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Norfolk Southern reports second-quarter 2019 results
Achieves record second-quarter operating income, operating ratio, net income, and earnings per share

NORFOLK, Va., July 24, 2019 /PRNewswire/ -- Norfolk Southern Corporation (NYSE: NSC) today reported second-quarter financial results.

Second-quarter net income was $722 million, up 2 percent year-over-year, a result of a 4 percent increase in income from railway operations – yielding a record second-quarter operating ratio of 63.6 percent. Diluted earnings per share were $2.70, up 8 percent year-over-year and a second-quarter record.

"Norfolk Southern's record financial results underscore our unrelenting commitment to shareholder value as we advance along the path of our strategic transformation," said James A. Squires, Norfolk Southern chairman, president and CEO. "Our strong financial and operational performance in the second quarter was achieved while also finalizing preparations for the successful implementation of our new operating plan, TOP'21. This execution reflects the strength of our team, commitment to our customers, and power of our balanced strategic plan to deliver enhanced shareholder value."

Second-quarter summary

  • Railway operating revenues of $2.9 billion increased 1 percent compared with prior year, as a 5 percent increase in average revenue per unit was offset by a 4 percent decline in total volume.  
  • Railway operating expenses were $1.9 billion, a decrease of $12 million, compared with the same period last year as fuel price declines and lower purchased services and rents were offset by increased depreciation expense.    
  • Income from railway operations was $1.1 billion, an increase of 4 percent year-over-year, a second-quarter record. The railway operating ratio, or operating expenses as a percentage of revenues, was 63.6 percent, also a second-quarter record. 

About Norfolk Southern
Norfolk Southern Corporation (NYSE: NSC) is one of the nation's premier transportation companies. Its Norfolk Southern Railway Company subsidiary operates approximately 19,500 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 is a major transporter of industrial products, including chemicals, agriculture, and metals and construction materials. In addition, the railroad operates the most extensive intermodal network in the East and is a principal carrier of coal, automobiles, and automotive parts.

Forward-looking statements
This news release contains forward-looking statements that may be identified by the use of words like "believe," "expect," "anticipate," "estimate," "plan," "consider," "project," and similar references to the future. Forward-looking statements reflect our good-faith evaluation of information currently available. These forward-looking statements are subject to a number of risks and uncertainties, and our actual results may differ materially from those projected. Please refer to our annual and quarterly reports filed with the SEC for a full discussion of those risks and uncertainties we view as most important. Forward-looking statements are not, and should not be relied upon as, a guarantee of future performance or results, nor will they necessarily prove to be accurate indications of the times at or by which any such performance or results will be achieved. As a result, actual outcomes and results may differ materially from those expressed in forward-looking statements. We undertake no obligation to update or revise forward-looking statements.

 

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Income

(Unaudited)

 
 

Second Quarter

 

First Six Months

 

2019

 

2018

 

2019

 

2018

 

($ in millions, except per share amounts)

               

Railway operating revenues

             

Merchandise

$

1,756

    

$

1,718

    

$

3,442

    

$

3,323

  

Intermodal

701

    

714

    

1,420

    

1,392

  

Coal

468

    

466

    

903

    

900

  

Total railway operating revenues

2,925

    

2,898

    

5,765

    

5,615

  
               

Railway operating expenses

             

Compensation and benefits

712

    

706

    

1,439

    

1,443

  

Purchased services and rents

418

    

430

    

842

    

831

  

Fuel

254

    

272

    

504

    

538

  

Depreciation

284

    

273

    

567

    

545

  

Materials and other

192

    

191

    

382

    

397

  

Total railway operating expenses

1,860

    

1,872

    

3,734

    

3,754

  
               

Income from railway operations

1,065

    

1,026

    

2,031

    

1,861

  
               

Other income – net

22

    

29

    

66

    

37

  

Interest expense on debt

153

    

131

    

302

    

267

  
               

Income before income taxes

934

    

924

    

1,795

    

1,631

  
               

Income taxes

              

Current

136

    

170

    

263

    

280

  

Deferred

76

    

44

    

133

    

89

  

Total income taxes

212

    

214

    

396

    

369

  
               

Net income

$

722

    

$

710

    

$

1,399

    

$

1,262

  
               

Earnings per share - diluted

$

2.70

    

$

2.50

    

$

5.21

    

$

4.43

  
               

Weighted average shares outstanding - diluted

267.1

    

283.7

    

268.3

    

284.8

  
 

See accompanying notes to consolidated financial statements.

