NORFOLK, Va., Oct. 23, 2019 /PRNewswire/ -- Norfolk Southern
Corporation (NYSE: NSC) today reported third-quarter financial
results.
Third-quarter net income was $657
million and diluted earnings per share were $2.49. The operating ratio for the quarter was
64.9%, a third-quarter record for NS. These results include a
$32 million write-off of a receivable
resulting from a legal dispute, which unfavorably impacted the
operating ratio by 110 basis points and earnings per share by
$0.09.
"Our team achieved a record third-quarter operating ratio while
successfully rolling out the first phase of our TOP21 operating
plan, followed by the swift transition to the plan's second phase.
These efforts produced an 11% reduction in crew starts and recrews
compared to the third-quarter last year, robustly outpacing the 6%
volume decline while maintaining resilient service that supported
an 11th consecutive quarter of year-over-year revenue
per unit growth," said James A.
Squires, Norfolk Southern chairman, president and CEO.
"Initiatives to reimagine mechanical operations while maintaining a
more efficient fleet of locomotives and railcars also progressed,
as these and other efforts delivered significant cost savings this
quarter. Looking ahead, additional productivity will be generated
as we advance to the third phase of TOP21 and execute initiatives
surrounding fuel efficiency, distributed power, intermodal
operations, and our mechanical network, just to name a few. Norfolk
Southern remains fully dedicated to our strategic plan for the
creation of shareholder value through sweeping productivity
improvements while maintaining a superior service product for our
customers."
Third-quarter summary and highlights
- Railway operating revenues of $2.8
billion decreased 4% compared with third-quarter 2018, as a
2% increase in average revenue per unit partially offset a 6%
decline in total volume.
- Railway operating expenses were $1.8
billion, a decrease of $82
million compared with the same period last year. Lower
compensation and benefits, equipment rents, and fuel prices were
partially offset by a $32 million
write-off of a receivable resulting from a legal dispute and
increased depreciation expense.
- Income from railway operations was $1.0
billion, a decrease of $24
million year-over-year. The railway operating ratio was
a third-quarter record 64.9%, despite the unfavorable impact of 110
basis points related to a legal dispute.
- Increased quarterly dividend by 9% from $0.86 to $0.94 per
share.
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)
|
|
|
Third
Quarter
|
|
First Nine
Months
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
(in millions,
except per share amounts)
|
|
|
|
|
|
|
|
|
Railway operating
revenues
|
|
|
|
|
|
|
|
Merchandise
|
$
|
1,731
|
|
|
$
|
1,737
|
|
|
$
|
5,173
|
|
|
$
|
5,060
|
|
Intermodal
|
707
|
|
|
746
|
|
|
2,127
|
|
|
2,138
|
|
Coal
|
403
|
|
|
464
|
|
|
1,306
|
|
|
1,364
|
|
Total railway
operating revenues
|
2,841
|
|
|
2,947
|
|
|
8,606
|
|
|
8,562
|
|
|
|
|
|
|
|
|
|
Railway operating
expenses
|
|
|
|
|
|
