SECURITIES AND EXCHANGE
COMMISSION
WASHINGTON, D.C. 20549
________________________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR
15(D)
OF THE SECURITIES ACT OF 1934
Date of Report (Date of earliest event reported):
October 26, 2005 (October 26, 2005)
NORFOLK SOUTHERN
CORPORATION
(Exact name of registrant as specified in its
charter)
|
Virginia |
1-8339 |
52-1188014 |
|
(State or other jurisdiction |
(Commission |
(IRS Employer |
|
Of incorporation) |
File Number) |
Identification No.) |
Three Commercial
Place
Norfolk, Virginia 23510-9241
(Address of principal
executive offices)
(757)
629-2680
(Registrant's telephone number, including area code)
No Change
(Former name
or former address, if changed since last report)
Item 2.02 Regulation FD Disclosure and
Item 7.01 Results of Operations and Financial Condition.
On October 26, 2005, the Registrant issued a Press Release, attached hereto as an Exhibit 99. The press release, which reports third quarter results, includes non-GAAP financial measures, as defined by SEC Regulation G, which are reconciled within the release. Specifically, the release excludes the effects of the Conrail corporate reorganization, which occurred in the third quarter of 2004, from net income and diluted earnings per share for the third quarter and first nine months of 2004 for the purpose of comparing them to results in the third quarter and first nine months of 2005, respectively. The release also excludes the effects of Ohio tax legislation, which was enacted during the second quarter of 2005, from net income and diluted earnings per share for the first nine months of 2005 for the purposes of comparing them to results in the first nine months of 2004.
These measures should be considered in addition to, not as a substitute for, net income and diluted earnings per share reported in accordance with U.S. Generally Accepted Accounting Principles. Management believes that net income and diluted earnings per share excluding these items may be more indicative of operating results for comparison to prior periods and to other companies, and it intends to use these non-GAAP financial measures for comparison purposes at its analysts' meeting scheduled today and in future comparisons to periods which involve the third quarter of 2004 and the second quarter of 2005
|
SIGNATURES |
|
NORFOLK SOUTHERN
CORPORATION |
|
/s/ Dezora M. Martin |
|
|
Date: October 26, 2005
EXHIBIT INDEX
Exhibit
Number
Description
99 Press Release dated October 26, 2005.
FOR IMMEDIATE RELEASE
October 26, 2005
NORFOLK SOUTHERN SETS THIRD QUARTER REVENUE RECORDS
For third quarter 2005:
* Railway operating revenues increased 16 percent to a record
$2.16 billion.
* Income from railway operations improved 13 percent to $528
million.
* Net income was $301 million, $0.73 per diluted share.
* Intermodal revenue climbed 17 percent to an all-time high.
Coal revenue was up 22 percent on record volumes. Merchandise
revenue increased 13 percent.
* The railroad operating ratio was 75.5 percent.
NORFOLK, VA. - For the third quarter of 2005, Norfolk Southern
Corporation(NYSE: NSC) reported net income of $301 million, or $0.73
per diluted share, compared with $288 million, or $0.72 per diluted
share, for the same period of 2004. Third-quarter 2004 results included
a gain from the Conrail corporate reorganization that increased
reported results by $53 million, or $0.13 per diluted share.
Third-quarter 2005 net income was 28 percent higher than the
$235 million, or $0.59 per diluted share, earned in the same period
of 2004 excluding the gain.
"These good results came from the effective response of our people
to the challenges of the quarter and our ability to maintain service
for our customers, while moving a record-setting two million carloads
of traffic," said NS Chairman and CEO David R. Goode. "While we had
some unplanned costs from hurricanes and casualty claims, the quarter
was very successful and continued our strong momentum."
For the first nine months, net income was a record $919 million,
or $2.24 per diluted share, an increase of 39 percent compared with
$659 million, or $1.66 per diluted share, for the same period of 2004.
Nine-month results for 2005 included a benefit of $96 million, or 0.23
per diluted share, from the effects of Ohio tax legislation. Net
income for the first nine months of 2004 included the $53 million,
or $0.13 per diluted share, gain on the Conrail reorganization.
Excluding both items, net income for the first nine months would
have been $823 million, or $2.01 per diluted share, in 2005, 36 percent
higher than 2004 net income for the first nine months of $606 million,
or $1.53 per diluted share.
