10-QPeriod: Q1 FY2012

NORFOLK SOUTHERN CORP Quarterly Report for Q1 Ended Mar 31, 2012

Filed April 27, 2012For Securities:NSC

Summary

Norfolk Southern Corporation (NSC) reported a significant increase in net income for the first quarter of 2012, reaching $410 million, up from $325 million in the same period of 2011. This growth was driven by a substantial 6% increase in railway operating revenues, which rose to $2.8 billion. The company benefited from improved economic conditions leading to higher general merchandise and intermodal traffic volumes, as well as an increase in revenue per unit, partially offset by declining coal business due to high utility stockpiles and weaker export demand. Despite a slight increase in operating expenses, NSC's railway operating ratio improved to 73.3% from 77.1% year-over-year, indicating enhanced operational efficiency. The company generated strong operating cash flow of $1 billion and actively managed its capital through property additions, significant share repurchases totaling $400 million, and strategic debt management, including new senior note issuance. The financial report also highlighted ongoing efforts in infrastructure development, such as the Crescent Corridor project, aimed at future growth and efficiency improvements.

Financial Highlights

45 data points
Beta

Revenue

$2.79B

Net Income

$410.00M

14.7% Net Margin

EPS (Diluted)

$1.23

Total Assets

$29.38B

Cash & Equivalents

$829.00M

Free Cash Flow

$574.00M

Financial Statements
Beta
Revenue$2.79B
Operating Expenses$2.04B
Operating Income$745.00M
Interest Expense$120.00M
Net Income$410.00M
EPS (Basic)$1.24
EPS (Diluted)$1.23

Key Highlights

  • 1Net income increased by 26% to $410 million for the first quarter of 2012, compared to $325 million in the prior year.
  • 2Railway operating revenues grew by 6% to $2.8 billion, driven by higher traffic volumes and increased revenue per unit, particularly in general merchandise and intermodal segments.
  • 3The railway operating ratio improved to 73.3% from 77.1% year-over-year, signaling better operational efficiency.
  • 4Operating cash flow was strong at $1 billion for the quarter, supporting investments and shareholder returns.
  • 5NSC repurchased approximately 5.7 million shares of common stock for $400 million in the first quarter of 2012.
  • 6The company issued $600 million of 3.0% senior notes due in 2022, strengthening its capital structure.

Frequently Asked Questions

Revenue growth was primarily driven by a 6% increase in railway operating revenues to $2.8 billion. This was fueled by improved economic conditions leading to higher traffic volumes and increased average revenue per unit in the general merchandise and intermodal segments. Although coal business declined, the overall increase in other segments, coupled with effective fuel surcharge strategies, contributed positively.

Railway operating expenses increased slightly by 1% to $2 billion. While higher fuel prices and compensation costs were factors, these were partially offset by the absence of a significant prior-year insurance arbitration ruling and improved network fluidity. The company's railway operating ratio improved to 73.3%, indicating efficient cost management relative to revenue.

Norfolk Southern is actively returning capital to shareholders through a substantial share repurchase program, having bought back approximately 5.7 million shares for $400 million in Q1 2012. The company also continues to invest in long-term growth initiatives like the Crescent Corridor project. Strong operating cash flow and strategic debt issuance ($600 million in senior notes) support these capital allocation priorities.

The company is involved in ongoing legal proceedings, including a rate reasonableness complaint from DuPont and antitrust class actions related to fuel surcharges. Management believes these will not have a material adverse effect on financial position, results of operations, or liquidity. Environmental liabilities of $38 million are recorded, and management believes existing accruals are adequate, with no individually material sites identified.