|
|
Compensation and
benefits
|
682
|
|
|
725
|
|
|
2,121
|
|
|
2,168
|
|
Purchased services
and rents
|
423
|
|
|
450
|
|
|
1,265
|
|
|
1,281
|
|
Fuel
|
226
|
|
|
274
|
|
|
730
|
|
|
812
|
|
Depreciation
|
286
|
|
|
276
|
|
|
853
|
|
|
821
|
|
Materials and
other
|
228
|
|
|
202
|
|
|
610
|
|
|
599
|
|
Total railway
operating expenses
|
1,845
|
|
|
1,927
|
|
|
5,579
|
|
|
5,681
|
|
|
|
|
|
|
|
|
|
Income from
railway operations
|
996
|
|
|
1,020
|
|
|
3,027
|
|
|
2,881
|
|
|
|
|
|
|
|
|
|
Other income –
net
|
22
|
|
|
30
|
|
|
88
|
|
|
67
|
|
Interest expense on
debt
|
150
|
|
|
142
|
|
|
452
|
|
|
409
|
|
|
|
|
|
|
|
|
|
Income before income
taxes
|
868
|
|
|
908
|
|
|
2,663
|
|
|
2,539
|
|
|
|
|
|
|
|
|
|
Income
taxes
|
|
|
|
|
|
|
|
Current
|
119
|
|
|
157
|
|
|
382
|
|
|
437
|
|
Deferred
|
92
|
|
|
49
|
|
|
225
|
|
|
138
|
|
Total income
taxes
|
211
|
|
|
206
|
|
|
607
|
|
|
575
|
|
|
|
|
|
|
|
|
|
Net
income
|
$
|
657
|
|
|
$
|
702
|
|
|
$
|
2,056
|
|
|
$
|
1,964
|
|
|
|
|
|
|
|
|
|
Earnings per share
- diluted
|
$
|
2.49
|
|
|
$
|
2.52
|
|
|
$
|
7.70
|
|
|
$
|
6.95
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding - diluted
|
264.3
|
|
|
278.2
|
|
|
266.9
|
|
|
282.6
|
|
|
See accompanying
notes to consolidated financial statements.
|
Norfolk Southern
Corporation and Subsidiaries
Consolidated
Balance Sheets
(Unaudited)
|
|
|
September
30,
|
|
December
31,
|
|
2019
|
|
2018
|
|
($ in
millions)
|
Assets
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
452
|
|
|
$
|
358
|
|
Accounts receivable –
net
|
973
|
|
|
1,009
|
|
Materials and
supplies
|
266
|
|
|
207
|
|
Other current
assets
|
325
|
|
|
288
|
|
Total current
assets
|
2,016
|
|
|
1,862
|
|
|
|
|
|
Investments
|
3,376
|
|
|
3,109
|
|
Properties less
accumulated depreciation of $12,381
|
|
|
|
and $12,374,
respectively
|
31,394
|
|
|
31,091
|
|
Other
assets
|
714
|
|
|
177
|
|
|
|
|
|
Total
assets
|
$
|
37,500
|
|
|
$
|
36,239
|
|
|
|
|
|
Liabilities and
stockholders' equity
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$
|
1,407
|
|
|
$
|
1,505
|
|
Short-term
debt
|
350
|
|
|
—
|
|
Income and other
taxes
|
202
|
|
|
255
|
|
Other current
liabilities
|
401
|
|
|
246
|
|
Current maturities of
long-term debt
|
401
|
|
|
585
|
|
Total current
liabilities
|
2,761
|
|
|
2,591
|
|
|
|
|
|
Long-term
debt
|
11,085
|
|
|
10,560
|
|
Other
liabilities
|
1,727
|
|
|
1,266
|
|
Deferred income
taxes
|
6,689
|
|
|
6,460
|
|
|
|
|
|
Total
liabilities
|
22,262
|
|
|
20,877
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
Common stock $1.00
per share par value, 1,350,000,000 shares
|
|
|
|
authorized;
outstanding 260,746,663 and 268,098,472 shares,
|
|
|
|
respectively,
net of treasury shares
|
262
|
|
|
269
|
|
Additional paid-in
capital
|
2,219
|
|
|
2,216
|
|
Accumulated other
comprehensive loss
|
(553)
|
|
|
(563)
|
|
Retained
income
|
13,310
|
|
|
13,440
|
|
|
|
|
|
Total
stockholders' equity
|
15,238
|
|
|
15,362
|
|
|
|
|
|
Total liabilities
and stockholders' equity
|
$
|
37,500
|
|
|
$
|
36,239
|
|
|
See accompanying
notes to consolidated financial statements.
