Summary
Norfolk Southern Corporation (NSC) reported a significant decline in financial performance for the second quarter and the first six months of 2009 compared to the same periods in 2008, primarily due to the adverse impact of the weakened economy on freight volumes and revenues. Railway operating revenues fell by 33% in the second quarter and 28% year-to-date, driven by substantial decreases in coal, general merchandise, and intermodal traffic. While operating expenses were reduced by 29% in the quarter and 24% year-to-date, largely due to lower fuel costs and compensation, these reductions were not enough to offset the revenue decline, leading to a significant drop in net income. Net income for the second quarter was $247 million, down 45% from the prior year, and year-to-date net income was $424 million, down 43%. Diluted earnings per share reflected this trend, decreasing to $0.66 in the second quarter and $1.13 year-to-date. Despite the economic headwinds, NSC maintained a solid liquidity position, with cash and cash equivalents totaling $722 million at June 30, 2009. The company actively managed its debt, issuing new notes and repaying existing debt. Capital expenditures remained a focus, with budgeted expenditures of approximately $1.3 billion for 2009, including investments in new joint ventures like Pan Am Southern LLC. While the company faces ongoing risks related to economic conditions and labor relations, management expressed confidence in its ability to meet ongoing obligations.
Financial Highlights
26 data points| Revenue | $1.86B |
| Operating Expenses | $1.39B |
| Operating Income | $468.00M |
| Interest Expense | $113.00M |
| Net Income | $247.00M |
| EPS (Basic) | $0.67 |
| EPS (Diluted) | $0.66 |
| Shares Outstanding (Basic) | 366.80M |
| Shares Outstanding (Diluted) | 371.40M |
Key Highlights
- 1Net income for the second quarter of 2009 decreased by 45% to $247 million, compared to $453 million in the prior year, reflecting the severe economic downturn's impact on rail volumes.
- 2Railway operating revenues declined significantly, down 33% in Q2 2009 and 28% year-to-date, primarily due to lower traffic volumes across all segments (Coal, General Merchandise, Intermodal).
- 3Operating expenses were reduced by 29% in Q2 2009 and 24% year-to-date, primarily driven by lower fuel costs (down 69% in Q2) and reduced compensation and benefits, helping to mitigate some of the revenue impact.
- 4Diluted earnings per share fell to $0.66 in Q2 2009, down from $1.18 in Q2 2008, and $1.13 year-to-date, down from $1.94 in the comparable prior period.
- 5The company maintained a healthy liquidity position with $722 million in cash and cash equivalents as of June 30, 2009.
- 6NSC issued new debt securities totaling $1 billion in the first half of 2009 ($500 million in Q1, $500 million in Q2) to manage its capital structure.
- 7A new joint venture, Pan Am Southern LLC, was formed with Pan Am Railways, Inc., involving significant capital contributions from NSC for infrastructure improvements.