How did Norfolk Southern's revenue performance compare to the previous year?

Norfolk Southern's total railway operating revenues increased by 11% to $2.39 billion in the third quarter of 2006 compared to the same period in 2005. This growth was primarily driven by higher average revenues per unit, including the impact of fuel surcharges, as overall traffic volume remained flat.

What was the impact of diesel fuel prices on operating expenses?

Diesel fuel expense increased by 36% in the third quarter of 2006 compared to the prior year, contributing significantly to the overall rise in railway operating expenses. Despite this increase, the company managed to improve its operating ratio due to strong revenue growth.

What is the company's strategy regarding share repurchases?

Norfolk Southern is actively engaged in a share repurchase program, authorized to buy back up to 50 million shares through the end of 2015. In the third quarter of 2006, the company repurchased and retired 17.1 million shares for $730 million, demonstrating a commitment to returning capital to shareholders.

Are there any significant legal or environmental matters affecting the company?

The company is involved in various legal and environmental matters. A notable one is a civil penalty proceeding initiated by the Pennsylvania Department of Environmental Protection related to a June 2006 derailment, for which the company believes the penalties sought are excessive and intends to defend vigorously. Management believes known environmental matters, individually or in aggregate, are unlikely to have a material adverse effect on the company's financial position, results of operations, or liquidity.

NSC 10-Q Quarterly Report Q3 FY2006 — Revenue, Net Income, EPS

Summary

Norfolk Southern Corporation (NSC) reported strong financial performance for the third quarter and the first nine months of 2006. Revenue growth was driven by higher pricing, including fuel surcharges, and increased traffic volumes in key segments like general merchandise and intermodal. Despite rising diesel fuel costs, the company improved its operating ratio and significantly boosted income from railway operations and net income compared to the prior year. NSC also demonstrated a strong commitment to shareholder returns through a substantial share repurchase program, buying back over 17 million shares in the third quarter alone. The company's financial position remains solid, with sufficient liquidity to meet ongoing obligations and planned capital expenditures. Management anticipates continued revenue growth, albeit at a moderating pace, and remains focused on operational efficiency and service improvement.

Key Highlights

1Total railway operating revenues increased by 11% to $2.39 billion for the third quarter of 2006, driven by higher pricing and fuel surcharges, with traffic volume remaining flat.
2Net income surged by 38% to $416 million ($1.02 per diluted share) for the third quarter of 2006, compared to $301 million ($0.73 per diluted share) in the same period of 2005.
3Railway operating expenses increased by 3% to $1.68 billion, primarily due to higher diesel fuel prices, though the operating ratio improved by 5.4 percentage points to 70.1%.
4Norfolk Southern actively repurchased shares, retiring 17.1 million shares in the third quarter of 2006 for $730 million, as part of a larger program to buy back up to 50 million shares.
5Investment in Conrail remains a significant asset, with NSC holding a 58% economic interest.
6The company's hedging program for diesel fuel concluded in the second quarter of 2006, with no new hedges entered into since May 2004.
7Capital expenditures for the full year 2006 are projected to be approximately $1.2 billion, with plans to increase spending by about 10% in 2007.

NORFOLK SOUTHERN CORP Quarterly Report for Q3 Ended Sep 30, 2006

Summary

Key Highlights

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