Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Income
(Unaudited)
($ millions except per share)
Three Months Ended
March 31,
------------------
2005 2004
---- ----
Railway operating revenues:
Coal $ 467 $ 398
General merchandise 1,086 967
Intermodal 408 328
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TOTAL RAILWAY OPERATING REVENUES 1,961 1,693
------- -------
Railway operating expenses:
Compensation and benefits 604 545
Materials, services and rents 436 365
Conrail rents and services (note 2) 35 102
Depreciation (note 2) 193 129
Diesel fuel 150 107
Casualties and other claims (note 1) 78 40
Other 62 59
------- -------
TOTAL RAILWAY OPERATING EXPENSES 1,558 1,347
------- -------
Income from railway operations 403 346
Other income - net 2 10
Interest expense on debt (128) (121)
------- -------
Income before income taxes 277 235
Provision for income taxes:
Current 59 49
Deferred 24 28
------- -------
TOTAL INCOME TAXES 83 77
------- -------
NET INCOME $ 194 $ 158
======= =======
Earnings per share:
Basic $ 0.48 $ 0.40
Diluted $ 0.47 $ 0.40
Average shares outstanding (000's):
Basic 401,771 391,231
Diluted 410,107 394,024
See notes to consolidated financial statements.
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Norfolk Southern Corporation and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
($ millions)
March 31, December 31,
-------- -----------
2005 2004
---- ----
ASSETS
Current assets:
Cash, cash equivalents and
short-term investments $ 1,119 $ 669
Accounts receivable - net (note 1) 890 767
Materials and supplies 114 104
Deferred income taxes 216 187
Other current assets 256 240
------- -------
Total current assets 2,595 1,967
Investments 1,525 1,499
Properties less accumulated depreciation 20,474 20,526
Other assets (note 1) 893 758
------- -------
TOTAL ASSETS $ 25,487 $ 24,750
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable (note 1) $ 1,098 $ 1,090
Income and other taxes 227 210
Other current liabilities 295 239
Current maturities of long-term debt 557 662
------- -------
Total current liabilities 2,177 2,201
Long-term debt 7,125 6,863
Other liabilities (note 1) 1,313 1,146
Deferred income taxes 6,618 6,550
------- -------
TOTAL LIABILITIES 17,233 16,760
------- -------
Stockholders' equity:
Common stock $1.00 per share par value 425 421
Additional paid-in capital 833 728
Unearned restricted stock (25) (8)
Accumulated other comprehensive loss (2) (24)
Retained income 7,043 6,893
------- -------
8,274 8,010
Less treasury stock at cost,
20,907,125 shares (20) (20)
------- -------
TOTAL STOCKHOLDERS' EQUITY 8,254 7,990
------- -------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 25,487 $ 24,750
======= =======
See notes to consolidated financial statements.
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Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended March 31,
($ millions)
---------------------------
2005 2004
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 194 $ 158
Reconciliation of net income to
net cash provided by operating activities:
Depreciation 197 132
Deferred income taxes 24 28
Equity in earnings of Conrail (6) (15)
Gains on properties and investments (7) (1)
Changes in assets and liabilities
affecting operations:
Accounts receivable (52) (71)
Materials and supplies (10) (5)
Other current assets 23 20
Current liabilities other than debt 36 40
Other - net 9 (28)
------- -------
Net cash provided by operating activities 408 258
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions (144) (172)
Property sales and other transactions 4 1
Investments, including short-term (303) (23)
Investment sales and other transactions 216 1
------- -------
Net cash used for investing activities (227) (193)
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends (44) (32)
Common stock issued - net 66 5
Proceeds from borrowings (note 3) 332 88
Debt repayments (138) (303)
------- -------
Net cash provided by (used for)
financing activities 216 (242)
------- -------
Net increase (decrease) in cash and
cash equivalents 397 (177)
CASH AND CASH EQUIVALENTS:
At beginning of year 467 284
------- -------
At end of period $ 864 $ 107
SHORT-TERM INVESTMENTS AT END OF PERIOD $ 255 $ 3
------- -------
CASH, CASH EQUIVALENTS AND SHORT-TERM
INVESTMENTS AT END OF PERIOD $ 1,119 $ 110
======= =======
SUPPLEMENTAL DISCLOSURE OF CASHFLOW
INFORMATION
Cash paid during the period for:
Interest (net of amounts capitalized) $ 70 $ 71
Income taxes $ -- $ --
See notes to consolidated financial statements.
- ---------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:
1. GRANITEVILLE DERAILMENT -
In the first quarter of 2005, NS recorded a liability related to
the Jan. 6, 2005, derailment in Graniteville, SC. The liability,
which includes a current and long-term portion, represents NS' best
estimate based on current facts and circumstances. The estimate
includes amounts related to business property damage and other
economic losses, personal injury and individual property damage
claims as well as third-party response costs. NS' commercial
insurance policies cover expenses related to this derailment above
NS' self-insured retention, including its own response costs and
legal fees. Accordingly, the Consolidated Balance Sheet reflects a
current and long-term receivable for estimated recoveries from its
insurance carriers.
First-quarter results include approximately $35 million of expenses
related to this incident, which represents NS' retention under its
insurance policies and other uninsured costs, and which reduced net
income by approximately $21 million, or 5 cents per share (basic and
diluted). NS expects $6 million of additional costs for the
remainder of the year.
While it is reasonable to expect that the liability for covered
losses could differ from the amount recorded, such a change would
be offset by a corresponding change in the recovery receivable.
As a result, NS does not believe that it is reasonably likely that
its total loss (the difference between the liability and future
recoveries) will be materially different than the loss recorded in
the first quarter of 2005. NS expects at this time that insurance
coverage is adequate to cover potential claims and settlements
above its self-insurance retention.
2. CONRAIL CORPORATE REORGANIZATION -
On August 27, 2004, NS, CSX and Conrail completed a corporate
reorganization of Conrail that resulted in the direct ownership and
control by Norfolk Southern Railway Company (NSR) of routes and
assets that had previously been operated by NSR under operating
and lease agreements with a Conrail subsidiary. As a part of the
reorganization, NSR issued new unsecured debt obligations, which
were exchanged for unsecured debt obligations of Consolidated Rail
Corporation (CRC), a Conrail subsidiary. In addition, NSR entered
into new lease and sublease arrangements with CRC to support CRC's
secured debt and lease obligations, and the long-term note due to
Conrail was eliminated. The reorganization did not affect the
Shared Assets Areas, which continue to be owned and operated by
CRC. After the reorganization, "Conrail rents and services"
reflects only the expenses associated with the Shared Assets Areas,
and other expenses (primarily the depreciation related to the routes
and assets) are reflected in their respective line items.
3. PAYMENTS TO CONRAIL -
Payments made to Conrail in accordance with the operating and lease
agreements in place before the Conrail corporate reorganization
(see note 2 on page 4) reduced NS' "Net cash provided by operating
activities." A significant portion of these payments was borrowed
back from a Conrail subsidiary. The net borrowings were included in
NS' "Net cash used for financing activities" and totaled $69 million
in the first quarter of 2004.