Norfolk Southern (NSC) 8-K Results of Operations and Financial Condition

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:

1.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. 

2. 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.

3. 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.