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Form 8-K NORFOLK SOUTHERN CORP For: Jul 27

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July 27, 2016 8:02 AM EDT


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
July 27, 2016 (July 27, 2016)
________________________________
    
NORFOLK SOUTHERN CORPORATION
(Exact name of registrant as specified in its charter)
________________________________

Virginia
1-8339
52-1188014
(State or Other Jurisdiction
of Incorporation)
(Commission File Number)
(IRS Employer
Identification Number)
 
 
 
Three Commercial Place
 
757-629-2680
Norfolk, Virginia 
23510-9241
 
(Registrant's telephone number, including area code)
(Address of principal executive offices)
 
 

No Change
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[ ]    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ]    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ]    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act
        (17 CFR 240.14d-2(b))

[ ]    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act
        (17 CFR 240.13e-4(c))




Item 2.02.    Results of Operations and Financial Condition
Item 7.01.    Regulation FD Disclosure

On July 27, 2016, the Registrant issued a Press Release, attached hereto as Exhibit 99.1, reporting second quarter results for 2016 and posted its Quarterly Financial Review – Second Quarter 2016 on its website, www.nscorp.com, in the “Invest in NS” section, under “Financial Reports.” The accompanying unaudited financial information and summary of certain notes to the consolidated financial statements should be read in conjunction with: (a) the consolidated financial statements and notes included in the Registrant's latest Annual Report on Form 10-K and in subsequent Quarterly Reports on Form 10-Q; and (b) any Current Reports on Form 8-K.  


Item 9.01.    Financial Statements and Exhibits.
 
(d) Exhibits
 
The following exhibit is filed as part of this Current Report on Form 8-K:
 
Exhibit Number
Description
99.1
Press Release dated July 27, 2016


Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

SIGNATURES
NORFOLK SOUTHERN CORPORATION
(Registrant)


/s/ Denise W. Hutson        
Name:  Denise W. Hutson
Title:    Corporate Secretary
Date: July 27, 2016
 

2





EXHIBIT INDEX
Exhibit Number
Description
99.1
Press Release dated July 27, 2016



3


FOR IMMEDIATE RELEASE

Norfolk Southern reports second-quarter 2016 results

Second-quarter 2016 results
•
Diluted earnings per share were $1.36.
•
Operating ratio improved to 68.6 percent, reflecting an 11 percent reduction in operating expenses coupled with a 10 percent decline in operating revenues.

NORFOLK, Va., July 27, 2016 – Norfolk Southern Corporation (NYSE: NSC) today reported financial results for second-quarter 2016. Net income was $405 million, compared with $433 million during the same period of 2015. Diluted earnings per share were $1.36, 4 percent lower compared with $1.41 per diluted share earned in the second quarter last year.

“Our second-quarter results reflect our unwavering focus on cost-control, steadfast commitment to customer service and significant improvements in network performance,” said Chairman, President, and CEO James A. Squires. “We are on track to achieve productivity savings of at least $200 million for 2016, and our record first half operating ratio of 69.4 percent gives us confidence we’ll achieve a full-year operating ratio below 70 percent. Through the continued execution of our strategic plan, we remain confident in our ability to drive superior shareholder value through excellent customer service that positions us for future revenue growth, combined with network efficiency and asset utilization.”

Second-quarter summary
•
Railway operating revenues were $2.5 billion, down 10 percent compared with second-quarter 2015, due to reduced volumes and lower fuel surcharge revenues. Overall volume declined 7 percent to 1.8 million units for the quarter.
•
Merchandise revenues were $1.6 billion, 3 percent lower than the same period last year. Volume declined 3 percent, largely due to fewer chemicals shipments resulting from continued low oil prices. The five merchandise commodity groups reported the following year-over-year revenue results:
◦
Chemicals:
$426 million, down 6 percent
◦
Agriculture:
$383 million, up 1 percent
◦
Metals/Construction:
$334 million, down 3 percent
◦
Automotive:
$248 million, down 2 percent
◦
Paper/Forest:
$186 million, down 5 percent




