Norfolk Southern Reports Second-Quarter 2010 Results
For second quarter 2010 vs. second quarter 2009:
- Railway operating revenues increased 31 percent to $2.4 billion.
- Income from railway operations improved 57 percent to $733 million.
- Net income increased 59 percent to $392 million.
- Diluted earnings per share rose 58 percent to $1.04.
- The railway operating ratio improved by 5 percentage points to 69.8 percent, resulting in a second-quarter record.
NORFOLK, Va., July 27 /PRNewswire-FirstCall/ -- Norfolk Southern Corporation (NYSE: NSC) today reported second-quarter 2010 net income of $392 million, an increase of 59 percent, compared with $247 million for second-quarter 2009. Diluted earnings per share were $1.04, up 58 percent, compared with $0.66 per diluted share earned in the second quarter of 2009.
"Norfolk Southern delivered strong financial results in the second quarter, based on continuing operating leverage," said CEO Wick Moorman. "This is our fourth straight quarter of volume growth, and we are optimistic about continued year-over-year increases in rail traffic. We remain focused on reinforcing the safety and quality of our franchise, improving operational efficiency and service, and supporting future business growth."
Second-quarter railway operating revenues improved 31 percent to $2.4 billion, compared with the second quarter of 2009, primarily as the result of a 22 percent increase in traffic volume.
General merchandise revenues were $1.3 billion, 31 percent higher compared with second-quarter 2009 results. Coal revenues increased 36 percent to $696 million compared with the same period last year. Intermodal revenues were $451 million, 23 percent higher compared with the second quarter of 2009.
Railway operating expenses for the quarter were $1.7 billion, 22 percent higher compared with the same period of 2009, primarily due to higher compensation and benefits, and fuel expenses. Income from railway operations improved 57 percent to $733 million in the second quarter compared with the same period last year.
The railway operating ratio was 69.8, a second-quarter record, and an improvement of 5 percentage points compared with 74.8 percent during second-quarter 2009.
Norfolk Southern Corporation (NYSE: NSC) is one of the nation's premier transportation companies. Its Norfolk Southern Railway subsidiary operates approximately 21,000 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, |
||||||||
2010 |
2009 |
2010 |
2009 |
||||||
(In millions, except per share amounts) |
|||||||||
Railway operating revenues: |
|||||||||
Coal |
$ |
696 |
$ |
511 |
$ |
1,325 |
$ |
1,113 |
|
General merchandise |
1,283 |
978 |
2,482 |
1,953 |
|||||
Intermodal |
451 |
368 |
861 |
734 |
|||||
Total railway operating revenues |
2,430 |
1,857 |
4,668 |
3,800 |
|||||
Railway operating expenses: |
|||||||||
Compensation and benefits |
670 |
551 |
1,369 |
1,190 |
|||||
Purchased services and rents |
374 |
334 |
709 |
689 |
|||||
Fuel |
258 |
153 |
512 |
312 |
|||||
Depreciation |
204 |
207 |
408 |
414 |
|||||
Materials and other (note 1) |
191 |
144 |
382 |
344 |
|||||
Total railway operating expenses |
1,697 |
1,389 |
3,380 |
2,949 |
|||||
Income from railway operations |
733 |
468 |
1,288 |
851 |
|||||
Other income – net |
17 |
36 |
37 |
53 |
|||||
Interest expense on debt |
115 |
113 |
234 |
230 |
|||||
Income before income taxes |
635 |
391 |
1,091 |
674 |
|||||
Provision for income taxes: |
|||||||||
Current |
237 |
85 |
396 |
175 |
|||||
Deferred (note 4) |
6 |
59 |
46 |
75 |
|||||
Total income taxes |
243 |
144 |
442 |
250 |
|||||
Net income |
$ |
392 |
$ |
247 |
$ |
649 |
$ |
424 |
|
Earnings per share (note 2): |
|||||||||
Basic |
$ |
1.06 |
$ |
0.67 |
$ |
1.74 |
$ |
1.14 |
|
Diluted |
$ |
1.04 |
$ |
0.66 |
$ |
1.72 |
$ |
1.13 |
|
Weighted average shares outstanding (notes 2 & 3): |
|||||||||
Basic |
369.7 |
366.8 |
369.6 |
366.5 |
|||||
Diluted |
375.1 |
371.4 |
375.0 |
371.3 |
|||||
See accompanying notes to consolidated financial statements. |
|||||||||
Norfolk Southern Corporation and Subsidiaries |
|||||
Consolidated Balance Sheets |
|||||
(Unaudited) |
|||||
June 30, |
December 31, |
||||
2010 |
2009 |
||||
($ in millions) |
|||||
Assets |
|||||
Current assets: |
|||||
Cash and cash equivalents |
$ |
855 |
$ |
996 |
|
Short-term investments |
205 |
90 |
|||
Accounts receivable – net |
892 |
766 |
|||
Materials and supplies |
179 |
164 |
|||
Deferred income taxes |
148 |
142 |
|||
Other current assets |
49 |
88 |
|||
Total current assets |
2,328 |
2,246 |
|||
Investments |
2,293 |
2,164 |
|||
Properties less accumulated depreciation |
22,786 |
22,643 |
|||
Other assets |
226 |
316 |
|||
Total assets |
$ |
27,633 |
$ |
27,369 |
|
