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Norfolk Southern reports record second-quarter 2014 results

NORFOLK, Va., July 23, 2014 /PRNewswire/ -- For the second quarter of 2014 Norfolk Southern (NYSE: NSC) reported record net income of $562 million, 21 percent higher compared with $465 million in second-quarter 2013. Diluted earnings per share increased 23 percent to a record $1.79, compared with $1.46 per diluted share in the same period last year. The railway operating ratio, or operating expenses as a percentage of revenue, improved 5 percent to 66.5 percent.

 

All-time Quarter Records

  • Railway operating revenues increased 9 percent to $3.0 billion.
  • Income from railway operations improved 22 percent to $1.0 billion.
  • Net income increased 21 percent to $562 million.
  • Diluted earnings per share rose 23 percent to $1.79.
  • The railway operating ratio was 66.5 percent, a 5 percent improvement.

"Norfolk Southern delivered excellent financial performance during the second quarter, reporting the highest railway operating revenues in its history," said CEO Wick Moorman. "We see continued strength across most of our business segments and are optimistic that overall economic conditions will drive growth. Our focus remains unchanged. We are committed to running the safest railroad, providing superior service, increasing efficiency, and driving superior returns to our shareholders."

Second-quarter railway operating revenues increased to a record $3.0 billion, 9 percent higher compared with the same period of 2013, driven by an 8 percent increase in volume.

General merchandise revenues increased 8 percent to a record $1.7 billion compared with the second quarter of 2013. Shipments of metals and construction, chemicals, and agricultural products fueled a 7 percent increase in traffic volume.

Second-Quarter Revenue by Commodity Group

 

 

 

  • Intermodal up 11 percent
  • Metals and Construction up 17 percent
  • Coal up 7 percent
  • Chemicals up 10 percent
  • Agriculture up 5 percent
  • Automotive up 3 percent
  • Paper up 2 percent  

 

Coal revenues increased 7 percent to $672 million in the second quarter compared with the same period of 2013, with volume up 3 percent, the result of increased demand for utility coal from stockpile replenishment in response to a severe winter and higher natural gas prices, which offset lower export volume.

Intermodal revenues increased 11 percent to a record $650 million compared with the second-quarter 2013. Volume increased 11 percent, the result of continued domestic growth coupled with new international business.

Railway operating expenses were $2.0 billion, 3 percent higher compared with second-quarter 2013, principally due to costs associated with higher business volumes.

Income from railway operations for the second quarter was a record $1.0 billion, 22 percent higher compared with the same period of 2013.

The railway operating ratio, or operating expenses as a percentage of revenue, was a record 66.5 percent, a 5 percent improvement compared with the same period of 2013.

Norfolk Southern Corporation (NYSE: NSC) is one of the nation's premier transportation companies. Its Norfolk Southern Railway Company subsidiary operates approximately 20,000 route miles in 22 states and the District of Columbia, serves every major container port in the eastern United States, and provides efficient connections to other rail carriers. Norfolk Southern operates the most extensive intermodal network in the East and is a major transporter of coal, automotive, and industrial products.

 

Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Income
(Unaudited)

       
 

Second Quarter

 

First Six Months

 

2014

 

2013

 

2014

 

2013

 

(in millions, except per share amounts)

                       

Railway operating revenues

                     

    Coal

$

672

 

$

626

 

$

1,213

 

$

1,261

    General merchandise

  

1,720

   

1,588

   

3,272

   

3,118

    Intermodal

  

650

   

588

   

1,246

   

1,161

        Total railway operating revenues

  

3,042

   

2,802

   

5,731

   

5,540

                       

Railway operating expenses

                     

    Compensation and benefits

  

715

   

726

   

1,455

   

1,506

    Purchased services and rents

  

414

   

410

   

806

   

803

    Fuel

  

408

   

391

   

840

   

820

    Depreciation

  

238

   

226

   

475

   

453

    Materials and other

  

248

   

213

   

469

   

431

        Total railway operating expenses

  

2,023

   

1,966

   

4,045

   

4,013

                       

        Income from railway operations

 

1,019

   

836

   

1,686

   

1,527

                       

Other income – net (note 1)

  

18

   

29

   

44

   

164

Interest expense on debt

  

139

   

128

   

278

   

257

                       

    Income before income taxes

  

898

   

737

   

1,452

   

1,434

                       

Provision for income taxes

                      

    Current

  

311

   

203

   

505

   

376

    Deferred

  

25

   

69

   

17

   

143

            Total income taxes

  

336

   

272

   

522

   

519

                       

            Net income

$

562

 

$

465

 

$

930

 

$

915

                       

Earnings per share (note 1)

                      

        Basic

$

1.81

 

$

1.47

 

$

2.99

 

$

2.90

        Diluted

  

1.79

   

1.46

   

2.97

   

2.87

                       

Weighted average shares outstanding (note 2)

                      

    Basic

  

309.5

   

314.1

   

309.5

   

314.3

    Diluted

  

312.8

   

317.8

   

312.7

   

317.9

 

See accompanying notes to consolidated financial statements.