•
Intermodal revenues were $538 million, 15 percent lower compared with second-quarter 2015. Volume declined 5 percent primarily due to the restructuring of the company’s Triple Crown Services subsidiary.
•
Coal revenues were $339 million, 25 percent lower compared with second-quarter 2015. High stockpiles, limited coal burn due to mild winter weather and sustained low natural gas prices combined to decrease volume by 24 percent.
•
Railway operating expenses declined 11 percent to $1.7 billion, primarily due to cost reduction initiatives as well as lower fuel costs, compared with the same period of 2015.
•
Income from railway operations was $770 million, 5 percent lower compared with second-quarter 2015.
•
The composite service metric improved 13 percent in the quarter and 18 percent for the first six months of 2016, compared with the same periods last year.
•
The operating ratio, or operating expenses as a percentage of revenue, was 68.6 percent, a 140 basis point improvement compared with 70.0 percent in the second quarter of last year.

About Norfolk Southern
Norfolk Southern Corporation is one of the nation’s premier transportation companies. Its Norfolk Southern Railway 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.

Media Inquiries:
Frank Brown, 757-629-2710 ([email protected])

Investor Inquiries:
Katie Cook, 757-629-2861 ([email protected])

http://www.norfolksouthern.com

###




Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Income
(Unaudited)
 
Second Quarter
 
First Six Months
 
2016
 
2015
 
2016
 
2015
 
($ in millions, except per share amounts)
 
 
 
 
 
 
 
 
 
 
 
 
Railway operating revenues
 
 
 
 
 
 
 
 
 
 
 
Merchandise
$
1,577

 
$
1,627

 
$
3,126

 
$
3,147

Intermodal
 
538

 
 
633

 
 
1,060

 
 
1,225

Coal
 
339

 
 
453

 
 
688

 
 
908

Total railway operating revenues
 
2,454

 
 
2,713

 
 
4,874

 
 
5,280

 
 
 
 
 
 
 
 
 
 
 
 
Railway operating expenses
 
 
 
 
 
 
 
 

 
 
 

Compensation and benefits
 
667

 
 
724

 
 
1,390

 
 
1,507

Purchased services and rents
 
384

 
 
438

 
 
763

 
 
861

Fuel
 
174

 
 
255

 
 
323

 
 
519

Depreciation
 
257

 
 
247

 
 
509

 
 
492

Materials and other
 
202

 
 
235

 
 
396

 
 
481

 
 
 
 
 
 
 
 
 
 
 
 
Total railway operating expenses
 
1,684

 
 
1,899

 
 
3,381

 
 
3,860

 
 
 
 
 
 
 
 
 
 
 
 
Income from railway operations
 
770

 
 
814

 
 
1,493

 
 
1,420

 
 
 
 
 
 
 
 
 
 
 
 
Other income – net
 
4

 
 
19

 
 
20

 
 
40

Interest expense on debt
 
138

 
 
134

 
 
277

 
 
266

 
 
 
 
 
 
 
 
 
 
 
 
Income before income taxes
 
636

 
 
699

 
 
1,236

 
 
1,194

 
 
 
 
 
 
 
 
 
 
 
 
Provision for income taxes
 
 
 
 
 
 
 
 
 
 
 
Current
 
174

 
 
243

 
 
343

 
 
416

Deferred
 
57

 
 
23

 
 
101

 
 
35

Total income taxes
 
231

 
 
266

 
 
444

 
 
451

 
 
 
 
 
 
 
 
 
 
 
 
Net income
$
405

 
$
433

 
$
792

 
$
743

 
 
 
 
 
 
 
 
 
 
 
 
Earnings per share
 
 
 
 
 
 
 
 
 
 
 
Basic
$
1.37

 
$
1.43

 
$
2.67

 
$
2.43

Diluted
 
1.36

 
 
1.41

 
 
2.65

 
 
2.41

 
 
 
 
 
 
 
 
 
 
 
 
Weighted average shares outstanding (note 1)
 
 
 
 
 
 
 
 
 
 
 
Basic
 
294.7

 
 
302.9

 
 
296.0

 
 
304.8

Diluted
 
296.6

 
 
305.5

 
 
297.7

 
 
307.5



See accompanying notes to consolidated financial statements.



