NORFOLK, Va., Oct. 28, 2020 /PRNewswire/ -- Norfolk Southern
Corporation (NYSE: NSC) today reported financial results for the
quarter ended September 30, 2020.
During the quarter, the company achieved net income of $569 million, diluted earnings per share of
$2.22, and an operating ratio of
66.5%. These results include a previously announced $99 million non-cash impairment charge. Excluding
the effects of the impairment charge, adjusted third-quarter net
income was $643 million, adjusted
diluted earnings per share were $2.51, and the adjusted operating ratio was
62.5%, which reflects a 240 basis point improvement compared with
third-quarter 2019.
"Since launching our Precision Scheduled Railroading strategy,
we have significantly enhanced Norfolk Southern's operational and
financial performance and delivered superior returns for
shareholders," said James A.
Squires, Norfolk Southern chairman, president and CEO.
"Given the impact of the COVID-19 pandemic on our industry and the
broader economy, we quickly executed a plan to align our assets and
resources with demand and generate sustainable margin improvement.
In addition to maintaining outstanding service levels with fewer
resources and reduced headcount, we successfully idled our fifth
hump in the last five quarters, helping Norfolk Southern achieve
record productivity. With the resilience of our railroad, strong
customer relationships and the hard work of our team, including new
Chief Operating Officer and PSR veteran Cindy Sanborn, we are confident in our ability
to achieve our goal of a 60% operating ratio with more to come,
while delivering enhanced free cash flow and further value creation
for Norfolk Southern shareholders."
Third-quarter summary
- Railway operating revenues of $2.5
billion decreased 12% compared with third-quarter 2019,
driven by a 7% decline in total volume and 5% decline in revenue
per unit.
- Railway operating expenses were $1.7
billion, including a $99
million non-cash impairment charge related to an
equity-method investment.
-
- Excluding the impairment charge, adjusted operating expenses
declined $278 million, or 15%,
compared with third-quarter 2019, driven by lower compensation and
benefits, fuel, purchased services, materials, and the absence of
last year's $32 million receivable
write-off.
- Income from railway operations was $840
million and the operating ratio was 66.5%.
-
- Excluding the impairment charge, adjusted income from railway
operations was $939 million, while
the adjusted operating ratio improved to 62.5% versus the
third-quarter record of 64.9% set in 2019.
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.
Non-GAAP Financial Measures
This news release includes certain non-GAAP financial
measures. Reconciliation of these non-GAAP financial measures is
provided in the table below, entitled "Reconciliation of Non-GAAP
Financial Measures."
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. Additional risks
include the impact of the COVID-19 pandemic on us, our customers,
our supply chain and our operations. 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.
Reconciliation of Non-GAAP Financial Measures
Information included within this filing includes non-GAAP
financial measures, as defined by SEC Regulation G. Non-GAAP
financial measures should be considered in addition to, not as a
substitute for, the financial measures reported in accordance with
U.S. generally accepted accounting principles (GAAP).
GAAP financial results are adjusted to exclude the effects of an
impairment charge in the third quarter of 2020 related to an equity
method investment.
Norfolk Southern believes that these non-GAAP financial measures
provide valuable information regarding its earnings and business
trends by excluding specific items that it believes are not
indicative of the ongoing operating results of its business,
providing a useful way for investors to make a comparison of our
performance over time and against other companies in our industry
by excluding the effects of the impairment charge. These non-GAAP
financial measures are being provided as supplemental information
to Norfolk Southern's GAAP financial measures, and Norfolk Southern
believes these measures provide investors with additional
meaningful financial information regarding our operational
performance. Norfolk Southern also uses these non-GAAP measures as
supplemental measures to evaluate its business and
performance.