Railway operating revenues for the third quarter increased
16 percent to a record $2.16 billion compared with $1.86 billion
for the same period a year earlier. For the first nine months,
railway operating revenues set a record, rising 17 percent to
$6.27 billion compared with $5.36 billion during the first nine
months of 2004.
General merchandise revenues reached $1.14 billion, an increase
of 13 percent over $1.0 billion for the third quarter last year. For
the first nine months, general merchandise revenues improved 12 percent
to a record $3.37 billion compared with $3.0 billion in the year-earlier
period. All merchandise markets reported revenue gains compared with
the same periods a year earlier primarily due to higher average
revenues, including fuel surcharges.
During the third quarter, NS set a record by moving more than
451,000 carloads of coal. Coal revenues increased 22 percent to
$546 million in the quarter and improved by 25 percent to a record
$1.6 billion during the first nine months compared with the same
periods last year. The revenue gains during both periods were driven
by higher average revenues, robust demand for utility coal and
fuel surcharges.
For the third quarter, intermodal revenues climbed 17 percent to
$471 million, the highest of any quarter in Norfolk Southern's history.
For the first nine months, intermodal revenues reached a record-setting
$1.31 billion, a 19 percent increase compared to the same period a
year earlier. A nine percent increase in traffic volume during both
periods, higher average revenues and fuel surcharges helped drive
the growth.
Railway operating expenses were $1.63 billion for the quarter,
up 17 percent compared with third-quarter 2004, and $4.75 billion
for the first nine months, an increase of 15 percent compared with
the same period a year earlier. Higher diesel fuel prices, costs
associated with additional business volume (including expenses related
to hiring additional employees), maintenance activities, and adverse
casualty claims costs contributed to the increases during both
periods.
For the quarter, the railway operating ratio was 75.5 percent
compared with 74.7 percent during third quarter 2004. For the first
nine months, the railway operating ratio improved to 75.7 percent
compared with 76.9 percent during the same period last year.
Norfolk Southern Corporation is one of the nation's premier
transportation companies. Its Norfolk Southern Railway subsidiary
operates 21,300 route miles in 22 states, the District of Columbia
and Ontario, Canada, serving every major container port in the
eastern United States and providing superior connections to western
rail carriers. NS operates the most extensive intermodal network
in the East and is North America's largest rail carrier of
automotive parts and finished vehicles.
# # #
For further information contact:
(Media) Bob Fort, 757-629-2710 (rcfort@nscorp.com)
(Investors) Leanne Marilley, 757-629-2861
(leanne.marilley@nscorp.com)
____________________________________________________________________
Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Income
(Unaudited)
($ millions except per share)
Three Months Ended
Sept. 30,
------------------
2005 2004
---- ----
Railway operating revenues:
Coal $ 546 $ 447
General merchandise 1,138 1,006
Intermodal 471 404
------- -------
TOTAL RAILWAY OPERATING REVENUES 2,155 1,857
------- -------
Railway operating expenses:
Compensation and benefits 629 570
Materials, services and rents 462 411
Conrail rents and services (note 1) 31 79
Depreciation (note 1) 195 150
Diesel fuel 189 98
Casualties and other claims 59 31
Other 62 49
------- -------
TOTAL RAILWAY OPERATING EXPENSES 1,627 1,388
------- -------
Income from railway operations 528 469
Other income - net (note 1) 32 40
Interest expense on debt (119) (121)
------- -------
Income before income taxes 441 388
Provision for income taxes:
Current 86 76
Deferred 54 24
------- -------
Total income taxes 140 100
------- -------
NET INCOME $ 301 $ 288
======= =======
Earnings per share:
Basic $ 0.74 $ 0.73
Diluted $ 0.73 $ 0.72
Average shares outstanding (000's):
Basic 404,261 394,449
Diluted 412,335 400,109
See notes to consolidated financial statements.
