NORFOLK, Va., Oct. 21 /PRNewswire-FirstCall/ -- Norfolk Southern Corporation reported third-quarter 2008 net income of $520 million, or $1.37 per diluted share, compared with $386 million, or $0.97 per diluted share, for the same period of 2007. Third-quarter income from railway operations increased 31 percent to a record $894 million.
"Our third quarter performance again demonstrates the strength of our diversified traffic base. We are also continuing to provide the high-quality service our customers require in this difficult economic environment," said Norfolk Southern CEO Wick Moorman.
Third-quarter railway operating revenues were $2.9 billion, up 23 percent compared with the same period a year earlier. Continued weakness in the automotive and housing-related industries, mostly offset by strength in coal shipments, contributed to a one percent reduction in traffic volume compared with the third quarter of 2007.
General merchandise revenues were $1.5 billion, an increase of 13 percent compared with the same period last year, despite a 6 percent decline in volume.
Coal revenues climbed 52 percent to $876 million in the quarter compared with the same period of 2007. Traffic volume increased by 23,548 carloads, or 6 percent, and set a record for the number of tons shipped in a quarter.
Despite flat volumes, intermodal revenues were $560 million, up 16 percent compared with the same period of 2007.
Railway operating expenses were $2.0 billion for the quarter, a 20 percent increase compared with the third quarter of 2007.
The railway operating ratio for the quarter improved by 2 percentage points to a record 69.1 percent, compared with 71.1 percent in 2007.
Norfolk Southern Corporation is one of the nation's premier transportation companies. Its Norfolk Southern Railway subsidiary operates approximately 21,000 route miles in 22 states and the District of Columbia, serving every major container port in the eastern United States and providing superior connections to western rail carriers. Norfolk Southern operates the most extensive intermodal network in the East and is North America's largest rail carrier of metals and automotive products.
Norfolk Southern Corporation and Subsidiaries Consolidated Statements of Income (Unaudited) ($ millions except per share) Three Months Ended Sept. 30, 2008 2007 Railway operating revenues: Coal (note 1) $876 $578 General merchandise 1,458 1,291 Intermodal 560 484 Total railway operating revenues 2,894 2,353 Railway operating expenses: Compensation and benefits (note 2) 708 619 Purchased services and rents 419 391 Fuel 474 289 Depreciation 201 194 Materials and other 198 179 Total railway operating expenses 2,000 1,672 Income from railway operations 894 681 Other income - net 39 31 Interest expense on debt 111 107 Income before income taxes 822 605 Provision for income taxes: Current 184 178 Deferred 118 41 Total income taxes 302 219 Net income $520 $386 Earnings per share: Basic $1.39 $0.99 Diluted $1.37 $0.97 Weighted average shares outstanding (millions) (note 3): Basic 372.5 389.0 Diluted 380.5 397.4 Norfolk Southern Corporation and Subsidiaries Consolidated Statements of Income (Unaudited) ($ millions except per share) Nine Months Ended Sept 30, 2008 2007 Railway operating revenues: Coal (note 1) $2,313 $1,714 General merchandise 4,268 3,839 Intermodal 1,578 1,425 Total railway operating revenues 8,159 6,978 Railway operating expenses: Compensation and benefits (note 2) 2,075 1,929 Purchased services and rents 1,194 1,155 Fuel 1,369 816 Depreciation 598 578 Materials and other 652 601 Total railway operating expenses 5,888 5,079 Income from railway operations 2,271 1,899 Other income - net 92 59 Interest expense on debt 332 333 Income before income taxes 2,031 1,625 Provision for income taxes: Current 586 541 Deferred 181 19 Total income taxes 767 560 Net income $1,264 $1,065 Earnings per share: Basic $3.37 $2.71 Diluted $3.30 $2.66 Weighted average shares outstanding (millions) (note 3): Basic 374.4 392.3 Diluted 382.6 400.5 Norfolk Southern Corporation and Subsidiaries Consolidated Balance Sheets (Unaudited) ($ millions) Sept. 30, Dec. 31, 2008 2007 Assets Current assets: Cash, cash equivalents and short-term investments $557 $206 Accounts receivable - net 1,076 942 Materials and supplies 210 176 Deferred income taxes 172 190 Other current assets 67 161 Total current assets 2,082 1,675 Investments 1,827 1,974 Properties less accumulated depreciation 22,032 21,583 Other assets 776 912 Total assets $26,717 $26,144 Liabilities and stockholders' equity Current liabilities: Accounts payable $1,225 $1,139 Income and other taxes 297 203 Other current liabilities 293 237 Current maturities of long-term debt 488 369 Total current liabilities 2,303 1,948 Long-term debt 5,983 5,999 Other liabilities 1,783 2,039 Deferred income taxes 6,602 6,431 Total liabilities 16,671 16,417 Stockholders' equity: Common stock $1.00 per share par value, 1,350,000,000 shares authorized; outstanding 370,279,291 and 379,297,891 shares, respectively, net of treasury shares 371 380 Additional paid-in capital 1,689 1,466 Accumulated other comprehensive loss (389) (399) Retained income 8,375 8,280 Total stockholders' equity 10,046 9,727 Total liabilities and stockholders' equity $26,717 $26,144 Norfolk Southern Corporation and Subsidiaries Consolidated Statements of Cash Flows (Unaudited) ($ millions) Nine Months Ended Sept. 30, 2008 2007 Cash flows from operating activities: Net income $1,264 $1,065 Reconciliation of net income to net cash provided by operating activities: Depreciation 606 587 Deferred income taxes 181 19 Gains on properties and investments (24) (36) Changes in assets and liabilities affecting operations: Accounts receivable 63 (21) Materials and supplies (34) (22) Other current assets 93 80 Current liabilities other than debt (80) 67 Other - net 6 72 Net cash provided by operating activities 2,075 1,811 Cash flows from investing activities: Property additions (1,104) (895) Property sales and other transactions 74 105 Investments, including short-term (34) (568) Investment sales and other transactions 254 758 Net cash used in investing activities (810) (600) Cash flows from financing activities: Dividends (338) (276) Common stock issued - net 224 166 Purchase and retirement of common stock (note 3) (899) (769) Proceeds from borrowings 1,225 -- Debt repayments (1,126) (454) Net cash used in financing activities (914) (1,333) Net increase (decrease) in cash and cash equivalents 351 (122) Cash and cash equivalents: At beginning of year 206 527 At end of period 557 405 Short-term investments at end of period -- 13 Cash, cash equivalents and short-term investments at end of period $557 $418 Supplemental disclosures of cash flow information Cash paid during the period for: Interest (net of amounts capitalized) $254 $279 Income taxes (net of refunds) $401 $386 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS: 1. COAL REVENUES Third quarter 2008 includes $22 million related to a coal customer's 2008 contracted volume shortfall and a nonrecurring effect related to the implementation of NS' new coal billing system. 2. LABOR AGREEMENT Third quarter 2008 includes $28 million for lump-sum payments (including payroll taxes) due under a new labor agreement with the Brotherhood of Locomotive Engineers and Trainmen (BLET). 3. STOCK REPURCHASE PROGRAM In March 2007, NS' Board of Directors amended the stock repurchase program that was authorized in November 2005 so as to increase the number of shares of NS common stock that may be repurchased from 50 million to 75 million. In addition, the term of the program was shortened from December 31, 2015 to December 31, 2010. During the first nine months of 2008, NS purchased and retired 15.2 million shares of common stock at a cost of $899 million. Since inception of the stock repurchase program in 2006, NS has repurchased and retired 60.5 million shares at a total cost of $3.1 billion.
