NORFOLK, Va., Jan. 22 /PRNewswire-FirstCall/ --
NS set the following fourth-quarter records: -- Railway operating revenues reached $2.5 billion. -- Income from railway operations rose 12 percent to $686 million. -- Net income increased 4 percent to $399 million. -- Diluted earnings per share climbed 7 percent to $1.02. NS set the following records for the year: -- Railway operating revenues increased $25 million to $9.4 billion. -- Income from railway operations rose $28 million to $2.6 billion. -- Diluted earnings per share increased 3 percent to $3.68.
Norfolk Southern Corporation today reported record fourth- quarter 2007 net income of $399 million, an increase of 4 percent, compared with $385 million for fourth-quarter 2006. Diluted earnings per share were $1.02, up 7 percent, compared with the $0.95 per diluted share earned in the fourth quarter of 2006. Net income for 2007 was $1.5 billion, down 1 percent, compared with record net income for 2006. Diluted earnings per share increased 3 percent, or 11 cents, to $3.68.
"I am pleased to report that Norfolk Southern delivered a strong financial performance in the fourth quarter in the face of economic headwinds and higher fuel costs," said CEO Wick Moorman. "While the economic picture remains uncertain, we are optimistic about our prospects for 2008 and beyond. We continue to invest in infrastructure development such as the Heartland Corridor to add capacity to our network for future growth, and we are confident in the value of rail as the best transportation choice for our customers."
Fourth-quarter railway operating revenues were a record $2.5 billion, up 6 percent, compared with the same period a year earlier. Flat merchandise shipments, together with fewer coal and intermodal shipments, contributed to a 3 percent decline in traffic volume. For 2007, railway operating revenues improved by $25 million to $9.4 billion, slightly higher than 2006, and volumes declined 4 percent.
General merchandise revenues were $1.4 billion, a fourth-quarter record, and an increase of 10 percent compared with the same period last year. These revenues included a contract volume settlement that had a favorable impact of $26 million in the fourth quarter. General merchandise volumes were about even, compared with the fourth quarter of last year. For 2007, general merchandise revenues reached a record $5.2 billion, a 2 percent increase over 2006, despite a 4 percent decline in volume.
Coal revenues improved 2 percent to $601 million, a fourth-quarter record, but declined 1 percent to $2.3 billion for the year, compared with the same periods of 2006. Traffic volume was down 5 percent in the quarter and declined 3 percent for the year compared with 2006 volumes.
Intermodal revenues were $496 million, up 1 percent, compared with fourth- quarter 2006. For 2007, intermodal revenues were $1.9 billion, down 3 percent, compared to last year. Traffic volume declined 4 percent in the quarter and for 2007 compared with the same periods of 2006.
Railway operating expenses were $1.8 billion for the quarter, 4 percent higher compared with fourth-quarter 2006, largely due to increased fuel costs. For 2007, railway operating expenses of $6.8 billion were about even with 2006.
Income from railway operations set records for both the fourth quarter and the year, climbing 12 percent to $686 million in the quarter and increasing 1 percent to $2.6 billion for the year, compared with 2006.
The fourth-quarter operating ratio improved by 1.5 percentage points to 72.0 percent, compared with the same quarter of 2006. For the year, the operating ratio was 72.6, down slightly from the year before.
Financial statements for the fourth quarter and for 2007 are attached to this news release, and the Quarterly Financial Review for the fourth quarter is posted on the NS Web site at http://www.nscorp.com/ under the Investors tab.
Norfolk Southern Corporation is one of the nation's premier transportation companies. Its Norfolk Southern Railway subsidiary operates approximately 21,000 route miles in 22 states and the District of Columbia, serving every major container port in the eastern United States and providing superior connections to western rail carriers. NS operates the most extensive intermodal network in the East and is North America's largest rail carrier of metals and automotive products.