- ---------------------------------------------------------------------
Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Income
(Unaudited)
($ millions except per share)
Nine Months Ended
Sept. 30,
----------------
2005 2004
---- ----
Railway operating revenues:
Coal $ 1,591 $ 1,269
General merchandise 3,372 2,998
Intermodal 1,307 1,096
------- -------
TOTAL RAILWAY OPERATING REVENUES 6,270 5,363
------- -------
Railway operating expenses:
Compensation and benefits 1,857 1,680
Materials, services and rents 1,344 1,165
Conrail rents and services (note 1) 97 282
Depreciation (note 1) 582 409
Diesel fuel 501 311
Casualties and other claims (note 4) 177 109
Other 189 167
------- -------
TOTAL RAILWAY OPERATING EXPENSES 4,747 4,123
------- -------
Income from railway operations 1,523 1,240
Other income - net (note 1) 43 50
Interest expense on debt (373) (363)
------- -------
Income before income taxes 1,193 927
Provision for income taxes:
Current 267 156
Deferred (note 3) 7 112
------- -------
Total income taxes 274 268
------- -------
NET INCOME (note 2) $ 919 $ 659
======= =======
Earnings per share:
Basic $ 2.28 $ 1.68
Diluted $ 2.24 $ 1.66
Average shares outstanding (000's):
Basic 403,066 392,693
Diluted 410,737 396,832
See notes to consolidated financial statements.
- ---------------------------------------------------------------------
Norfolk Southern Corporation and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
($ millions)
Sept. 30, December 31,
2005 2004
---- ----
ASSETS
Current assets:
Cash, cash equivalents and
short-term investments $ 1,050 $ 669
Accounts receivable - net (note 4) 950 767
Materials and supplies 137 104
Deferred income taxes 175 187
Other current assets 124 240
------- -------
Total current assets 2,436 1,967
Investments 1,608 1,499
Properties less accumulated depreciation 20,481 20,526
Other assets (note 4) 908 758
------- -------
TOTAL ASSETS $ 25,433 $ 24,750
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable (note 4) $ 1,132 $ 1,090
Income and other taxes 262 210
Other current liabilities 275 239
Current maturities of long-term debt 313 662
------- -------
Total current liabilities 1,982 2,201
Long-term debt (note 5) 6,645 6,863
Other liabilities (note 4) 1,323 1,146
Deferred income taxes 6,567 6,550
------- -------
TOTAL LIABILITIES 16,517 16,760
------- -------
Stockholders' equity:
Common stock $1.00 per share par value 427 421
Additional paid-in capital 890 728
Unearned restricted stock (19) (8)
Accumulated other comprehensive loss (33) (24)
Retained income 7,671 6,893
------- -------
8,936 8,010
Less treasury stock at cost, 20,879,625
and 20,907,125 shares, respectively (20) (20)
------- -------
TOTAL STOCKHOLDERS' EQUITY 8,916 7,990
------- -------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 25,433 $ 24,750
======= =======
See notes to consolidated financial statements.
- -----------------------------------------------------------------
Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Cash Flow
(Unaudited)
($ millions)
Nine Months Ended Sept. 30,
2005 2004
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 919 $ 659
Reconciliation of net income to
net cash provided by operating activities:
Depreciation 591 417
Deferred income taxes 7 112
Equity in earnings of Conrail (28) (45)
Gain on Conrail corporate reorganization (note 1) -- (53)
Gains on properties and investments (26) (15)
Changes in assets and liabilities
affecting operations:
Accounts receivable (112) (110)
Materials and supplies (33) (10)
Other current assets 106 70
Current liabilities other than debt 93 162
Other - net 85 24
----- -----
Net cash provided by operating activities 1,602 1,211
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions (578) (669)
Property sales and other transactions 55 45
Investments, including short-term (1,232) (253)
Investment sales and other transactions 553 5
----- -----
Net cash used for investing activities (1,202) (872)
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends (141) (102)
Common stock issued - net 114 71
Proceeds from borrowings (note 6) 332 202
Debt repayments (note 5) (863) (426)
----- -----
Net cash used for financing activities (558) (255)
----- -----
Net (decrease) increase in cash
and cash equivalents (158) 84
CASH AND CASH EQUIVALENTS:
At beginning of year 467 284
----- -----
At end of period 309 368
SHORT-TERM INVESTMENTS AT END OF PERIOD 741 162
----- -----
CASH, CASH EQUIVALENTS AND SHORT-TERM
INVESTMENTS AT END OF PERIOD $1,050 $ 530
===== =====
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid during the period for:
Interest (net of amounts capitalized) $ 330 $ 311
Income taxes (net of refunds) $ 161 $ 78
See notes to consolidated financial statements.
