What were the main drivers of Norfolk Southern's revenue growth in the first quarter of 2011?

Revenue growth was primarily driven by a 17% increase in railway operating revenues to $2.6 billion. This was fueled by higher traffic volumes across all segments, especially coal and intermodal, and an increase in average revenue per unit, which included significant contributions from fuel surcharges that were up $90 million year-over-year.

What factors contributed to the increase in operating expenses?

Operating expenses increased by 20% to $2.0 billion. Key contributors included a 53% rise in fuel costs due to higher prices and increased consumption, higher compensation and benefits reflecting increased employee activity, and an unfavorable $58 million insurance arbitration ruling which resulted in a $43 million expense related to denied insurance recovery and an additional $15 million for other affected receivables.

How did Norfolk Southern manage its cash and capital during the quarter?

Norfolk Southern generated $652 million in cash from operating activities. The company used this cash to fund capital expenditures, repay debt, and execute its share repurchase program, under which it bought back 5.3 million shares for $343 million. Total cash, cash equivalents, and short-term investments stood at $488 million at the end of the quarter.

Are there any significant legal or regulatory matters that investors should be aware of?

The company is involved in several legal proceedings, including rate reasonableness complaints from customers like DuPont and SMEPA filed with the Surface Transportation Board, and ongoing antitrust class actions related to fuel surcharges. While management believes these will not materially affect the company's financial position, outcomes could have future impacts. Additionally, the company is undergoing an IRS audit for its 2008 consolidated income tax return.

NSC 10-Q Quarterly Report Q1 FY2011 — Revenue, Net Income, EPS

Summary

Norfolk Southern Corporation (NSC) reported strong financial performance for the first quarter of 2011, with net income increasing by 26% to $325 million, or $0.90 per diluted share, compared to the same period in 2010. This growth was driven by a significant 17% increase in railway operating revenues, which reached $2.6 billion, benefiting from higher average revenue per unit and increased traffic volumes across all segments, particularly coal and intermodal. Despite a 20% rise in operating expenses, largely due to higher fuel costs and an unfavorable insurance arbitration ruling, the company demonstrated improved operational efficiency leading to a higher income from railway operations. NSC also actively managed its capital structure during the quarter, repurchasing approximately 5.3 million shares of common stock for $343 million. The company's liquidity remains solid, with $652 million in cash provided by operating activities. Management anticipates continued revenue growth for the remainder of the year, supported by favorable market conditions and fuel surcharges, while also navigating ongoing legal disputes and potential regulatory changes.

Financial Highlights

48 data points

Beta

Revenue

$2.62B

Net Income

$325.00M

0.1% Net Margin

EPS (Diluted)

$0.90

Total Assets

$27.73B

Cash & Equivalents

$236.00M

Free Cash Flow

$229.00M

Financial Statements

Beta

Revenue	$2.62B
Operating Expenses	$2.02B
Operating Income	$600.00M
Interest Expense	$112.00M
Net Income	$325.00M
EPS (Basic)	$0.91
EPS (Diluted)	$0.90
Shares Outstanding (Basic)	355.20M
Shares Outstanding (Diluted)	360.50M

Key Highlights

1Net income for Q1 2011 rose 26% to $325 million ($0.90 diluted EPS) from $257 million ($0.68 diluted EPS) in Q1 2010.
2Railway operating revenues increased 17% to $2.6 billion, driven by a 17% rise in traffic volume and higher average revenue per unit, including a significant increase in fuel surcharges.
3Operating expenses increased 20% to $2.0 billion, impacted by higher fuel costs (up 53%) and an unfavorable insurance arbitration ruling that resulted in a $43 million expense.
4The company repurchased 5.3 million shares of common stock for $343 million in Q1 2011 as part of its ongoing share repurchase program.
5Cash provided by operating activities was $652 million, supporting capital expenditures, debt repayments, share repurchases, and dividends.
6The effective income tax rate decreased to 36.9% in Q1 2011 from 43.6% in Q1 2010, primarily due to the absence of a prior year deferred tax charge related to healthcare legislation.
7Management expects continued revenue growth through the remainder of 2011, supported by improving economic conditions and traffic volumes.

NORFOLK SOUTHERN CORP Quarterly Report for Q1 Ended Mar 31, 2011

Summary

Financial Highlights

Key Highlights

Frequently Asked Questions