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As usual, transcripts of the call also will be posted on our website. At the end of the prepared portion of today's call, we will conduct a question-and-answer session. At that time, if you choose to ask a question, an operator will instruct you how to do so from your telephone keypad.Please be advised that any forward-looking statements made during the course of this presentation represent our best good faith judgment as to what may occur in the future. Statements that are forward-looking can be identified by the use of words such as believe, expect, anticipate and project. Our actual results may differ materially from those projected and will be subject to a number of risks and uncertainties, some of which may be outside of our control. Please refer to our annual and quarterly reports filed with the SEC for discussions of those risks and uncertainties we view as most important. Additionally, keep in mind that all references to reported results excluding certain adjustments such as non-GAAP numbers have been reconciled on our website at nscorp.com in the Investors section. Now it is my pleasure to introduce Norfolk Southern Chairman, President and CEO, Wick Moorman. Charles Moorman Thank you, Leanne, and good afternoon. It's my pleasure to welcome all of you to our fourth quarter 2010 earnings conference call. Today, we will provide a comprehensive overview of the quarter and review with you the current business environment as well as our capital plan. I'm joined today by several members of our senior management team including Don Seale, our Chief Marketing Officer; Mark Manion, our Chief Operating Officer; Jim Squires, our Chief Financial Officer and Deb Butler, our Chief Financial Officer, all of whom you will hear from this afternoon. Since we have an additional presentation this quarter, I'll keep my remarks brief to allow time for your questions. While Norfolk Southern's fourth quarter results were not quite as strong as we might have anticipated driven by factors that we'll discuss on the call, they nonetheless were very strong on a year-over-year basis and capped a very strong year for our company. In fact, 2010 was our second best year ever for earnings and post Conrail operating ratio. And it also marked our highest ever free cash flow.
Even more importantly, the trends that we saw in the quarter in terms of service delivery other than in the early winter storms we experienced, along with the trends in terms of demand, give us cause to be optimistic about our prospects for 2011.Looking at the numbers, bottom line net income of $402 million or $1.09 per share was up 31% compared with last year. Income from Railway operations of $642 million was up 17%, driven by a 14% increase in revenues and a 12% increase in expenses. Income taxes included a $34 million favorable adjustment, which Jim will describe. For the full year, net income and earnings per share both increased 45%, and our operating ratio improved 350 basis points to 71.9%. As all of you know, lowering the operating ratio has always been and continues to be a primary goal for us, and we remain committed to and confident in further improvement. Our top line exhibited strong growth with fourth quarter revenues up 14% and full-year revenues up 19%. Don will talk more about our traffic in a moment and provide you with insights as to what we anticipate will be a solid 2011. Before leaving the numbers, I do want to say a word about safety, our most important metric. Mark and his team redoubled their efforts even in the face of weather challenges and delivered the best employee safety ratio in the company's history. This achievement is a testament to our people who continue to make the extra efforts to improve safety even as we handled increased volumes and tackled some severe operating conditions. Those severe operating conditions also had some impact in the quarter in terms of both revenue and expenses. And as I said earlier, our overall metrics particularly as they relate to some of our bulk business were not at the levels where we or our customers expect them to be.
Since then, our service levels have improved, and we're continuing our targeted hiring and bringing on new locomotives in anticipation of future growth. Mark will provide you with a report on the service front.Looking ahead to 2011, we expect to handle increased business, and we plan to deploy over $2 billion into capital improvements in order to invest in the franchise, to build for growth and to improve operating service and efficiency. Deb will review with you the details of our capital plans. In recognition of the 2010 results and their confidence in the strategic direction of our company, the board this morning increased our quarterly dividend by $0.04 per share or 11%. We are also continuing this share repurchase program into 2011, as Jim will outline for you, another indication of our strong commitment to return value to our owners. As you will see from the presentations during 2010, we profitably grow the business, invested in the franchise, generated significant levels of cash and produced attractive returns for our shareholders. We have every reason to believe that 2011 will be an even stronger year for us fueled by growth across our network. With that, I'll turn it over to Don for a discussion of our revenues. Donald Seale Thank you, Wick, and good afternoon, everyone. In my comments today, I'll recap our fourth quarter and year end 2010 revenues, revenue per unit and volumes along with the key drivers of these results, I'll then conclude my remarks with our outlook for 2011. Starting with our fourth quarter revenue, 9% higher volumes and a 4% increase in revenue per unit combined to generate revenues of $2.4 billion, up $286 million or 14% over the fourth quarter of 2009. Approximately 65% or $190 million of our revenue gain in the quarter was driven by increased volume while continued growth in revenue per unit contributed $96 million. During the quarter, harsh winter weather, as mentioned by Wick reduced revenue by an estimated $14 million, mostly in our coal and merchandise traffic.
Turning to Slide 3, you will see the summary of our full year's revenue, which was our second-highest year ever, with total revenue of $9.5 billion, up $1.5 billion or 19% over last year. Agriculture and chemicals traffic both achieved record revenue for the year. Looking at the components of our revenue growth, volume up 14% for the year accounted for 70% of the improvement, contributing $1.1 billion while increased revenue per unit up 5% added $468 million.With respect to yield, as shown on Slide 4, revenue per unit reached $1,400 for the quarter and $1,407 for the year, increases of 4% and 5%, respectively. All business groups achieved year-over-year RPU gains for the quarter and with the exception of forest products, all business groups produced positive comparisons for the year. Market-based pricing improvement and increased fuel revenue drove the gains last for both the quarter and the year. As seen in the third quarter, negative mix moderated revenue per unit gains in our Agriculture, Chemicals, Intermodal, and Coal business segments. In this regard, Agricultural's revenue per unit was impacted by increased shipments of shorter whole grain and phosphate rock. Read the rest of this transcript for free on seekingalpha.com