- ---------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:
1. CONRAIL CORPORATE REORGANIZATION -
On August 27, 2004, NS, CSX and Conrail completed a corporate
reorganization of Conrail that resulted in the direct ownership
and control by Norfolk Southern Railway Company (NSR) of routes and
assets that had previously been operated by NSR under operating
and lease agreements with a Conrail subsidiary. As a part
of the reorganization, NSR issued new unsecured debt obligations,
which were exchanged for unsecured debt obligations of Consolidated
Rail Corporation (CRC), a Conrail subsidiary. In addition,
NSR entered into new lease and sublease arrangements with CRC
to support CRC's secured debt and lease obligations, and the
long-term note due to Conrail was eliminated. The reorganization
did not affect the Shared Assets Areas, which continue to be owned
and operated by CRC. After the reorganization, "Conrail rents and
services" reflects only the expenses associated with the Shared
Assets Areas, and other expenses (primarily the depreciation
related to the routes and assets) are reflected in their respective
line items.
This distribution resulted in a net gain of $53 million, which is
included in Other income-net on the Consolidated Statement of Income.
The gain increased net income by $53 million, or 13 cents per share
(basic and diluted).
2. SETTLEMENTS OF COAL RATE CASES -
During the second quarter of 2005, NS entered into settlement
agreements with two utility customers that resolved their rail
transportation rate cases before the Surface Transportation Board
(STB). In 2002, Duke Energy (Duke) and Carolina Power & Light
(CP&L) each filed rate reasonableness complaints with the STB.
In October 2004, the STB found NS' rates to be reasonable in
both cases, and at the STB's invitation, Duke and CP&L each
initiated proceedings to determine if phasing constraints
should apply. As a result of the settlements, NS recognized
additional revenue related to the period in dispute, which
net of associated expenses and income taxes increased
second-quarter net income by $24 million, or 6 cents
per share (basic and diluted).
3. REDUCTION OF DEFERRED TAXES -
In the second quarter of 2005, Ohio enacted tax legislation that
phases out its Corporate Franchise Tax, which was generally based
on federal taxable income, and phases in a new gross receipts tax
called the Commercial Activity Tax, which is based on current year
sales and rentals. The elimination of the Corporate Franchise
Tax resulted in a reduction of NS' deferred income tax liability
in the second quarter, as required by Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes,"
which increased net income by $96 million, or 23 cents per share
(basic and diluted).
4. GRANITEVILLE DERAILMENT -
In the first quarter of 2005, NS recorded a liability related to
the Jan. 6, 2005, derailment in Graniteville, SC. The liability,
which includes a current and long-term portion, represents
NS' best estimate based on current facts and circumstances.
The estimate includes amounts related to business property damage
and other economic losses, personal injury and individual property
damage claims as well as third-party response costs. NS'
commercial insurance policies are expected to cover expenses related
to this derailment above NS' self-insured retention, including its own
response costs and legal fees. Accordingly, the Consolidated Balance
Sheet reflects a current and long-term receivable for estimated
recoveries from its insurance carriers.
Nine month results include approximately $39 million of expenses related
to this incident, which represents NS' retention under its insurance
policies and other uninsured costs, and which reduced net income
by approximately $24 million, or 6 cents per share (basic and diluted).
NS expects $2 million of additional costs for the remainder of the year.
While it is reasonable to expect that the liability for covered losses
could differ from the amount recorded, such a change would be offset by
a corresponding change in the recovery receivable. As a result, NS
does not believe that it is reasonably likely that its net loss
(the difference between the liability and future recoveries) will
be materially different than the loss recorded in the first nine
months of 2005. NS expects at this time that insurance coverage
is adequate to cover potential claims and settlements above
its self-insurance retention.
5. DEBT EXCHANGE -
In the second quarter of 2005, NS issued $717 million of new
unsecured notes ($350 million at 5.64% due 2029 and $367 million
at 5.59% due 2025)and paid $218 million of premium in exchange
for $717 million of its previously issued unsecured notes
($350 million at 7.8% due 2027, $200 million at 7.25% due 2031,
and $167 million at 9.0% due 2021). The $218 million cash
premium payment is reflected as a reduction of debt in the
Consolidated Balance Sheet and Statement of Cash Flows and will
be amortized as additional interest expense over the terms
of the new debt.
6. PAYMENTS TO CONRAIL -
Payments made to Conrail in accordance with the operating and lease
agreements in place before the Conrail corporate reorganization
(see note 1) reduced NS' "Net cash provided by operating activities."
A significant portion of these payments was borrowed back from a
Conrail subsidiary. The net borrowings were included in NS'
"Net cash used for financing activities" and totaled $118 million
in the first nine months of 2004.