NORFOLK SOUTHERN CORP - FORM 8-K - EX-99

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8-K - NORFOLK SOUTHERN CORP	earnings3q118k1.htm
EX-99 - NORFOLK SOUTHERN CORP	pressrelease3qrtr.htm

Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Income
(Unaudited)

		Three Months Ended				Nine Months Ended
		September 30,				September 30,
		2011		2010		2011		2010
		(in millions, except per share amounts)

Railway operating revenues:
Coal	$	899	$	709	$	2,608	$	2,034
General merchandise		1,439		1,283		4,191		3,765
Intermodal		551		464		1,576		1,325
Total railway operating revenues		2,889		2,456		8,375		7,124

Railway operating expenses:
Compensation and benefits		736		680		2,240		2,049
Purchased services and rents		403		377		1,191		1,086
Fuel		385		259		1,186		771
Depreciation		217		204		641		612
Materials and other (note 1)		210		190		704		572
Total railway operating expenses		1,951		1,710		5,962		5,090

Income from railway operations		938		746		2,413		2,034

Other income - net		60		81		121		118
Interest expense on debt		114		113		339		347

Income before income taxes		884		714		2,195		1,805

Provision for income taxes:
Current		159		143		345		539
Deferred		171		126		414		172
Total income taxes (note 2)		330		269		759		711

Net income	$	554	$	445	$	1,436	$	1,094

Earnings per share (note 3):
Basic	$	1.61	$	1.21	$	4.09	$	2.95
Diluted	$	1.59	$	1.19	$	4.03	$	2.91

Weighted average shares outstanding (note 4):
Basic		343.2		366.3		349.8		368.5
Diluted		349.0		371.6		355.6		373.8




See accompanying notes to consolidated financial statements.

Norfolk Southern Corporation and Subsidiaries
Consolidated Balance Sheets
(Unaudited)

	September 30,		December 31,
	2011		2010
	($ in millions)
Assets
Current assets:
Cash and cash equivalents	$	242	$	827
Short-term investments		152		283
Accounts receivable - net		1,029		807
Materials and supplies		212		169
Deferred income taxes		160		145
Other current assets		30		240
Total current assets		1,825		2,471

Investments		2,240		2,193

Properties less accumulated depreciation of $9,351 and
$9,262, respectively		23,978		23,231

Other assets		268		304

Total assets	$	28,311	$	28,199

Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	1,329	$	1,181
Short-term debt		-		100
Income and other taxes		221		199
Other current liabilities		331		244
Current maturities of long-term debt		55		358
Total current liabilities		1,936		2,082

Long-term debt		6,782		6,567

Other liabilities		1,788		1,793

Deferred income taxes		7,550		7,088
Total liabilities		18,056		17,530

Stockholders' 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 shares		337		358
Additional paid-in capital		1,912		1,892
Accumulated other comprehensive loss		(753)		(805)
Retained income		8,759		9,224
Total stockholders' equity		10,255		10,669

Total liabilities and stockholders' equity	$	28,311	$	28,199

See accompanying notes to consolidated financial statements.

Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)

		Nine Months Ended
		September 30,
		2011		2010
		($ in millions)

Cash flows from operating activities:
Net income	$	1,436	$	1,094
Reconciliation of net income to net cash provided
by operating activities:
Depreciation		646		617
Deferred income taxes		414		172
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 assets		60		50
Current liabilities other than debt		402		254
Other - net		101		136
Net cash provided by operating activities		2,764		2,128

Cash flows from investing activities:
Property additions		(1,433)		(907)
Property sales and other transactions		70		81
Investments, including short-term		(88)		(441)
Investment sales and other transactions		246		261
Net cash used in investing activities		(1,205)		(1,006)

Cash flows from financing activities:
Dividends		(432)		(384)
Common stock issued - net		95		59
Purchase and retirement of common stock (note 4)		(1,611)		(437)
Proceeds from borrowings - net		396		250
Debt repayments		(592)		(477)
Net cash used in financing activities		(2,144)		(989)

Net increase (decrease) in cash and cash equivalents		(585)		133

Cash and cash equivalents:
At beginning of year		827		996

At end of period	$	242	$	1,129

Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest (net of amounts capitalized)	$	296	$	296
Income taxes (net of refunds)	$	121	$	498


See 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.

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