Norfolk Southern (NSC) 8-K Norfolk Southern reports third-quarter 2010 results

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Income

(Unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2010			2009			2010			2009
	(in millions, except per share amounts)
Railway operating revenues:
Coal	$	709	$		571	$		2,034	$		1,684
General merchandise		1,283			1,103			3,765			3,056
Intermodal		464			389			1,325			1,123
Total railway operating revenues		2,456			2,063			7,124			5,863
Railway operating expenses:
Compensation and benefits		680			598			2,049			1,788
Purchased services and rents		377			352			1,086			1,041
Fuel		259			192			771			504
Depreciation		204			210			612			624
Materials and other (note 1)		190			149			572			493
Total railway operating expenses		1,710			1,501			5,090			4,450
Income from railway operations		746			562			2,034			1,413
Other income - net		81			37			118			90
Interest expense on debt		113			118			347			348
Income before income taxes		714			481			1,805			1,155
Provision for income taxes:
Current		143			80			539			255
Deferred (note 2)		126			98			172			173
Total income taxes		269			178			711			428
Net income	$	445	$		303	$		1,094	$		727
Earnings per share (note 3):
Basic	$	1.21	$		0.82	$		2.95	$		1.97
Diluted	$	1.19	$		0.81	$		2.91	$		1.94
Weighted average shares outstanding (notes 3 & 4):
Basic		366.3			367.3			368.5			366.8
Diluted		371.6			372.5			373.8			371.7
See accompanying notes to consolidated financial statements.

Norfolk Southern Corporation and Subsidiaries

Consolidated Balance Sheets

(Unaudited)

	September 30,			December 31,
	2010			2009
	($ in millions)
Assets
Current assets:
Cash and cash equivalents	$	1,129	$		996
Short-term investments		229			90
Accounts receivable - net		908			766
Materials and supplies		179			164
Deferred income taxes		153			142
Other current assets		35			88
Total current assets		2,633			2,246
Investments		2,307			2,164
Properties less accumulated depreciation		22,893			22,643
Other assets		229			316
Total assets	$	28,062	$		27,369
Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	1,131	$		974
Short-term debt		-			100
Income and other taxes		116			109
Other current liabilities		347			232
Current maturities of long-term debt		361			374
Total current liabilities		1,955			1,789
Long-term debt		6,574			6,679
Other liabilities		1,784			1,801
Deferred income taxes		6,960			6,747
Total liabilities		17,273			17,016
Stockholders' equity:
Common stock $1.00 per share par value, 1,350,000,000 shares
authorized; outstanding 363,372,120 and 369,019,990 shares,
respectively, net of treasury shares		364			370
Additional paid-in capital		1,890			1,809
Accumulated other comprehensive loss		(804)			(853)
Retained income		9,339			9,027
Total stockholders' equity		10,789			10,353
Total liabilities and stockholders' equity	$	28,062	$		27,369
See accompanying notes to consolidated financial statements.

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

	Nine Months Ended
	September 30,
	2010		2009
	($ in millions)
Cash flows from operating activities:
Net income	$	1,094	$	727
Reconciliation of net income to net cash provided
by operating activities:
Depreciation		617		630
Deferred income taxes		172		173
Gains and losses on properties		(38)		(13)
Changes in assets and liabilities affecting operations:
Accounts receivable		(142)		(26)
Materials and supplies		(15)		22
Other current assets		50		111
Current liabilities other than debt		254		(184)
Other - net		136		(65)
Net cash provided by operating activities		2,128		1,375
Cash flows from investing activities:
Property additions		(907)		(919)
Property sales and other transactions		81		61
Investments, including short-term		(441)		(119)
Investment sales and other transactions		261		10
Net cash used in investing activities		(1,006)		(967)
Cash flows from financing activities:
Dividends		(384)		(374)
Common stock issued - net		59		32
Purchase and retirement of common stock (note 4)		(437)		-
Proceeds from borrowings - net		250		990
Debt repayments		(477)		(675)
Net cash used in financing activities		(989)		(27)
Net increase in cash and cash equivalents		133		381
Cash and cash equivalents:
At beginning of year		996		618
At end of period	$	1,129	$	999
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest (net of amounts capitalized)	$	296	$	288
Income taxes (net of refunds)	$	498	$	234
See accompanying notes to consolidated financial statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS: 1.   MATERIALS AND OTHER Second quarter 2009 includes a $21 million favorable adjustment related to settlement of a multi-year state tax dispute. 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 these Acts eliminate, 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. 3.   EARNINGS PER SHARE As required under the provisions of ASC 260-10, "Earnings Per Share," for basic earnings per share, income available to common stockholders for the third quarters of 2010 and 2009 reflects a $2 million reduction and for the first nine months of 2010 and 2009 a $6 million reduction from net income for the effect of dividend equivalent payments made to holders of stock options.  In addition, for the third quarters and first nine months of 2010 and 2009, 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 a $2 million and $6 million reduction, respectively, from net income for dividend equivalent payments. 4.   STOCK REPURCHASE PROGRAM In July 2010, NS' Board of Directors amended NS' share repurchase program, increasing the authorized amount of share repurchases from 75 million to 125 million and lengthening the term of the program from December 31, 2010 to December 31, 2014.  During the first nine months of 2010, NS purchased and retired 7.8 million shares of common stock at a cost of $437 million.  Since inception of the share repurchase program, NS has repurchased and retired 72.5 million shares at a total cost of $3.7 billion.