 

 

 

 

Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Comprehensive Income
(Unaudited)

       
 

Second Quarter

 

First Six Months

 

2014

 

2013

 

2014

 

2013

 

($ in millions)

                       

Net income

$

562

 

$

465

 

$

930

 

$

915

Other comprehensive income, before tax:

                      

    Pension and other postretirement benefits

  

7

   

36

   

306

   

72

    Other comprehensive income of equity investees

  

7

   

1

   

10

   

2

Other comprehensive income, before tax

  

14

   

37

   

316

   

74

Income tax expense related to items of other   

                     

    comprehensive income

  

(4)

   

(14)

   

(118)

   

(28)

Other comprehensive income, net of tax

  

10

   

23

   

198

   

46

                       

    Total comprehensive income

$

572

 

$

488

 

$

1,128

 

$

961

 

See accompanying notes to consolidated financial statements.

 

 

 

Norfolk Southern Corporation and Subsidiaries
Consolidated Balance Sheets
(Unaudited)

       
 

June 30,

 

December 31,
 

2014

 

2013

 

($ in millions)

Assets

             

Current assets:

              

   Cash and cash equivalents

  

$

1,667

   

$

1,443

   Short-term investments

    

-

     

118

   Accounts receivable - net

    

1,122

     

1,024

   Materials and supplies

    

251

     

223

   Deferred income taxes

    

161

     

180

   Other current assets

    

65

     

87

      Total current assets

    

3,266

     

3,075

               

Investments

    

2,505

     

2,439

Properties less accumulated depreciation of $10,634 and

              

    $10,387, respectively

    

26,927

     

26,645

Other assets

    

342

     

324

               

       Total assets

 

$

33,040

   

$

32,483

               

Liabilities and stockholders' equity

             

Current liabilities:

              

    Accounts payable

  

$

1,245

   

$

1,265

    Short-term debt

    

-

     

100

    Income and other taxes

    

359

     

225

    Other current liabilities

    

331

     

270

    Current maturities of long-term debt

    

433

     

445

        Total current liabilities

    

2,368

     

2,305

               

Long-term debt

    

8,814

     

8,903

Other liabilities

    

1,122

     

1,444

Deferred income taxes

    

8,659

     

8,542

        Total liabilities

   

20,963

     

21,194

               

Stockholders' equity:

              

    Common stock $1.00 per share par value, 1,350,000,000 shares

              

     authorized; outstanding 309,515,208 and 308,878,402 shares,

              

     respectively, net of treasury shares

    

311

     

310

    Additional paid-in capital

    

2,113

     

2,021

    Accumulated other comprehensive loss

    

(183)

     

(381)

    Retained income

    

9,836

     

9,339

               

        Total stockholders' equity

   

12,077

     

11,289

               

        Total liabilities and stockholders' equity

 

$

33,040

   

$

32,483

 

See accompanying notes to consolidated financial statements.

 

 

 

 

Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)

   
 

First Six Months

 

2014

 

2013

 

($ in millions)

Cash flows from operating activities

         

    Net income

$

930

 

$

915

    Reconciliation of net income to net cash provided by operating activities:

          

    Depreciation

  

478

   

456

    Deferred income taxes

  

17

   

143

    Gains and losses on properties and investments (note 1)

  

(3)

   

(99)

    Changes in assets and liabilities affecting operations:

          

    Accounts receivable

  

(98)

   

37

    Materials and supplies

  

(28)

   

(12)

    Other current assets

  

30

   

28

    Current liabilities other than debt

  

144

   

6

 Other – net

  

(33)

   

32

        Net cash provided by operating activities

  

1,437

   

1,506

           

Cash flows from investing activities

         

    Property additions

  

(809)

   

(884)

    Property sales and other transactions

  

44

   

68

    Investments, including short-term

  

(3)

   

(7)

    Investment sales and other transactions

  

121

   

16

        Net cash used in investing activities

  

(647)

   

(807)

           

Cash flows from financing activities

         

    Dividends

  

(335)

   

(315)

    Common stock issued – net

  

82

   

80

    Purchase and retirement of common stock (note 2)

  

(100)

   

(314)

    Debt repayments

  

(213)

   

(216)

        Net cash used in financing activities

  

(566)

   

(765)

           

        Net increase (decrease) in cash and cash equivalents

  

224

   

(66)

           

Cash and cash equivalents

         

    At beginning of period

  

1,443

   

653

           

    At end of period

$

1,667

 

$

587

           

Supplemental disclosures of cash flow information

         

    Cash paid during the period for:

          

        Interest (net of amounts capitalized)

$

255

 

$

244

        Income taxes (net of refunds)

  

313

   

238

 

See accompanying notes to consolidated financial statements.

 

 

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:

1. Other Income – Net

 

     In first quarter 2013, we recognized a $97 million gain on a land sale, which increased net income by $60 million or $0.19 per share.

2. Stock Repurchase Program

 

     We repurchased 1.0 million shares of common stock in the first six months of 2014, totaling $100 million, and 4.2 million shares at a cost of $314 million for the same period of 2013. We have remaining authorization from our Board of Directors to repurchase up to 37.2 million shares through December 31, 2017. The timing and volume of purchases is guided by our assessment of market conditions and other pertinent factors. Any near-term share repurchases are expected to be made with internally generated cash, cash on hand, or proceeds from borrowings. Since the beginning of 2006, we have repurchased and retired 137.8 million shares at a total cost of $8.2 billion.

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SOURCE Norfolk Southern Corporation

For further information: (Media) Frank Brown, 757-629-2710 (fsbrown@nscorp.com); or (Investors) Katie Cook, 757-629-2861 (InvestorRelations@nscorp.com)