FOR IMMEDIATE RELEASE
April 26, 2006
NORFOLK SOUTHERN REPORTS RECORD REVENUES;
NET INCOME INCREASES 57 PERCENT
For first-quarter 2006 vs. first-quarter 2005:
* Railway operating revenues of $2.3 billion were the highest of
any quarter in Norfolk Southern's history.
* Income from railway operations climbed 37 percent to $551
million and set a first-quarter record.
* Net income increased 57 percent to $305 million, or $0.72 per
diluted share.
* The railway operating ratio improved 3.3 percentage points to
76.1 percent.
NORFOLK, VA - Norfolk Southern Corporation (NYSE: NSC) today
reported first-quarter net income of $305 million, or $0.72 per
diluted share, an increase of 57 percent compared with $194 million,
or $0.47 per diluted share, for the first quarter of 2005.
"Continued strong demand for rail service allowed us to produce
a substantial improvement over the prior year," said Wick Moorman,
Norfolk Southern's chief executive officer. "From our vantage point,
demand for rail transportation remains healthy, and our first-quarter
results reflect solid execution throughout the enterprise. I'm even
more encouraged that we were able to achieve our lowest first-quarter
operating ratio since the Conrail transaction and report continuing
substantial volume growth in conjunction with our improved earnings."
Railway operating revenues of $2.3 billion were the highest of
any quarter in Norfolk Southern's history and improved 17 percent
compared with $1.96 billion in the first quarter of 2005.
General merchandise revenues were a record $1.28 billion,
an increase of 18 percent compared with the same period a year
earlier. The gains were due primarily to higher average revenues
and a 3 percent increase in traffic volumes. Each of the major
business groups reported revenue improvements. Agricultural product
revenues increased by 38 percent, metals and construction by 25
percent, paper, clay and forest products by 14 percent, chemical
products by 11 percent and automotive by 4 percent.
Coal revenues climbed $92 million, or 20 percent, to
$559 million, compared with the same period last year, primarily
a result of higher average revenues and a 4 percent increase in
coal volumes.
Intermodal revenues set a first-quarter record, rising 14
percent to $466 million compared with the same period a year
earlier. The improvement was driven by higher average revenues
and an 8 percent increase in traffic volume, reflecting strength
in the international and truckload sectors.
First-quarter railway operating expenses were $1.75 billion,
up 12 percent over the same period in 2005. Higher compensation
and benefits, a 54 percent increase in diesel fuel expense and
costs of handling additional business volumes contributed to the
increases during the quarter.
The first-quarter operating ratio of 76.1 percent was an
improvement of 3.3 percentage points compared with 79.4 percent
during first-quarter 2005.
Norfolk Southern Corporation is one of the nation's premier
transportation companies. Its Norfolk Southern Railway subsidiary
operates approximately 21,200 route miles in 22 states, the
District of Columbia and Ontario, Canada, serving every major
container port in the eastern United States and providing superior
connections to western rail carriers. NS operates the most extensive
intermodal network in the East and is North America's largest rail
carrier of automotive parts and finished vehicles.
# # #
Norfolk Southern contacts:
(Media) Bob Fort, 757-629-2710 (rcfort@nscorp.com)
(Investors) Leanne Marilley, 757-629-2861(leanne.marilley@nscorp.com)
Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Income
(Unaudited)
($ millions except per share)
Three Months Ended
March 31,
2006 2005
---- ----
Railway operating revenues:
Coal $ 559 $ 467
General merchandise 1,278 1,086
Intermodal 466 408
------- -------
TOTAL RAILWAY OPERATING REVENUES 2,303 1,961
------- -------
Railway operating expenses:
Compensation and benefits (note 1) 721 604
Materials, services and rents 471 436
Conrail rents and services 32 35
Depreciation 183 193
Diesel fuel 231 150
Casualties and other claims (note 2) 53 78
Other 61 62
------- -------
TOTAL RAILWAY OPERATING EXPENSES 1,752 1,558
------- -------
Income from railway operations 551 403
Other income - net 35 2
Interest expense on debt 120 128
------- -------
Income before income taxes 466 277
Provision for income taxes:
Current 162 59
Deferred (1) 24
------- -------
TOTAL INCOME TAXES 161 83
------- -------
NET INCOME $ 305 $ 194
======= =======
Earnings per share:
Basic $ 0.74 $ 0.48
Diluted $ 0.72 $ 0.47
Average shares outstanding (000's):
Basic 412,444 401,771
Diluted 421,773 410,107
See notes to consolidated financial statements.