 

 

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income

(Unaudited)

 
 

Second Quarter

 

First Six Months

 

2019

 

2018

 

2019

 

2018

 

($ in millions)

               

Net income

$

722

    

$

710

    

$

1,399

    

$

1,262

  

Other comprehensive income, before tax:

              

Pension and other postretirement benefits

5

    

8

    

10

    

1

  

Other comprehensive income (loss) of

              

equity investees

—

    

1

    

(1)

    

2

  

Other comprehensive income, before tax

5

    

9

    

9

    

3

  
               

Income tax expense related to items of

              

other comprehensive income

(2)

    

(2)

    

(3)

    

—

  
               

Other comprehensive income, net of tax

3

    

7

    

6

    

3

  
               

Total comprehensive income

$

725

    

$

717

    

$

1,405

    

$

1,265

  
 

See accompanying notes to consolidated financial statements.

 

 

Norfolk Southern Corporation and Subsidiaries

Consolidated Balance Sheets

(Unaudited)

 
 

June 30,

 

December 31,

 

2019

 

2018

 

($ in millions)

Assets

     

Current assets:

      

Cash and cash equivalents

$

274

    

$

358

  

Accounts receivable – net

1,039

    

1,009

  

Materials and supplies

256

    

207

  

Other current assets

345

    

288

  

Total current assets

1,914

    

1,862

  
       

Investments

3,301

    

3,109

  

Properties less accumulated depreciation of $12,372

      

and $12,374, respectively

31,201

    

31,091

  

Other assets

756

    

177

  
       

Total assets

$

37,172

    

$

36,239

  
       

Liabilities and stockholders' equity

     

Current liabilities:

      

Accounts payable

$

1,407

    

$

1,505

  

Income and other taxes

270

    

255

  

Other current liabilities

373

    

246

  

Current maturities of long-term debt

401

    

585

  

Total current liabilities

2,451

    

2,591

  
       

Long-term debt

11,076

    

10,560

  

Other liabilities

1,738

    

1,266

  

Deferred income taxes

6,596

    

6,460

  
       

Total liabilities

21,861

    

20,877

  
       

Stockholders' equity:

      

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

      

  authorized; outstanding 263,406,773 and 268,098,472 shares,

      

  respectively, net of treasury shares

265

    

269

  

Additional paid-in capital

2,226

    

2,216

  

Accumulated other comprehensive loss

(557)

    

(563)

  

Retained income

13,377

    

13,440

  
       

Total stockholders' equity

15,311

    

15,362

  
       

Total liabilities and stockholders' equity

$

37,172

    

$

36,239

  
 

See accompanying notes to consolidated financial statements.

 

 

 

 

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

 
 

First Six Months

 

2019

 

2018

 

($ in millions)

Cash flows from operating activities

     

Net income

$

1,399

    

$

1,262

  

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

      

Depreciation

567

    

546

  

Deferred income taxes

133

    

89

  

Gains and losses on properties

(7)

    

(14)

  

Changes in assets and liabilities affecting operations:

      

Accounts receivable

(30)

    

(92)

  

Materials and supplies

(49)

    

(38)

  

Other current assets

55

    

19

  

Current liabilities other than debt

(30)

    

134

  

Other – net

(86)

    

(80)

  
       

Net cash provided by operating activities

1,952

    

1,826

  
       

Cash flows from investing activities

     

Property additions

(979)

    

(836)

  

Property sales and other transactions

214

    

48

  

Investment purchases

(12)

    

(4)

  

Investment sales and other transactions

(75)

    

6

  
       

Net cash used in investing activities

(852)

    

(786)

  
       

Cash flows from financing activities

     

Dividends

(458)

    

(408)

  

Common stock transactions

18

    

15

  

Purchase and retirement of common stock

(1,050)

    

(700)

  

Proceeds from borrowings – net of issuance costs

1,054

    

543

  

Debt repayments

(750)

    

(750)

  
       

Net cash used in financing activities

(1,186)

    

(1,300)

  
       

Net decrease in cash, cash equivalents, and restricted cash

(86)

    

(260)

  
       

Cash, cash equivalents, and restricted cash

     

At beginning of year

446

    

690

  
       

At end of period

$

360

    

$

430

  
       

Supplemental disclosures of cash flow information

     

Cash paid during the period for:

      

Interest (net of amounts capitalized)

$

271

    

$

246

  

Income taxes (net of refunds)

215

    

126

  
 

See accompanying notes to consolidated financial statements.

