3 million in 2012 and $2 million in 2011. STOCK REPURCHASE PROGRAM   NS repurchased and retired 16.5 million shares of Common Stock in the first nine months of 2012, at a cost of $1.2 billion, and 23.8 million shares at a cost of $1.6 billion for the same period of 2011.  On August 1, 2012, NS' Board of Directors authorized the repurchase of up to an additional 50 million shares of Common Stock through December 31, 2017.  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 the beginning of 2006, NS has repurchased and retired 126.1 million shares at a total cost of $7.4 billion.SOURCE Norfolk Southern CorporationFor further information: Norfolk Southern: (Media) Frank Brown, +1-757-629-2710, fsbrown@nscorp.com; or (Investors) Michael Hostutler, +1-757-629-2861, michael.hostutler@nscorp.com