(Norfolk Southern issued the following news release on July 26.)
NORFOLK, Va. — For the second quarter of 2006, Norfolk Southern Corporation NSC reported net income of $375 million, or $0.89 per diluted share, compared with $424 million, or $1.04 per diluted share, for the same period of 2005. Second-quarter 2005 results included a benefit from the effects of Ohio tax legislation as well as the effects of the settlement of two coal rate cases, which combined to increase 2005 reported results by $120 million, or $0.29 per diluted share. Second- quarter 2006 net income was 23 percent higher than the $304 million, or $0.75 per diluted share, earned in the same period of 2005, excluding those two items.
“I am pleased to report that Norfolk Southern produced record revenues and income from railway operations in the second quarter, reflecting the continuing strength of the market for our transportation products, as well as our sustained focus on providing a higher-value service product,” said CEO Wick Moorman. “Demand for rail transportation continues to grow in most sectors of our business, and our second-quarter results reflect strong volume growth and an improved operating ratio.”
For the first six months, net income was a record $680 million, or $1.61 per diluted share, an increase of 10 percent compared with $618 million, or $1.51 per diluted share, for the same period of 2005. Results for the first six months included a combined benefit from the tax legislation and settlement of the rate cases of $120 million, or $0.29 per diluted share. Excluding this $120 million, net income for the first six months of 2006 would have been 37 percent higher than the $498 million, or $1.22 per diluted share, earned in the same period of 2005.
Second-quarter railway operating revenues of $2.39 billion were the highest of any quarter in Norfolk Southern’s history and improved 11 percent compared with $2.15 billion for the same quarter a year earlier. Railway operating revenues for the first half of 2006 set a six-month record, increasing 14 percent to $4.7 billion compared with $4.1 billion for the first half of 2005. Traffic volume during both periods increased 4 percent, strengthened by an additional 77,000 carloads in the quarter and some 171,000 units year to date.
General merchandise revenues set records for both the second quarter and the first six months. The revenue increases during both periods primarily were due to higher average revenues, including fuel surcharges, as well as increased traffic volume. For the quarter, revenues climbed to $1.31 billion, up 14 percent compared with second quarter 2005. All commodity groups posted significant revenue increases during the period, led by metals and construction products, up 25 percent. For the first six months, revenues increased 16 percent to $2.59 billion.
In the quarter, coal revenues increased 1 percent to a record $584 million compared with the same period of 2005. For the first six months, coal revenues improved 9 percent to $1.14 billion compared with the same period last year. The revenue gains during both periods were the result of higher average revenues, including fuel surcharges, and strong demand for coal moving to utilities, which continue to experience increased demand for electricity generation. Coal revenues in 2005 benefited from the settlements of the two rate cases.
Intermodal revenues climbed 16 percent to $497 million, setting a second- quarter record, and rose 15 percent to a record $963 million for the first six months compared to the same periods of 2005. This primarily was the result of strong international business as well as higher average revenues, including fuel surcharges. Volume levels continued to increase in this sector, rising by more than 59,000 units, or 8 percent, in the second quarter, and by more than 115,000 units, or 8 percent, in the first six months compared to the same periods a year earlier.
Second-quarter railway operating expenses were $1.72 billion, up 10 percent compared with second-quarter 2005. For the first six months, railway operating expenses were $3.47 billion, up 11 percent over the same period a year earlier. The increases in both periods reflected higher diesel fuel prices, costs associated with increased traffic volume and, for the quarter, higher expenses related to casualties and other claims.
The second-quarter operating ratio of 71.7 percent, which was the lowest since the Conrail integration, was 0.8 of a percentage point better than the second quarter a year ago. For the first six months, the operating ratio was 73.8 percent, improving 2 percentage points compared to the same period a year earlier.
Norfolk Southern Corporation is one of the nation’s premier transportation companies. Its Norfolk Southern Railway subsidiary operates approximately 21,200 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.