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

 
Second Quarter
 
First Six Months
 
2016
 
2015
 
2016
 
2015
 
($ in millions)
 
 
 
 
 
 
 
 
 
 
 
 
Net income
$
405

 
$
433

 
$
792

 
$
743

Other comprehensive income, before tax:
 
 
 
 
 
 
 
 
 
 
 
Pension and other postretirement benefits
 
6

 
 
11

 
 
13

 
 
21

Other comprehensive income (loss) of
 
 
 
 
 
 
 
 
 
 
 
equity investees
 
1

 
 
—

 
 
—

 
 
(4
)
 
 
 
 
 
 
 
 
 
 
 
 
Other comprehensive income, before tax
 
7

 
 
11

 
 
13

 
 
17

Income tax expense related to items of other
 
 
 
 
 
 
 
 

 
 
 

comprehensive income
 
(2
)
 
 
(5
)
 
 
(5
)
 
 
(8
)
 
 
 
 
 
 
 
 
 
 
 
 
Other comprehensive income, net of tax
 
5

 
 
6

 
 
8

 
 
9

 
 
 
 
 
 
 
 
 
 
 
 
Total comprehensive income
$
410

 
$
439

 
$
800

 
$
752



See accompanying notes to consolidated financial statements.




Norfolk Southern Corporation and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
 
June 30,
 
December 31,
 
2016
 
2015
 
($ in millions)
Assets
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
Cash and cash equivalents
$
 
866

 
$
 
1,101

Accounts receivable – net
 
 
985

 
 
 
946

Materials and supplies
 
 
306

 
 
 
271

Other current assets
 
 
82

 
 
 
194

Total current assets (note 2)
 
 
2,239

 
 
 
2,512

 
 
 
 
 
 
 
 
Investments
 
 
2,639

 
 
 
2,572

Properties less accumulated depreciation of $11,586 and
 
 
 
 
 
 
 

$11,478, respectively
 
 
29,387

 
 
 
28,992

Other assets
 
 
69

 
 
 
63

 
 
 
 
 
 
 
 
Total assets
$
 
34,334

 
$
 
34,139

 
 
 
 
 
 
 
 
Liabilities and stockholders’ equity
 
 
 

 
 
 
 

Current liabilities:
 
 
 

 
 
 
 

Accounts payable
$
 
1,085

 
$
 
1,091

Short-term debt
 
 
—

 
 
 
200

Income and other taxes
 
 
205

 
 
 
203

Other current liabilities
 
 
267

 
 
 
237

Current maturities of long-term debt
 
 
550

 
 
 
500

Total current liabilities
 
 
2,107

 
 
 
2,231

 
 
 
 
 
 
 
 
Long-term debt
 
 
9,549

 
 
 
9,393

Other liabilities
 
 
1,358

 
 
 
1,385

Deferred income taxes (note 2)
 
 
9,047

 
 
 
8,942

 
 
 
 
 
 
 
 
Total liabilities
 
 
22,061

 
 
 
21,951

 
 
 
 
 
 
 
 
Stockholders’ equity:
 
 
 
 
 
 
 
Common stock $1.00 per share par value, 1,350,000,000 shares
 
 
 
 
 
 
 
  authorized; outstanding 293,549,767 and 297,795,016 shares,
 
 
 
 
 
 
 
respectively, net of treasury shares
 
 
295

 
 
 
299

Additional paid-in capital
 
 
2,146

 
 
 
2,143

Accumulated other comprehensive loss
 
 
(437
)
 
 
 
(445
)
Retained income
 
 
10,269

 
 
 
10,191

 
 
 
 
 
 
 
 
Total stockholders’ equity
 
 
12,273

 
 
 
12,188

 
 
 
 
 
 
 
 
Total liabilities and stockholders’ equity
$
 
34,334

 
$
 
34,139


See accompanying notes to consolidated financial statements.




Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
 
First Six Months
 
2016
 
2015
 
($ in millions)
Cash flows from operating activities
 
 
 
 
 
Net income
$
792

 
$
743

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

Depreciation
 
511

 
 
494

Deferred income taxes
 
101

 
 
35

Gains and losses on properties
 
(7
)
 
 
(18
)
Changes in assets and liabilities affecting operations:
 
 
 
 
 

Accounts receivable
 
(17
)
 
 
—

Materials and supplies
 
(35
)
 
 
(41
)
Other current assets
 
103

 
 
282

Current liabilities other than debt (note 3)
 
25

 
 
27

Other – net
 
(41
)
 
 
(21
)
 
 
 
 
 
 
Net cash provided by operating activities
 
1,432

 
 
1,501

 
 
 
 
 
 
Cash flows from investing activities
 
 

 
 
 

Property additions
 
(932
)
 
 
(886
)
Property sales and other transactions
 
40

 
 
32

Investment purchases
 
(23
)
 
 
(3
)
Investment sales and other transactions
 
3

 
 
5

 
 
 
 
 
 
Net cash used in investing activities
 
(912
)
 
 
(852
)
 
 
 
 
 
 
Cash flows from financing activities
 
 

 
 
 

Dividends
 
(350
)
 
 
(360
)
Common stock transactions (note 3)
 
1

 
 
—

Purchase and retirement of common stock (note 1)
 
(400
)
 
 
(765
)
Proceeds from borrowings – net
 
594

 
 
494

Debt repayments
 
(600
)
 
 
(102
)
 
 
 
 
 
 
Net cash used in financing activities
 
(755
)
 
 
(733
)
 
 
 
 
 
 
Net decrease in cash and cash equivalents
 
(235
)
 
 
(84
)
 
 
 
 
 
 
Cash and cash equivalents
 
 

 
 
 

At beginning of year
 
1,101

 
 
973

 
 
 
 
 
 
At end of period
$
866

 
$
889

 
 
 
 
 
 
Supplemental disclosures of cash flow information
 
 

 
 
 

Cash paid during the period for:
 
 

 
 
 

Interest (net of amounts capitalized)
$
260

 
$
249

Income taxes (net of refunds)
 
251

 
 
55


See accompanying notes to consolidated financial statements.





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:

1.     Stock Repurchase Program
We repurchased and retired 5.0 million and 7.4 million shares of common stock under our stock repurchase program in the first six months of 2016 and 2015, respectively, at a cost of $400 million and $765 million, respectively. 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 156.1 million shares at a total cost of $9.9 billion.

2.    New Accounting Pronouncement- Deferred Taxes
In November 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2015-17, "Balance Sheet Classification of Deferred Taxes." This update requires that deferred tax liabilities and assets be classified as noncurrent on the balance sheet rather than as separate current and noncurrent amounts. We adopted the provisions of this ASU during the first quarter of 2016 and applied it retrospectively. The adoption of ASU 2015-17 resulted in the presentation of $110 million of current deferred income tax assets as a reduction of "Deferred income taxes" in the long-term liabilities section of the Consolidated Balance Sheet at June 30, 2016. We retrospectively presented the December 31, 2015, Consolidated Balance Sheet and related disclosures to reflect the reclassification of $121 million of deferred income tax assets from "Deferred income taxes" in the current assets section of the balance sheet to "Deferred income taxes" in the long-term liabilities section of the balance sheet.

3.    New Accounting Pronouncement- Stock-Based Compensation
In March 2016, the FASB issued ASU No. 2016-09, "Improvements to Employee Share-Based Payment Accounting." We adopted the provisions of this ASU during the first quarter of 2016. This update principally affects the recognition of excess tax benefits and deficiencies and the cash flow classification of share-based compensation-related transactions. The requirement to recognize excess tax benefits and deficiencies as income tax expense or benefit in the income statement was applied prospectively, with a benefit of $6 million recognized in the "Provision for income taxes" line item for the six months ended June 30, 2016. The classification requirements on the Consolidated Statements of Cash Flows for the adoption of ASU 2016-09 resulted in a $23 million increase in "Current liabilities other than debt" within the operating activities section and a corresponding decrease in "Common stock transactions" within the financing activities section for the first six months of 2016. We retrospectively presented the Consolidated Statements of Cash Flows for the first six months of 2015 to reflect a $28 million increase in "Current liabilities other than debt" within the operating activities section and a corresponding decrease in "Common stock transactions" within the financing activities section.







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