Norfolk Southern (NSC) 8-K Norfolk Southern reports third-quarter 2013 earnings

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Income

(Unaudited)

	Third Quarter				First Nine Months
	2013		2012		2013		2012
	(in millions, except per share amounts)
Railway operating revenues
Coal	$	641	$	701	$	1,902	$	2,222
General merchandise		1,578		1,425		4,696		4,477
Intermodal		605		567		1,766		1,657
Total railway operating revenues		2,824		2,693		8,364		8,356
Railway operating expenses
Compensation and benefits		735		724		2,241		2,234
Purchased services and rents		420		403		1,223		1,186
Fuel		390		379		1,210		1,182
Depreciation		230		230		683		683
Materials and other		200		226		631		661
Total railway operating expenses		1,975		1,962		5,988		5,946
Income from railway operations		849		731		2,376		2,410
Other income – net (note 1)		30		33		194		93
Interest expense on debt		131		124		388		366
Income before income taxes		748		640		2,182		2,137
Provision for income taxes
Current		194		97		570		522
Deferred		72		141		215		279
Total income taxes		266		238		785		801
Net income	$	482	$	402	$	1,397	$	1,336
Earnings per share (notes 1 & 2)
Basic	$	1.55	$	1.26	$	4.45	$	4.12
Diluted		1.53		1.24		4.40		4.07
Weighted average shares outstanding (note 3)
Basic		310.4		317.7		313.0		322.9
Diluted		313.9		321.8		316.6		327.4

See accompanying notes to consolidated financial statements.

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income

(Unaudited)

	Third Quarter				First Nine Months
	2013		2012		2013		2012
	($ in millions)
Net income	$	482	$	402	$	1,397	$	1,336
Other comprehensive income, before tax:
Pension and other postretirement benefits		38		33		110		97
Other comprehensive income (loss) of equity investees		-		-		2		(4)
Other comprehensive income, before tax		38		33		112		93
Income tax expense related to items of other
comprehensive income		(15)		(13)		(43)		(38)
Other comprehensive income, net of tax		23		20		69		55
Total comprehensive income	$	505	$	422	$	1,466	$	1,391

See accompanying notes to consolidated financial statements.

Norfolk Southern Corporation and Subsidiaries

Consolidated Balance Sheets

(Unaudited)

	September 30,			December 31,
	2013			2012
	($ in millions)
Assets
Current assets:
Cash and cash equivalents		$	984		$	653
Short-term investments			20			15
Accounts receivable - net			1,083			1,109
Materials and supplies			224			216
Deferred income taxes			149			167
Other current assets			34			82
Total current assets			2,494			2,242
Investments			2,395			2,300
Properties less accumulated depreciation of $10,271 and
$9,922, respectively			26,413			25,736
Other assets			63			64
Total assets		$	31,365		$	30,342
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable		$	1,267		$	1,362
Short-term debt			-			200
Income and other taxes			241			206
Other current liabilities			377			263
Current maturities of long-term debt			447			50
Total current liabilities			2,332			2,081
Long-term debt			8,499			8,432
Other liabilities			2,166			2,237
Deferred income taxes			8,074			7,832
Total liabilities			21,071			20,582
Stockholders’ equity:
Common stock $1.00 per share par value, 1,350,000,000 shares
authorized; outstanding 308,910,329 and 314,034,174 shares,
respectively, net of treasury shares			310			315
Additional paid-in capital			1,979			1,911
Accumulated other comprehensive loss			(1,040)			(1,109)
Retained income			9,045			8,643
Total stockholders’ equity			10,294			9,760
Total liabilities and stockholders’ equity		$	31,365		$	30,342

See accompanying notes to consolidated financial statements.

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

	First Nine Months
	2013		2012
	($ in millions)
Cash flows from operating activities
Net income	$	1,397	$	1,336
Reconciliation of net income to net cash provided by operating activities:
Depreciation		687		688
Deferred income taxes		215		279
Gains and losses on properties and investments (note 1)		(100)		(4)
Changes in assets and liabilities affecting operations:
Accounts receivable		26		(56)
Materials and supplies		(8)		(27)
Other current assets		48		43
Current liabilities other than debt		121		183
Other – net		18		34
Net cash provided by operating activities		2,404		2,476
Cash flows from investing activities
Property additions		(1,470)		(1,522)
Property sales and other transactions		109		47
Investments, including short-term		(29)		(14)
Investment sales and other transactions		21		37
Net cash used in investing activities		(1,369)		(1,452)
Cash flows from financing activities
Dividends		(476)		(467)
Common stock issued – net		92		77
Purchase and retirement of common stock (note 3)		(564)		(1,150)
Proceeds from borrowings – net		492		1,291
Debt repayments		(248)		(358)
Net cash used in financing activities		(704)		(607)
Net increase in cash and cash equivalents		331		417
Cash and cash equivalents
At beginning of period		653		276
At end of period	$	984	$	693
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest (net of amounts capitalized)	$	305	$	297
Income taxes (net of refunds)		485		536

See accompanying notes to consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:

1.Other Income — Net    

In first quarter 2013, we recognized a $97 million gain on a land sale, 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 third quarter, $2 million in 2013 and $3 million in 2012; and for the first nine months, $5 million in 2013 and $7 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 third quarter, $1 million in both 2013 and 2012; and for the first nine months, $3 million in both 2013 and 2012.

3.Stock Repurchase Program

We repurchased and retired 7.5 million shares of common stock in the first nine months of 2013, at a cost of $564 million, and 16.5 million shares at a cost of $1.2 billion 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 135.9 million shares at a total cost of $8.1 billion.