 

 

 

 

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Changes in Stockholders' Equity

(Unaudited)

 
 

Common

Stock

 

Additional

Paid-in

Capital

 

Accum. Other

Comprehensive

Loss

 

Retained

Income

 

Total

 

($ in millions, except per share amounts)

                   

Balance at December 31, 2018

$

269

    

$

2,216

    

$

(563)

    

$

13,440

    

$

15,362

  
                   

Comprehensive income:

                  

Net income

            

677

    

677

  

Other comprehensive income

        

3

        

3

  

Total comprehensive income

                

680

  

Dividends on common stock,

                  

$0.86 per share

            

(230)

    

(230)

  

Share repurchases

(3)

    

(22)

        

(475)

    

(500)

  

Stock-based compensation

1

    

19

        

(1)

    

19

  
                   

Balance at March 31, 2019

267

    

2,213

    

(560)

    

13,411

    

15,331

  
                   

Comprehensive income:

                  

Net income

            

722

    

722

  

Other comprehensive income

        

3

        

3

  

Total comprehensive income

                

725

  

Dividends on common stock,

                  

$0.86 per share

            

(228)

    

(228)

  

Share repurchases

(2)

    

(22)

        

(526)

    

(550)

  

Stock-based compensation

    

35

        

(2)

    

33

  
                   

Balance at June 30, 2019

$

265

    

$

2,226

    

$

(557)

    

$

13,377

    

$

15,311

  
 

See accompanying notes to consolidated financial statements.

 

 

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Changes in Stockholders' Equity

(Unaudited)

 
 

Common
Stock

 

Additional
Paid-in
Capital

 

Accum. Other
Comprehensive
Loss

 

Retained
Income

 

Total

 

($ in millions, except per share amounts)

                   

Balance at December 31, 2017

$

285

    

$

2,254

    

$

(356)

    

$

14,176

    

$

16,359

  
                   

Comprehensive income:

                  

Net income

            

552

    

552

  

Other comprehensive loss

        

(4)

        

(4)

  

Total comprehensive income

                

548

  

Dividends on common stock,

                  

$0.72 per share

            

(205)

    

(205)

  

Share repurchases

(2)

    

(16)

        

(282)

    

(300)

  

Stock-based compensation

1

    

17

        

(2)

    

16

  

Reclassification of stranded

                  

tax effects

        

(88)

    

88

    

—

  
                   

Balance at March 31, 2018

284

    

2,255

    

(448)

    

14,327

    

16,418

  
                   

Comprehensive income:

                  

Net income

            

710

    

710

  

Other comprehensive income

        

7

        

7

  

Total comprehensive income

                

717

  

Dividends on common stock,

                  

$0.72 per share

            

(203)

    

(203)

  

Share repurchases

(3)

    

(20)

        

(377)

    

(400)

  

Stock-based compensation

    

28

        

(1)

    

27

  
                   

Balance at June 30, 2018

$

281

    

$

2,263

    

$

(441)

    

$

14,456

    

$

16,559

  
 

See accompanying notes to consolidated financial statements.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:

1.   Stock Repurchase Program
We repurchased and retired 5.7 million shares and 4.8 million shares of common stock under our stock repurchase program in the first six months of 2019 and 2018, respectively, at a cost of $1.1 billion and $700 million, respectively.  Since the beginning of 2006, we have repurchased and retired 191.3 million shares at a total cost of $15.2 billion.

2.   Leases
On January 1, 2019, we adopted Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) 2016-02, "Leases (Topic 842)" which requires lessees to recognize right-of-use (ROU) assets and lease liabilities on the balance sheet for leases greater than twelve months.  As a result of the adoption, the Consolidated Balance Sheet at June 30, 2019 includes the recognition of ROU assets of $586 million included in "Other assets," current lease liabilities of $98 million included in "Other current liabilities," and non-current lease liabilities of $488 million included in "Other liabilities."

3.   Restricted Cash
The "Cash, cash equivalents, and restricted cash" line item in the Consolidated Statements of Cash Flows includes restricted cash of $86 million at June 30, 2019 and $88 million at December 31, 2018, reflecting deposits held by a third-party bond agent as collateral for certain debt obligations maturing in 2019.  The restricted cash balance is included as part of "Other current assets" on the Consolidated Balance Sheets in both periods.

4.   Reclassification of Stranded Tax Effects
In February 2018, the FASB issued ASU 2018-02, "Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income."  We adopted the provisions of ASU 2018-02 in the first quarter of 2018 resulting in an increase to "Accumulated other comprehensive loss" of $88 million and a corresponding increase to "Retained income," with no impact on "Total stockholders' equity."

Cision View original content:http://www.prnewswire.com/news-releases/norfolk-southern-reports-second-quarter-2019-results-300889926.html

SOURCE Norfolk Southern Corporation

For further information: Media Inquiries: Media Relations, 404-420-4444 (media.relations@nscorp.com) or Investor Inquiries: Pete Sharbel, 757-629-2861 (peter.sharbel@nscorp.com), http://www.norfolksouthern.com