Norfolk Southern Corporation and Subsidiaries Consolidated Statements of Income (Unaudited) ($ millions except per share) Three Months Ended December 31, 2007 2006 Railway operating revenues: Coal $601 $592 General merchandise (note 1) 1,357 1,234 Intermodal 496 493 Total railway operating revenues 2,454 2,319 Railway operating expenses (note 2): Compensation and benefits 623 655 Purchased services and rents 396 401 Fuel 353 256 Depreciation 197 187 Materials and other 199 206 Total railway operating expenses 1,768 1,705 Income from railway operations 686 614 Other income - net 34 40 Interest expense on debt 108 115 Income before income taxes 612 539 Provision for income taxes: Current 107 120 Deferred 106 34 Total income taxes 213 154 Net income $399 $385 Earnings per share: Basic $1.04 $0.97 Diluted $1.02 $0.95 Average shares outstanding (millions) (note 3): Basic 381.6 396.0 Diluted 389.9 404.3 Norfolk Southern Corporation and Subsidiaries Consolidated Statements of Income (Unaudited) ($ millions except per share) Years Ended December 31, 2007 2006 Railway operating revenues: Coal $2,315 $2,330 General merchandise (note 1) 5,196 5,106 Intermodal 1,921 1,971 Total railway operating revenues 9,432 9,407 Railway operating expenses (note 2): Compensation and benefits 2,552 2,637 Purchased services and rents 1,551 1,578 Fuel 1,169 1,095 Depreciation 775 738 Materials and other 800 802 Total railway operating expenses 6,847 6,850 Income from railway operations 2,585 2,557 Other income - net 93 149 Interest expense on debt 441 476 Income before income taxes 2,237 2,230 Provision for income taxes: Current 648 757 Deferred 125 (8) Total income taxes 773 749 Net income $1,464 $1,481 Earnings per share: Basic $3.74 $3.63 Diluted $3.68 $3.57 Average shares outstanding (millions) (note 3): Basic 389.6 406.0 Diluted 397.8 414.7 Norfolk Southern Corporation and Subsidiaries Consolidated Balance Sheets (Unaudited) ($ millions) As of December 31, 2007 2006 Assets Current assets: Cash, cash equivalents and short-term investments $206 $918 Accounts receivable - net 942 992 Materials and supplies 176 151 Deferred income taxes 190 186 Other current assets 161 153 Total current assets 1,675 2,400 Investments 1,974 1,755 Properties less accumulated depreciation 21,583 21,098 Other assets 912 775 Total assets $26,144 $26,028 Liabilities and stockholders' equity Current liabilities: Accounts payable $1,139 $1,181 Income and other taxes 203 205 Other current liabilities 237 216 Current maturities of long-term debt 369 491 Total current liabilities 1,948 2,093 Long-term debt 5,999 6,109 Other liabilities 2,039 1,767 Deferred income taxes 6,431 6,444 Total liabilities 16,417 16,413 Stockholders' equity: Common stock $1.00 per share par value 400 418 Additional paid-in capital 1,466 1,303 Accumulated other comprehensive loss (399) (369) Retained income 8,280 8,283 9,747 9,635 Less treasury stock at cost, 20,683,686 and 20,780,638 shares, respectively (20) (20) Total stockholders' equity 9,727 9,615 Total liabilities and stockholders' equity $26,144 $ 26,028 Norfolk Southern Corporation and Subsidiaries Consolidated Statements of Cash Flows (Unaudited) ($ millions) Years Ended December 31, 2007 2006 Cash flows from operating activities: Net income $1,464 $1,481 Reconciliation of net income to net cash provided by operating activities: Depreciation 786 750 Deferred income taxes 125 (8) Gains on properties and investments (51) (54) Changes in assets and liabilities affecting operations: Accounts receivable 30 (60) Materials and supplies (25) (19) Other current assets (17) (11) Current liabilities other than debt 38 38 Other - net (17) 89 Net cash provided by operating activities 2,333 2,206 Cash flows from investing activities: Property additions (1,341) (1,178) Property sales and other transactions 124 119 Investments, including short-term (635) (1,804) Investment sales and other transactions 827 2,179 Net cash used for investing activities (1,025) (684) Cash flows from financing activities: Dividends (377) (278) Common stock issued - net 183 297 Purchase and retirement of common stock (note 3) (1,196) (964) Proceeds from borrowings 250 -- Debt repayments (489) (339) Net cash used for financing activities (1,629) (1,284) Net increase (decrease) in cash and cash equivalents (321) 238 Cash and cash equivalents: At beginning of year 527 289 At end of year 206 527 Short-term investments at end of year -- 391 Cash, cash equivalents and short-term investments at end of year $206 $918 Supplemental disclosures of cash flow information Cash paid during the year for: Interest (net of amounts capitalized) $441 $473 Income taxes (net of refunds) $603 $692 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS: 1. CONTRACT SETTLEMENT Fourth quarter 2007 automotive revenue includes $26 million related to contract settlement. 2. RECLASSIFICATIONS Prior year amounts have been reclassified to conform to current year presentation. Specifically, "Fuel" includes locomotive fuel and other fuel used in railway operations. Material, casualties and other claims, and other railway expenses have been combined into "Materials and other." 3. STOCK REPURCHASE PROGRAM In March 2007, NS' Board of Directors amended the stock repurchase program that was authorized in November 2005 to increase the number of shares of NS common stock that may be repurchased from 50 million to 75 million. In addition, the authorization term was shortened from December 31, 2015 to December 31, 2010. During 2007, NS purchased and retired 23.6 million shares of common stock at a cost of $1.2 billion. Since inception of this program, NS has purchased and retired 45.3 million shares at a total cost of $2.2 billion.