($ in millions except
per share amounts)
|
Third
|
|
Quarter
2020
|
|
|
Railway operating
expenses
|
$
|
1,666
|
Effect
of impairment charge
|
|
(99)
|
Adjusted railway
operating expenses
|
$
|
1,567
|
|
|
Income from railway
operations
|
$
|
840
|
Effect
of impairment charge
|
|
99
|
Adjusted income from
railway operations
|
$
|
939
|
|
|
Operating ratio
(%)
|
|
66.5
|
Effect
of impairment charge (%)
|
|
(4.0)
|
Adjusted operating
ratio (%)
|
|
62.5
|
|
|
Net income
|
$
|
569
|
Effect
of impairment charge
|
|
74
|
Adjusted net
income
|
$
|
643
|
|
|
Diluted earnings per
share
|
$
|
2.22
|
Effect
of impairment charge
|
|
0.29
|
Adjusted diluted
earnings per share
|
$
|
2.51
|
|
|
|
Norfolk Southern
Corporation and Subsidiaries
|
Consolidated
Statements of Income
|
(Unaudited)
|
|
|
Third
Quarter
|
|
First Nine
Months
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
(in millions,
except per share amounts)
|
|
|
|
|
|
|
|
|
Railway operating
revenues
|
|
|
|
|
|
|
|
Merchandise
|
$
|
1,556
|
|
|
$
|
1,731
|
|
|
$
|
4,535
|
|
|
$
|
5,173
|
|
Intermodal
|
700
|
|
|
707
|
|
|
1,924
|
|
|
2,127
|
|
Coal
|
250
|
|
|
403
|
|
|
757
|
|
|
1,306
|
|
Total railway
operating revenues
|
2,506
|
|
|
2,841
|
|
|
7,216
|
|
|
8,606
|
|
|
|
|
|
|
|
|
|
Railway operating
expenses
|
|
|
|
|
|
|
|
Compensation and
benefits
|
578
|
|
|
682
|
|
|
1,786
|
|
|
2,121
|
|
Purchased services and
rents
|
486
|
|
|
423
|
|
|
1,261
|
|
|
1,265
|
|
Fuel
|
126
|
|
|
226
|
|
|
399
|
|
|
730
|
|
Depreciation
|
293
|
|
|
286
|
|
|
867
|
|
|
853
|
|
Materials and
other
|
183
|
|
|
228
|
|
|
500
|
|
|
610
|
|
Loss on asset
disposal
|
—
|
|
|
—
|
|
|
385
|
|
|
—
|
|
Total railway
operating expenses
|
1,666
|
|
|
1,845
|
|
|
5,198
|
|
|
5,579
|
|
|
|
|
|
|
|
|
|
Income from railway
operations
|
840
|
|
|
996
|
|
|
2,018
|
|
|
3,027
|
|
|
|
|
|
|
|
|
|
Other income –
net
|
39
|
|
|
22
|
|
|
110
|
|
|
88
|
|
Interest expense on
debt
|
155
|
|
|
150
|
|
|
465
|
|
|
452
|
|
|
|
|
|
|
|
|
|
Income before income
taxes
|
724
|
|
|
868
|
|
|
1,663
|
|
|
2,663
|
|
|
|
|
|
|
|
|
|
Income
taxes
|
|
|
|
|
|
|
|
Current
|
133
|
|
|
119
|
|
|
243
|
|
|
382
|
|
Deferred
|
22
|
|
|
92
|
|
|
78
|
|
|
225
|
|
Total income
taxes
|
155
|
|
|
211
|
|
|
321
|
|
|
607
|
|
|
|
|
|
|
|
|
|
Net
income
|
$
|
569
|
|
|
$
|
657
|
|
|
$
|
1,342
|
|
|
$
|
2,056
|
|
|
|
|
|
|
|
|
|
Earnings per share
– diluted
|
$
|
2.22
|
|
|
$
|
2.49
|
|
|
$
|
5.21
|
|
|
$
|
7.70
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding – diluted
|
256.1
|
|
|
264.3
|
|
|
257.2
|
|
|
266.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying
notes to consolidated financial statements
|
|
|
|
Norfolk Southern
Corporation and Subsidiaries
|
Consolidated
Balance Sheets
|
(Unaudited)
|
|
|
September
30,
|
|
December
31,
|
|
2020
|
|
2019
|
|
($ in
millions)
|
Assets
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
1,359
|
|
|
$
|
580
|
|
Accounts receivable –
net
|
883
|
|
|
920
|
|
Materials and
supplies
|
247
|
|
|
244
|
|
Other current
assets
|
90
|
|
|
337
|
|
Total current
assets
|
2,579
|
|
|
2,081
|
|
|
|
|
|
Investments
|
3,566
|
|
|
3,428
|
|
Properties less
accumulated depreciation of $11,873
|
|
|
|
and $11,982,
respectively
|
31,239
|
|
|
31,614
|
|
Other
assets
|
795
|
|
|
800
|
|
|
|
|
|
Total
assets
|
$
|
38,179
|
|
|
$
|
37,923
|
|
|
|
|
|
Liabilities and
stockholders' equity
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$
|
1,273
|
|
|
$
|
1,428
|
|
Income and other
taxes
|
257
|
|
|
229
|
|
Other current
liabilities
|
386
|
|
|
327
|
|
Current maturities of
long-term debt
|
89
|
|
|
316
|
|
Total current
liabilities
|
2,005
|
|
|
2,300
|
|
|
|
|
|
Long-term
debt
|
12,634
|
|
|
11,880
|
|
Other
liabilities
|
1,701
|
|
|
1,744
|
|
Deferred income
taxes
|
6,898
|
|
|
6,815
|
|
|
|
|
|
Total
liabilities
|
23,238
|
|
|
22,739
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
Common stock $1.00 per
share par value, 1,350,000,000 shares authorized;
outstanding 253,985,338 and 257,904,956 shares, respectively, net
of treasury shares
|
255
|
|
|
259
|
|
Additional paid-in
capital
|
2,246
|
|
|
2,209
|