- ---------------------------------------------------------------------
Norfolk Southern Corporation and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
($ millions)
March 31, December 31,
2006 2005
---- ----
ASSETS
Current assets:
Cash, cash equivalents and
short-term investments $ 1,542 $ 1,257
Accounts receivable - net (note 2) 985 931
Materials and supplies 143 132
Deferred income taxes 167 167
Other current assets 107 163
------- -------
Total current assets 2,944 2,650
Investments 1,623 1,590
Properties less accumulated depreciation 20,756 20,705
Other assets (note 2) 918 916
------- -------
TOTAL ASSETS $ 26,241 $ 25,861
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable (note 2) $ 1,036 $ 1,163
Income and other taxes 301 231
Other current liabilities 276 213
Current maturities of long-term debt 348 314
------- -------
Total current liabilities 1,961 1,921
Long-term debt 6,550 6,616
Other liabilities (note 2) 1,408 1,415
Deferred income taxes 6,613 6,620
------- -------
TOTAL LIABILITIES 16,532 16,572
------- -------
Stockholders' equity:
Common stock $1.00 per share par value 436 431
Additional paid-in capital 1,220 992
Unearned restricted stock -- (17)
Accumulated other comprehensive loss (85) (77)
Retained income 8,158 7,980
------- -------
9,729 9,309
Less treasury stock at cost,
20,833,125 shares (20) (20)
------- -------
TOTAL STOCKHOLDERS' EQUITY 9,709 9,289
------- -------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 26,241 $ 25,861
======= =======
See notes to consolidated financial statements.
- ---------------------------------------------------------------
Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended
March 31,
($ millions)
2006 2005
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 305 $ 194
Reconciliation of net income to
net cash provided by operating activities:
Depreciation 185 197
Deferred income taxes (1) 24
Equity in earnings of Conrail (6) (6)
Gains on properties and investments (19) (7)
Changes in assets and liabilities
affecting operations:
Accounts receivable (54) (52)
Materials and supplies (11) (10)
Other current assets 28 23
Current liabilities other than debt 53 36
Other - net 30 9
------- -------
Net cash provided by operating activities 510 408
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions (256) (144)
Property sales and other transactions 52 4
Investments, including short-term (354) (303)
Investment sales and other transactions 267 216
------- -------
Net cash used for investing activities (291) (227)
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends (66) (44)
Common stock issued - net 183 66
Purchase and retirement of common stock (note 3) (67) --
Proceeds from borrowings -- 332
Debt repayments (32) (138)
------- -------
Net cash provided by financing activities 18 216
------- -------
Net increase in cash and cash equivalents 237 397
CASH AND CASH EQUIVALENTS:
At beginning of year 289 467
------- -------
At end of period 526 864
SHORT-TERM INVESTMENTS AT END OF PERIOD 1,016 255
------- -------
CASH, CASH EQUIVALENTS AND SHORT-TERM
INVESTMENTS AT END OF PERIOD $ 1,542 $ 1,119
======= =======
SUPPLEMENTAL DISCLOSURE OF CASHFLOW INFORMATION
Cash paid during the year for:
Interest (net of amounts capitalized) $ 63 $ 70
Income taxes (net of refunds) $ 17 $ --
See notes to consolidated financial statements.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:
1. ADOPTION OF SFAS 123(R), "SHARE-BASED PAYMENT"
Effective January 1, 2006, NS adopted Statement of Financial
Accounting Standards, No. 123(R), "Share-Based Payment,"
[SFAS 123(R)]. This statement applies to awards granted,
modified, repurchased or cancelled after the effective date
as well as awards that are unvested at the effective date and
includes, among other things, the requirement to expense the
fair value of stock options. As a result of the implementation
of SFAS 123(R), compensation and benefits expense in the first
quarter of 2006 included $27 million for the immediate
expensing of awards granted to retirement eligible employees
and $4 million for stock options granted to non-retirement
eligible employees.
2. 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 are expected to 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.
Results for the first quarter of 2005 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 diluted share.
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 insurance receivable.
As a result, NS does not believe that it is reasonably likely that
its net loss (the difference between the liability and future
recoveries) will be materially different than the loss recorded in
2005. NS expects at this time that insurance coverage is adequate
to cover potential claims and settlements above its self-insurance
retention.
3. STOCK REPURCHASE PROGRAM -
In November 2005, NS' Board of Directors authorized the repurchase
of up to 50 million shares of NS common stock through the end of
2015. During the first quarter of 2006, cash flows from financing
activities included $67 million for the purchase and retirement of
1,310,000 shares of common stock under this program.