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

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EX-99 - NORFOLK SOUTHERN CORP	pressrelease1qrtr.htm
8-K - NORFOLK SOUTHERN CORP	earnings1q118-k1.htm

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

		Three Months Ended
		March 31,
		2011		2010
	(in millions, except per share amounts)

Railway operating revenues:
Coal	$	816	$	629
General merchandise		1,319		1,199
Intermodal		485		410
Total railway operating revenues		2,620		2,238

Railway operating expenses:
Compensation and benefits		765		699
Purchased services and rents		383		335
Fuel		389		254
Depreciation		211		204
Materials and other (note 1)		272		191
Total railway operating expenses		2,020		1,683

Income from railway operations		600		555

Other income - net		27		20
Interest expense on debt		112		119

Income before income taxes		515		456

Provision for income taxes:
Current		78		159
Deferred (note 2)		112		40
Total income taxes		190		199

Net income	$	325	$	257

Earnings per share (note 3):
Basic	$	0.91	$	0.69
Diluted	$	0.90	$	0.68

Weighted average shares outstanding (notes 3 & 4):
Basic		355.2		369.5
Diluted		360.5		374.9

See accompanying notes to consolidated financial statements.

Norfolk Southern Corporation and Subsidiaries
Consolidated Balance Sheets
(Unaudited)

		March 31,		December 31,
		2011		2010
		($ in millions)
Assets
Current assets:
Cash and cash equivalents	$	236	$	827
Short-term investments		252		283
Accounts receivable - net		934		807
Materials and supplies		190		169
Deferred income taxes		148		145
Other current assets		72		240
Total current assets		1,832		2,471

Investments		2,199		2,193

Properties less accumulated depreciation		23,451		23,231

Other assets		246		304

Total assets	$	27,728	$	28,199

Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	1,093	$	1,181
Short-term debt		-		100
Income and other taxes		102		199
Other current liabilities		309		244
Current maturities of long-term debt		63		358
Total current liabilities		1,567		2,082

Long-term debt		6,554		6,567

Other liabilities		1,794		1,793

Deferred income taxes		7,212		7,088
Total liabilities		17,127		17,530

Stockholders' equity:
Common stock $1.00 per share par value, 1,350,000,000 shares
authorized; outstanding 353,216,661 and 357,362,604 shares,
respectively, net of treasury shares		354		358
Additional paid-in capital		1,939		1,892
Accumulated other comprehensive loss		(786)		(805)
Retained income		9,094		9,224
Total stockholders' equity		10,601		10,669

Total liabilities and stockholders' equity	$	27,728	$	28,199

See accompanying notes to consolidated financial statements.

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

		Three Months Ended
		March 31,
		2011		2010
		($ in millions)

Cash flows from operating activities:
Net income	$	325	$	257
Reconciliation of net income to net cash provided
by operating activities:
Depreciation		213		206
Deferred income taxes		112		40
Gains and losses on properties		-		(1)
Changes in assets and liabilities affecting operations:
Accounts receivable		(127)		(101)
Materials and supplies		(21)		(16)
Other current assets		19		17
Current liabilities other than debt		27		209
Other - net		104		147
Net cash provided by operating activities		652		758

Cash flows from investing activities:
Property additions		(423)		(256)
Property sales and other transactions		(10)		-
Investments, including short-term		(4)		(155)
Investment sales and other transactions		55		51
Net cash used in investing activities		(382)		(360)

Cash flows from financing activities:
Dividends		(142)		(126)
Common stock issued - net		32		21
Purchase and retirement of common stock (note 4)		(343)		-
Debt repayments		(408)		(128)
Net cash used in financing activities		(861)		(233)

Net increase (decrease) in cash and cash equivalents		(591)		165

Cash and cash equivalents:
At beginning of year		827		996

At end of period	$	236	$	1,161

Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest (net of amounts capitalized)	$	72	$	50
Income taxes (net of refunds)	$	3	$	-

See accompanying notes to consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:

1. MATERIAL 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. 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. As required by the Financial Accounting Standards Board Accounting Standards Codification (ASC) 740, "Income Taxes," 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 first quarters of 2011 and 2010 reflects $2 million in reductions from net income for the effect of dividend equivalent payments made to holders of stock options and restricted stock units. In addition, for the first quarters of 2011 and 2010, 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 $2 million in reductions from net income, in both periods, for dividend equivalent payments made to holders of stock options.

4. STOCK REPURCHASE PROGRAM

NS repurchased and retired 5.3 million shares of Common Stock in the first quarter of 2011, at a cost of $343 million. There were no shares repurchased under this program in the first quarter of 2010. The timing and volume of purchases is guided by management's assessment of market conditions and other pertinent facts. 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 84.7 million shares at a total cost of $4.5 billion.

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