Norfolk Southern reports first-quarter 2013 results

Apr 24, 2013

NORFOLK, Va., April 23, 2013 /PRNewswire/ --

For 2013 vs. 2012:

Railway operating revenues were $2.7 billion.
Income from railway operations was $691 million.
Net income was $450 million, or $1.41 per diluted share.
Net income included $60 million, or $0.19 per diluted share from a property sale.
The first-quarter railway operating ratio was 74.8 percent.

For the first quarter of 2013, Norfolk Southern Corporation (NYSE: NSC) reported net income of $450 million, or $1.41 per diluted share, 10 percent higher than $410 million, or $1.23 per diluted share, for the first quarter of 2012.

First-quarter results included a gain from the sale of land to the Michigan Department of Transportation, which increased net income by $60 million, or $0.19 per diluted share.

"We're pleased with Norfolk Southern's first-quarter results, which illustrate our diverse customer base, superior operating performance, productivity initiatives, and expense controls," said CEO Wick Moorman. "We are working to ensure that our rail franchise continues to thrive regardless of how our business mix changes."

Railway operating revenues were $2.7 billion, 2 percent lower compared with first-quarter 2012, but shipment volumes increased 3 percent.

General merchandise revenues were $1.5 billion, 2 percent higher compared with first-quarter 2012, driven by increased shipments of chemicals and automobiles.

First-quarter coal revenues were $635 million, down 17 percent compared with the same quarter last year, due to lower average revenue per unit and a 4 percent decline in volume, the result of mild winter weather and low natural gas prices.

Intermodal revenues climbed 9 percent to $573 million as volumes increased by 9 percent compared with first-quarter 2012.

Railway operating expenses for the quarter were $2.0 billion, about even compared with first-quarter 2012.

Income from railway operations for the first quarter was $691 million, 7 percent lower compared with the same period of 2012.

The railway operating ratio was 74.8 percent compared with 73.3 percent for first-quarter 2012.

Norfolk Southern Corporation (NYSE: NSC) is one of the nation's premier transportation companies. Its Norfolk Southern Railway Company subsidiary operates approximately 20,000 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, automotive, and industrial products.

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

	First Quarter
	2013		2012
	($ in millions, except per share amounts)

Railway operating revenues
Coal	$	635	$	766
General merchandise		1,530		1,496
Intermodal		573		527
Total railway operating revenues		2,738		2,789

Railway operating expenses
Compensation and benefits		780		786
Purchased services and rents		393		391
Fuel		429		413
Depreciation		227		224
Materials and other		218		230
Total railway operating expenses		2,047		2,044

Income from railway operations		691		745

Other income – net (note 1)		135		29
Interest expense on debt		129		120

Income before income taxes		697		654

Provision for income taxes
Current		173		156
Deferred		74		88
Total income taxes		247		244

Net income	$	450	$	410

Earnings per share (notes 1 & 2)
Basic	$	1.43	$	1.24
Diluted		1.41		1.23

Weighted average shares outstanding (note 3)
Basic		314.5		328.3
Diluted		318.1		332.9

See accompanying notes to consolidated financial statements.

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

	First Quarter
	2013		2012
	($ in millions)

Net income	$	450	$	410
Other comprehensive income, before tax:
Pension and other postretirement benefits		36		32
Other comprehensive income (loss) of equity investees		1		(4)
Other comprehensive income, before tax		37		28
Income tax expense related to items of other
comprehensive income		(14)		(12)
Other comprehensive income, net of tax		23		16

Total comprehensive income	$	473	$	426

See accompanying notes to consolidated financial statements.

Norfolk Southern Corporation and Subsidiaries Consolidated Balance Sheets (Unaudited)

	March 31,		December 31,
	2013		2012
	($ in millions)
Assets
Current assets:
Cash and cash equivalents	$	672	$	653
Short-term investments		15		15
Accounts receivable – net		1,158		1,109
Materials and supplies		246		216
Deferred income taxes		167		167
Other current assets		65		82
Total current assets		2,323		2,242

Investments		2,341		2,300
Properties less accumulated depreciation of $10,042 and $9,922,
respectively		25,870		25,736
Other assets		65		64

Total assets	$	30,599	$	30,342

Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	1,188	$	1,362
Short-term debt		-		200
Income and other taxes		319		206
Other current liabilities		350		263
Current maturities of long-term debt		47		50
Total current liabilities		1,904		2,081

Long-term debt		8,438		8,432
Other liabilities		2,226		2,237
Deferred income taxes		7,921		7,832
Total liabilities		20,489		20,582

Stockholders' equity:
Common stock $1.00 per share par value, 1,350,000,000 shares
authorized; outstanding 315,088,379 and 314,034,174 shares,
respectively, net of treasury shares		316		315
Additional paid-in capital		1,976		1,911
Accumulated other comprehensive loss		(1,086)		(1,109)
Retained income		8,904		8,643

Total stockholders' equity		10,110		9,760

Total liabilities and stockholders' equity	$	30,599	$	30,342

See accompanying notes to consolidated financial statements.

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

	First Quarter
	2013		2012
	($ in millions)
Cash flows from operating activities
Net income	$	450	$	410
Reconciliation of net income to net cash provided by operating activities:
Depreciation		228		226
Deferred income taxes		74		88
Gains and losses on properties and investments (note 1)		(99)		(1)
Changes in assets and liabilities affecting operations:
Accounts receivable		(49)		(34)
Materials and supplies		(30)		(19)
Other current assets		17		5
Current liabilities other than debt		96		316
Other – net		36		44
Net cash provided by operating activities		723		1,035

Cash flows from investing activities
Property additions		(379)		(461)
Property sales and other transactions		19		2
Investments, including short-term		(5)		(4)
Investment sales and other transactions		(1)		27
Net cash used in investing activities		(366)		(436)

Cash flows from financing activities
Dividends		(157)		(155)
Common stock issued – net		55		31
Purchase and retirement of common stock (note 3)		(33)		(400)
Proceeds from borrowings – net		-		696
Debt repayments		(203)		(218)
Net cash used in financing activities		(338)		(46)

Net increase in cash and cash equivalents		19		553

Cash and cash equivalents
At beginning of period		653		276

At end of period	$	672	$	829

Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest (net of amounts capitalized)	$	62	$	60
Income taxes (net of refunds)		23		2

See accompanying notes to consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:

OTHER INCOME – NET
First quarter 2013 results include a $97 million land sale gain, which increased net income by $60 million or $0.19 per share.
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 first quarter, $2 million in 2013 and $3 million in 2012.
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 first quarter, $1 million in 2013 and $2 million in 2012.
STOCK REPURCHASE PROGRAM
We repurchased and retired 0.5 million shares of common stock in the first quarter of 2013, at a cost of $33 million, and 5.7 million shares at a cost of $400 million for the same period of 2012. 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 128.9 million shares at a total cost of $7.5 billion.