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

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8-K - NORFOLK SOUTHERN CORP	8-K.htm
EX-99 - NORFOLK SOUTHERN CORP	Press_Release.htm

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Income

(Unaudited)

	Three Months Ended				Years Ended
	December 31,				December 31,
	2012		2011		2012		2011
	(in millions, except per share amounts)

Railway operating revenues:
Coal	$	657	$	850	$	2,879	$	3,458
General merchandise		1,443		1,393		5,920		5,584
Intermodal		584		554		2,241		2,130
Total railway operating revenues		2,684		2,797		11,040		11,172

Railway operating expenses:
Compensation and benefits		726		734		2,960		2,974
Purchased services and rents		418		419		1,604		1,610
Fuel		395		403		1,577		1,589
Depreciation		233		221		916		862
Materials and other (note 1)		198		220		859		924
Total railway operating expenses		1,970		1,997		7,916		7,959

Income from railway operations		714		800		3,124		3,213

Other income – net		36		39		129		160
Interest expense on debt		129		116		495		455

Income before income taxes		621		723		2,758		2,918

Provision for income taxes:
Current		121		130		643		475
Deferred		87		113		366		527
Total income taxes (note 2)		208		243		1,009		1,002

Net income	$	413	$	480	$	1,749	$	1,916

Earnings per share (note 3):
Basic	$	1.31	$	1.44	$	5.42	$	5.52
Diluted		1.30		1.42		5.37		5.45

Weighted average shares outstanding (note 4):
Basic		314.8		332.8		320.9		345.5
Diluted		318.6		338.6		325.2		351.3

See accompanying notes.

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income

(Unaudited)

	Three Months Ended				Years Ended
	December 31,				December 31,
	2012		2011		2012		2011
	($ in millions)

Net income	$	413	$	480	$	1,749	$	1,916
Other comprehensive loss, before tax:
Pension and other postretirement benefits		(211)		(410)		(114)		(325)
Other comprehensive loss of equity investees		(9)		(21)		(13)		(21)
Other comprehensive loss, before tax		(220)		(431)		(127)		(346)
Income tax benefit related to items of other
comprehensive loss		82		158		44		125
Other comprehensive loss, net of tax		(138)		(273)		(83)		(221)

Total comprehensive income	$	275	$	207	$	1,666	$	1,695

See accompanying notes.

Norfolk Southern Corporation and Subsidiaries

Consolidated Balance Sheets

(Unaudited)

	December 31,			December 31,
	2012			2011
	($ in millions)
Assets
Current assets:
Cash and cash equivalents		$	653		$	276
Short-term investments			15			25
Accounts receivable - net			1,109			1,022
Materials and supplies			216			209
Deferred income taxes			167			143
Other current assets			82			76
Total current assets			2,242			1,751

Investments			2,300			2,234
Properties less accumulated depreciation of $9,922 and
$9,464, respectively			25,736			24,469
Other assets			64			84

Total assets		$	30,342		$	28,538

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable		$	1,362		$	1,092
Short-term debt			200			100
Income and other taxes			206			207
Other current liabilities			263			252
Current maturities of long-term debt			50			50
Total current liabilities			2,081			1,701

Long-term debt			8,432			7,390
Other liabilities			2,237			2,050
Deferred income taxes			7,832			7,486
Total liabilities			20,582			18,627

Stockholders’ equity:
Common Stock $1.00 per share par value, 1,350,000,000 shares
authorized; outstanding 314,034,174 and 330,386,089 shares,
respectively, net of treasury shares			315			332
Additional paid-in capital			1,911			1,912
Accumulated other comprehensive loss			(1,109)			(1,026)
Retained income			8,643			8,693
Total stockholders’ equity			9,760			9,911

Total liabilities and stockholders’ equity		$	30,342		$	28,538

See accompanying notes.

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

	Years Ended
	December 31,
	2012		2011
	($ in millions)
Cash flows from operating activities:
Net income	$	1,749	$	1,916
Reconciliation of net income to net cash provided by operating activities:
Depreciation		922		869
Deferred income taxes		366		527
Gains and losses on properties and investments		(6)		(32)
Changes in assets and liabilities affecting operations:
Accounts receivable		(64)		(215)
Materials and supplies		(7)		(40)
Other current assets		(6)		14
Current liabilities other than debt		82		68
Other – net		29		120
Net cash provided by operating activities		3,065		3,227

Cash flows from investing activities:
Property additions		(2,241)		(2,160)
Property sales and other transactions		192		84
Investments, including short-term		(23)		(135)
Investment sales and other transactions		78		439
Net cash used in investing activities		(1,994)		(1,772)

Cash flows from financing activities:
Dividends		(624)		(576)
Common Stock issued – net		89		120
Purchase and retirement of Common Stock (note 4)		(1,288)		(2,051)
Proceeds from borrowings – net		1,491		1,101
Debt repayments		(362)		(600)
Net cash used in financing activities		(694)		(2,006)

Net increase (decrease) in cash and cash equivalents		377		(551)

Cash and cash equivalents:
At beginning of year		276		827

At end of year	$	653	$	276

Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest (net of amounts capitalized)	$	473	$	435
Income taxes (net of refunds)		618		289

See accompanying notes.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:

1. MATERIALS AND OTHER

During the first quarter of 2011, we received an unfavorable ruling for an arbitration claim with an insurance carrier, and were denied recovery of the contested portion of the claim. As a result, we 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 (IRS) completed its examination of our 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. During the second and fourth quarters of 2011, enacted state tax law changes resulted in a decrease to deferred income tax expense of $19 million and $11 million, respectively.

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 fourth quarter, $2 million in 2012 and $3 million in 2011; and for the year, $9 million in both 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 fourth quarter, $1 million in 2012 and less than $1 million in 2011; and for the year, $4 million in 2012 and $2 million in 2011.

4. STOCK REPURCHASE PROGRAM

We repurchased and retired 18.8 million shares of Common Stock in 2012, at a cost of $1.3 billion, and 30.2 million shares at a cost of $2.1 billion for the same period of 2011. On August 1, 2012, our 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 our 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, we have repurchased and retired 128.4 million shares at a total cost of $7.5 billion.

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