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

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8-K - NORFOLK SOUTHERN CORP	earnings2q128k1.htm
EX-99 - NORFOLK SOUTHERN CORP	pressrelease2Q12.htm

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Income

(Unaudited)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2012		2011		2012		2011
	(in millions, except per share amounts)

Railway operating revenues:
Coal	$	755	$	893	$	1,521	$	1,709
General merchandise		1,556		1,433		3,052		2,752
Intermodal		563		540		1,090		1,025
Total railway operating revenues		2,874		2,866		5,663		5,486


Railway operating expenses:
Compensation and benefits		724		739		1,510		1,504
Purchased services and rents		392		405		783		788
Fuel		390		412		803		801
Depreciation		229		213		453		424
Materials and other (note 1)		205		222		435		494
Total railway operating expenses		1,940		1,991		3,984		4,011


Income from railway operations		934		875		1,679		1,475


Other income - net		31		34		60		61
Interest expense on debt		122		113		242		225


Income before income taxes		843		796		1,497		1,311


Provision for income taxes:
Current		269		108		425		186
Deferred		50		131		138		243
Total income taxes (note 2)		319		239		563		429


Net income	$	524	$	557	$	934	$	882


Earnings per share (note 3):
Basic	$	1.62	$	1.58	$	2.86	$	2.49
Diluted		1.60		1.56		2.82		2.45


Weighted average shares outstanding (note 4):
Basic		322.7		351.0		325.5		353.1
Diluted		327.5		357.3		330.2		358.9

See accompanying notes.

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income

(Unaudited)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2012		2011		2012		2011
	($ in millions)

Net income	$	524	$	557	$	934	$	882
Other comprehensive income, before tax:
Pension and other postretirement benefits		32		29		64		57
Other comprehensive loss of equity investees		-		-		(4)		-
Other comprehensive income, before tax		32		29		60		57
Income tax expense related to items of other
comprehensive income		(13)		(13)		(25)		(22)
Other comprehensive income, net of tax		19		16		35		35


Total comprehensive income	$	543	$	573	$	969	$	917

See accompanying notes.

Norfolk Southern Corporation and Subsidiaries

Consolidated Balance Sheets

(Unaudited)

	June 30,			December 31,
	2012			2011
	($ in millions)
Assets
Current assets:
Cash and cash equivalents		$	356		$	276
Short-term investments			15			25
Accounts receivable - net			1,086			1,022
Materials and supplies			242			209
Deferred income taxes			133			143
Other current assets			52			76
Total current assets			1,884			1,751


Investments			2,278			2,234
Properties less accumulated depreciation of $9,738 and
$9,464, respectively			24,968			24,469
Other assets			61			84


Total assets		$	29,191		$	28,538


Liabilities and stockholders' equity
Current liabilities:
Accounts payable		$	1,126		$	1,092
Short-term debt			-			100
Income and other taxes			322			207
Other current liabilities			299			252
Current maturities of long-term debt			27			50
Total current liabilities			1,774			1,701


Long-term debt			7,972			7,390
Other liabilities			2,028			2,050
Deferred income taxes			7,639			7,486
Total liabilities			19,413			18,627


Stockholders' equity:
Common stock $1.00 per share par value, 1,350,000,000 shares
authorized; outstanding 319,516,715 and 330,386,089 shares,
respectively, net of treasury shares			321			332
Additional paid-in capital			1,904			1,912
Accumulated other comprehensive loss			(991)			(1,026)
Retained income			8,544			8,693
Total stockholders' equity			9,778			9,911


Total liabilities and stockholders' equity		$	29,191		$	28,538

See accompanying notes.

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

	Six Months Ended
	June 30,
	2012		2011
	($ in millions)
Cash flows from operating activities:
Net income	$	934	$	882
Reconciliation of net income to net cash provided by operating activities:
Depreciation		456		428
Deferred income taxes		138		243
Gains and losses on properties		(2)		-
Changes in assets and liabilities affecting operations:
Accounts receivable		(64)		(184)
Materials and supplies		(33)		(32)
Other current assets		23		36
Current liabilities other than debt		162		221
Other - net		49		106
Net cash provided by operating activities		1,663		1,700


Cash flows from investing activities:
Property additions		(968)		(888)
Property sales and other transactions		15		20
Investments, including short-term		(12)		(67)
Investment sales and other transactions		33		134
Net cash used in investing activities		(932)		(801)


Cash flows from financing activities:
Dividends		(308)		(283)
Common stock issued - net		47		69
Purchase and retirement of common stock (note 4)		(850)		(792)
Proceeds from borrowings - net		696		396
Debt repayments		(236)		(438)
Net cash used in financing activities		(651)		(1,048)


Net increase (decrease) in cash and cash equivalents		80		(149)


Cash and cash equivalents:
At beginning of year		276		827


At end of period	$	356	$	678


Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest (net of amounts capitalized)	$	232	$	219
Income taxes (net of refunds)		264		45

See accompanying notes.

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, and was denied recovery of the contested portion ($43 million) of the claim. 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 was no longer probable.

2. INCOME TAXES

During the second quarter of 2011, the Internal Revenue Service 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.

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 second quarter, $2 million in 2012 and 2011; and for the first six months, $4 million for 2012 and 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 second quarter, less than $1 million in 2012 and 2011; and for the first six months, $2 million for 2012 and 2011.

4. STOCK REPURCHASE PROGRAM

NS repurchased and retired 12.3 million shares of Common Stock in the first six months of 2012, at a cost of $850 million, and 11.6 million shares at a cost of $792 million for the same period of 2011. 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 121.9 million shares at a total cost of $7.1 billion.

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