|
Accumulated other
comprehensive loss
|
(471)
|
|
|
(491)
|
|
Retained
income
|
12,911
|
|
|
13,207
|
|
|
|
|
|
Total stockholders'
equity
|
14,941
|
|
|
15,184
|
|
|
|
|
|
Total liabilities
and stockholders' equity
|
$
|
38,179
|
|
|
$
|
37,923
|
|
|
See accompanying
notes to consolidated financial statements
|
|
|
|
Norfolk Southern
Corporation and Subsidiaries
|
Consolidated
Statements of Cash Flows
|
(Unaudited)
|
|
|
First Nine
Months
|
|
2020
|
|
2019
|
|
($ in
millions)
|
Cash flows from
operating activities
|
|
|
|
Net income
|
$
|
1,342
|
|
|
$
|
2,056
|
|
Reconciliation of net
income to net cash provided by operating activities:
|
|
|
|
Depreciation
|
867
|
|
|
854
|
|
Deferred income
taxes
|
78
|
|
|
225
|
|
Gains and losses on
properties
|
(14)
|
|
|
(4)
|
|
Loss on asset
disposal
|
385
|
|
|
—
|
|
Impairment of
investment
|
99
|
|
|
—
|
|
Changes in assets and
liabilities affecting operations:
|
|
|
|
Accounts
receivable
|
36
|
|
|
34
|
|
Materials and
supplies
|
(3)
|
|
|
(59)
|
|
Other current
assets
|
55
|
|
|
40
|
|
Current liabilities
other than debt
|
104
|
|
|
(72)
|
|
Other – net
|
(182)
|
|
|
(77)
|
|
|
|
|
|
Net cash provided by
operating activities
|
2,767
|
|
|
2,997
|
|
|
|
|
|
Cash flows from
investing activities
|
|
|
|
Property
additions
|
(1,053)
|
|
|
(1,494)
|
|
Property sales and
other transactions
|
291
|
|
|
282
|
|
Investment
purchases
|
(6)
|
|
|
(12)
|
|
Investment sales and
other transactions
|
(50)
|
|
|
(99)
|
|
|
|
|
|
Net cash used in
investing activities
|
(818)
|
|
|
(1,323)
|
|
|
|
|
|
Cash flows from
financing activities
|
|
|
|
Dividends
|
(722)
|
|
|
(705)
|
|
Common stock
transactions
|
53
|
|
|
21
|
|
Purchase and
retirement of common stock
|
(960)
|
|
|
(1,550)
|
|
Proceeds from
borrowings – net of issuance costs
|
784
|
|
|
1,404
|
|
Debt
repayments
|
(325)
|
|
|
(750)
|
|
|
|
|
|
Net cash used in
financing activities
|
(1,170)
|
|
|
(1,580)
|
|
|
|
|
|
Net increase in cash,
cash equivalents, and restricted cash
|
779
|
|
|
94
|
|
|
|
|
|
Cash, cash
equivalents, and restricted cash
|
|
|
|
At beginning of
year
|
580
|
|
|
446
|
|
|
|
|
|
At end of
period
|
$
|
1,359
|
|
|
$
|
540
|
|
|
|
|
|
Supplemental
disclosures of cash flow information
|
|
|
|
Cash paid during the
period for:
|
|
|
|
Interest (net of
amounts capitalized)
|
$
|
395
|
|
|
$
|
392
|
|
Income taxes (net of
refunds)
|
118
|
|
|
404
|
|
|
|
|
|
|
|
See accompanying
notes to consolidated financial statements
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:
1. Impairment of Investment
During the third quarter of 2020, we recorded an
other-than-temporary impairment of $99
million related to the carrying value of an equity method
investment. This non-cash impairment charge is recorded in
"Purchased services and rents" on the Consolidated Statements of
Income and had a $74 million impact
on net income for the third quarter and the first nine months of
2020.
2. Loss on Asset Disposal
In the first quarter of 2020, we committed to a plan to dispose
of certain locomotives deemed excess and no longer needed for
railroad operations. Specifically, during the first nine
months of 2020, the Company recorded a charge related to the loss
on the sale of 574 locomotives disposed of in the first nine
months, and a write-down of 129 additional locomotives that
we are actively marketing to sell. Accordingly, a
$385 million loss was recorded to
adjust their carrying amount to their estimated fair value.
3. Stock Repurchase Program
We repurchased and retired 5.3 million and 8.4 million shares of
common stock under our stock repurchase program during the first
nine months of 2020 and 2019, respectively, at a cost of
$960 million and $1.6 billion, respectively.
4. Restricted Cash
The "Cash, cash equivalents, and restricted cash" line item on
the Consolidated Statements of Cash Flows includes restricted
cash of $88 million in 2019,
reflecting deposits held by a third-party bond agent as collateral
for certain debt obligations which matured on October 1, 2019.
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SOURCE Norfolk Southern Corporation