Liabilities and stockholders’ equity |
|||||
Current liabilities: |
|||||
Accounts payable |
$ |
1,064 |
$ |
974 |
|
Short-term debt |
- |
100 |
|||
Income and other taxes |
226 |
109 |
|||
Other current liabilities |
284 |
232 |
|||
Current maturities of long-term debt |
363 |
374 |
|||
Total current liabilities |
1,937 |
1,789 |
|||
Long-term debt |
6,326 |
6,679 |
|||
Other liabilities |
1,791 |
1,801 |
|||
Deferred income taxes |
6,818 |
6,747 |
|||
Total liabilities |
16,872 |
17,016 |
|||
Stockholders’ equity: |
|||||
Common stock $1.00 per share par value, 1,350,000,000 shares |
|||||
authorized; outstanding 368,615,496 and 369,019,990 shares, |
|||||
respectively, net of treasury shares |
370 |
370 |
|||
Additional paid-in capital |
1,894 |
1,809 |
|||
Accumulated other comprehensive loss |
(820) |
(853) |
|||
Retained income |
9,317 |
9,027 |
|||
Total stockholders’ equity |
10,761 |
10,353 |
|||
Total liabilities and stockholders’ equity |
$ |
27,633 |
$ |
27,369 |
|
See accompanying notes to consolidated financial statements. |
|||||
Norfolk Southern Corporation and Subsidiaries |
|||||
Consolidated Statements of Cash Flows |
|||||
(Unaudited) |
|||||
Six Months Ended |
|||||
June 30, |
|||||
2010 |
2009 |
||||
($ in millions) |
|||||
Cash flows from operating activities: |
|||||
Net income |
$ |
649 |
$ |
424 |
|
Reconciliation of net income to net cash provided |
|||||
by operating activities: |
|||||
Depreciation |
411 |
418 |
|||
Deferred income taxes |
46 |
75 |
|||
Gains and losses on properties |
(3) |
(4) |
|||
Changes in assets and liabilities affecting operations: |
|||||
Accounts receivable |
(126) |
29 |
|||
Materials and supplies |
(15) |
6 |
|||
Other current assets |
36 |
75 |
|||
Current liabilities other than debt |
236 |
(319) |
|||
Other – net |
148 |
(61) |
|||
Net cash provided by operating activities |
1,382 |
643 |
|||
Cash flows from investing activities: |
|||||
Property additions |
(569) |
(566) |
|||
Property sales and other transactions |
21 |
27 |
|||
Investments, including short-term |
(260) |
(119) |
|||
Investment sales and other transactions |
77 |
9 |
|||
Net cash used in investing activities |
(731) |
(649) |
|||
Cash flows from financing activities: |
|||||
Dividends |
(252) |
(250) |
|||
Common stock issued – net |
42 |
24 |
|||
Purchase and retirement of common stock (note 3) |
(114) |
- |
|||
Proceeds from borrowings – net |
- |
990 |
|||
Debt repayments |
(468) |
(654) |
|||
Net cash provided by (used in) financing activities |
(792) |
110 |
|||
Net increase (decrease) in cash and cash equivalents |
(141) |
104 |
|||
Cash and cash equivalents: |
|||||
At beginning of year |
996 |
618 |
|||
At end of period |
$ |
855 |
$ |
722 |
|
Supplemental disclosure of cash flow information |
|||||
Cash paid during the period for: |
|||||
Interest (net of amounts capitalized) |
$ |
232 |
$ |
224 |
|
Income taxes (net of refunds) |
$ |
253 |
$ |
222 |
|
See accompanying notes to consolidated financial statements. |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:
1. MATERIALS AND OTHER
Second quarter 2009 includes a $21 million favorable adjustment related to settlement of a multiyear state tax dispute.
2. EARNINGS PER SHARE
As required under the provisions of the Financial Accounting Standards Board Accounting Standards Codification (ASC) 260-10, "Earnings Per Share," for basic earnings per share, income available to common stockholders for the second quarters of 2010 and 2009 reflects a $2 million reduction and for the first six months of 2010 and 2009 a $4 million reduction from net income for the effect of dividend equivalent payments made to holders of stock options. In addition, for the second quarters and first six months of 2010 and 2009, diluted earnings per share were calculated under the more dilutive two-class method (as compared to the treasury stock method) and income available to common stockholders reflects a $2 million and $4 million reduction, respectively, from net income for dividend equivalent payments.
3. STOCK REPURCHASE PROGRAM
During the first six months of 2010, NS purchased and retired 2.0 million shares of common stock at a cost of $114 million. Since inception of the stock repurchase program, NS has repurchased and retired 66.7 million shares at a total cost of $3.4 billion.
4. 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 these Acts eliminate, after 2012, the tax deduction available for reimbursed prescription drug expenses under the Medicare Part D retiree drug subsidy program. As required by ASC 740, "Income Taxes," NS recorded a $27 million charge to deferred tax expense.
SOURCE Norfolk Southern Corporation
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