What was the primary driver for the increase in net income during the second quarter of 2007?

The primary driver for the increase in net income was an improvement in income from railway operations, coupled with lower interest expense and a lower effective tax rate. These factors more than offset a slight decline in operating revenues.

How is Norfolk Southern managing its share repurchase program?

Norfolk Southern's Board of Directors authorized a share repurchase program to buy back up to 75 million shares of Common Stock through the end of 2010. In the second quarter of 2007, the company purchased and retired 2.8 million shares for $151 million under this program.

What impact did the Surface Transportation Board (STB) decision on fuel surcharges have?

The STB ruled that fuel surcharges based on a percentage of line haul revenue would no longer be permitted for regulated traffic under public rates. Norfolk Southern discontinued assessing these surcharges on its published non-intermodal public rates, with future pricing adjustments to reflect market conditions. The company does not expect this change to materially affect its financial condition.

What is the company's outlook for its key revenue segments in the near future?

For Coal, revenues are expected to trail year-ago levels in Q3 but be comparable in Q4. General Merchandise revenues are projected to be flat in Q3 and modestly higher in Q4. Intermodal revenues are expected to show modest growth in both Q3 and Q4.

NSC 10-Q Quarterly Report Q2 FY2007 — Revenue, Net Income, EPS

Summary

Norfolk Southern Corporation (NSC) reported its second-quarter 2007 results, showing a modest increase in net income and diluted earnings per share compared to the prior year. This improvement was driven by better income from railway operations, partially offset by a slight decline in operating revenues. The company's operating ratio also improved, indicating increased efficiency. Key financial activities during the period included a robust share repurchase program, with the Board authorizing the repurchase of up to 75 million shares through 2010. Despite a decrease in cash and short-term investments, the company maintained sufficient liquidity from operating activities to fund capital expenditures, debt maturities, and shareholder returns. NSC also highlighted ongoing efforts to manage market risks, particularly interest rate fluctuations, and continued to invest in its infrastructure with planned locomotive purchases.

Key Highlights

1Net income increased by 5% to $394 million for the second quarter of 2007, compared to $375 million in the same period of 2006.
2Diluted earnings per share (EPS) grew by 10% to $0.98 in Q2 2007 from $0.89 in Q2 2006, supported by higher net income and share repurchases.
3Railway operating revenues saw a slight decrease of 1% to $2.4 billion in Q2 2007, primarily due to lower traffic volumes, though this was partly offset by increased average revenue per unit.
4Railway operating expenses decreased by 2% to $1.7 billion in Q2 2007, reflecting lower fuel costs, casualty claims, and compensation and benefits.
5The company's operating ratio improved to 71.0% in Q2 2007, down from 71.7% in Q2 2006, indicating improved operational efficiency.
6Norfolk Southern continued its share repurchase program, buying back 2.8 million shares in Q2 2007 and authorizing up to 75 million shares through 2010.
7The company adopted Financial Accounting Standards Board Interpretation No. 48 (FIN 48) on accounting for uncertainty in income taxes, resulting in a $10 million increase to equity.

NORFOLK SOUTHERN CORP Quarterly Report for Q2 Ended Jun 30, 2007

Summary

Key Highlights

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