|
Norfolk Southern
Corporation and Subsidiaries Consolidated Statements of
Cash Flows (Unaudited)
|
|
|
First Nine
Months
|
|
2019
|
|
2018
|
|
($ in
millions)
|
Cash flows from
operating activities
|
|
|
|
Net income
|
$
|
2,056
|
|
|
$
|
1,964
|
|
Reconciliation of net
income to net cash provided by operating activities:
|
|
|
|
Depreciation
|
854
|
|
|
822
|
|
Deferred income
taxes
|
225
|
|
|
138
|
|
Gains and losses on
properties
|
(4)
|
|
|
(26)
|
|
Changes in assets and
liabilities affecting operations:
|
|
|
|
Accounts
receivable
|
34
|
|
|
(102)
|
|
Materials and
supplies
|
(59)
|
|
|
(45)
|
|
Other current
assets
|
40
|
|
|
45
|
|
Current liabilities
other than debt
|
(72)
|
|
|
173
|
|
Other –
net
|
(77)
|
|
|
(85)
|
|
|
|
|
|
Net cash provided by
operating activities
|
2,997
|
|
|
2,884
|
|
|
|
|
|
Cash flows from
investing activities
|
|
|
|
Property
additions
|
(1,494)
|
|
|
(1,326)
|
|
Property sales and
other transactions
|
282
|
|
|
93
|
|
Investment
purchases
|
(12)
|
|
|
(4)
|
|
Investment sales and
other transactions
|
(99)
|
|
|
96
|
|
|
|
|
|
Net cash used in
investing activities
|
(1,323)
|
|
|
(1,141)
|
|
|
|
|
|
Cash flows from
financing activities
|
|
|
|
Dividends
|
(705)
|
|
|
(627)
|
|
Common stock
transactions
|
21
|
|
|
38
|
|
Purchase and
retirement of common stock
|
(1,550)
|
|
|
(2,300)
|
|
Proceeds from
borrowings – net of issuance costs
|
1,404
|
|
|
2,023
|
|
Debt
repayments
|
(750)
|
|
|
(750)
|
|
|
|
|
|
Net cash used in
financing activities
|
(1,580)
|
|
|
(1,616)
|
|
|
|
|
|
Net increase in cash,
cash equivalents, and restricted cash
|
94
|
|
|
127
|
|
|
|
|
|
Cash, cash
equivalents, and restricted cash
|
|
|
|
At beginning of
year
|
446
|
|
|
690
|
|
|
|
|
|
At end of
period
|
$
|
540
|
|
|
$
|
817
|
|
|
|
|
|
Supplemental
disclosures of cash flow information
|
|
|
|
Cash paid during the
period for:
|
|
|
|
Interest (net of
amounts capitalized)
|
$
|
392
|
|
|
$
|
327
|
|
Income taxes (net of
refunds)
|
404
|
|
|
314
|
|
|
See accompanying
notes to consolidated financial statements.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:
1. Stock Repurchase Program
We repurchased and
retired 8.4 million shares of common stock under our stock
repurchase program during the first nine months of 2019, at a cost
of $1.6 billion. During the
first nine months of 2018, we repurchased and retired 12.8 million
shares (5.7 million under an accelerated share repurchase program
and 7.1 million shares under our ongoing program) at a cost of
$2.1 billion. Since the
beginning of 2006, we have repurchased and retired 194.0 million
shares at a total cost of $15.7
billion.
2. Leases
On January 1,
2019, we adopted Financial Accounting Standards Board
Accounting Standards Update 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 September 30, 2019 includes
the recognition of ROU assets of $561
million included in "Other assets," current lease
liabilities of $97 million included
in "Other current liabilities," and non-current lease liabilities
of $464 million included in "Other
liabilities."
3. Restricted Cash
The "Cash, cash equivalents,
and restricted cash" line item on the Consolidated Statements of
Cash Flows includes restricted cash of $88
million at both September 30,
2019 and December 31, 2018,
reflecting deposits held by a third-party bond agent as collateral
for certain debt obligations maturing in October 2019. The
restricted cash balance is included as part of "Other current
assets" on the Consolidated Balance Sheets in both periods.
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SOURCE Norfolk Southern Corporation