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Norfolk Southern reports second-quarter 2017 results

July 26, 2017 8:00 AM

NORFOLK, Va., July 26, 2017 /PRNewswire/ -- Norfolk Southern Corporation (NYSE: NSC) today reported second-quarter financial results.

Second-quarter net income was $497 million, up 23 percent year-over-year, driven by a 15 percent increase in income from railway operations, and a record operating ratio. Diluted earnings per share were $1.71, up 26 percent year-over-year.

"Norfolk Southern's strong financial results and all-time record operating ratio reflect the power of our team, successful execution of our dynamic plan, and focus on operating even more efficiently while providing high quality service to customers," said James A. Squires, Norfolk Southern chairman, president and CEO. "We remain committed to our core pillars of safety, service, stewardship and growth as we continue to enhance operations across the organization. We are confident in our ability to reach our goals and deliver sustainable shareholder value in the near and long terms. As a result of our achievements to date and the confidence we have in our outlook, we are increasing this year's share repurchase guidance by 25% to $1 billion."

Second-quarter summary

  • Railway operating revenues of $2.6 billion increased 7 percent compared with second-quarter 2016, as overall volumes were 6 percent higher, reflecting growth within our major commodity categories of coal and intermodal.
  • Railway operating expenses increased $65 million, or 4 percent, to $1.7 billion as targeted expense reductions helped offset volume and inflation-related expenses.
  • Income from railway operations was $888 million, up 15 percent year-over-year, and the operating ratio, or operating expenses as a percentage of revenues, was 66.3 percent, an all-time 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 operates the most extensive intermodal network in the East and is a major transporter of coal, automotive, and industrial products.

http://www.norfolksouthern.com

Norfolk Southern Corporation and SubsidiariesConsolidated Statements of Income(Unaudited)

Second Quarter

First Six Months

2017

2016

2017

2016

($ in millions, except per share amounts)

Railway operating revenues

Merchandise

$

1,597

$

1,577

$

3,181

$

3,126

Intermodal

593

538

1,164

1,060

Coal

447

339

867

688

Total railway operating revenues

2,637

2,454

5,212

4,874

Railway operating expenses

Compensation and benefits

703

667

1,446

1,390

Purchased services and rents

392

384

769

763

Fuel

190

174

403

323

Depreciation

264

257

523

509

Materials and other

200

202

410

396

Total railway operating expenses

1,749

1,684

3,551

3,381

Income from railway operations

888

770

1,661

1,493

Other income – net

32

4

56

20

Interest expense on debt

140

138

282

277

Income before income taxes

780

636

1,435

1,236

Provision for income taxes

Current

225

174

391

343

Deferred

58

57

114

101

Total income taxes

283

231

505

444

Net income

$

497

$

405

$

930

$

792

Earnings per share

Basic

$

1.72

$

1.37

$

3.20

$

2.67

Diluted

1.71

1.36

3.18

2.65

Weighted average shares outstanding

Basic

289.0

294.7

289.6

296.0

Diluted

291.2

296.6

292.0

297.7

See accompanying notes to consolidated financial statements.

Norfolk Southern Corporation and SubsidiariesConsolidated Statements of Comprehensive Income(Unaudited)

Second Quarter

First Six Months

2017

2016

2017

2016

($ in millions)

Net income

$

497

$

405

$

930

$

792

Other comprehensive income, before tax:

Reclassification adjustments for costs

included in net income

7

6

14

13

Other comprehensive income (loss) of

equity investees

1

1

(1)

—

Other comprehensive income, before tax

8

7

13

13

Income tax expense related to reclassification

adjustments for costs included in net income

(3)

(2)

(6)

(5)

Other comprehensive income, net of tax

5

5

7

8

Total comprehensive income

$

502

$

410

$

937

$

800

See accompanying notes to consolidated financial statements.

Norfolk Southern Corporation and SubsidiariesConsolidated Balance Sheets(Unaudited)

June 30,

December 31,

2017

2016

($ in millions)

Assets

Current assets:

Cash and cash equivalents

$

642

$

956

Accounts receivable – net

926

945

Materials and supplies

289

257

Other current assets

79

133

Total current assets

1,936

2,291

Investments

2,848

2,777

Properties less accumulated depreciation of $11,984 and

$11,737, respectively

30,033

29,751

Other assets

105

73

Total assets

$

34,922

$

34,892

Liabilities and stockholders' equity

Current liabilities:

Accounts payable

$

1,223

$

1,215

Short-term debt

—

100

Income and other taxes

268

245

Other current liabilities

252

229

Current maturities of long-term debt

600

550

Total current liabilities

2,343

2,339

Long-term debt

9,273

9,562

Other liabilities

1,385

1,442

Deferred income taxes

9,259

9,140

Total liabilities

22,260

22,483

Stockholders' equity:

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

authorized; outstanding 288,181,852 and 290,417,610 shares,

respectively, net of treasury shares

290

292

Additional paid-in capital

2,228

2,179

Accumulated other comprehensive loss

(480)

(487)

Retained income

10,624

10,425

Total stockholders' equity

12,662

12,409

Total liabilities and stockholders' equity

$

34,922

$

34,892

See accompanying notes to consolidated financial statements.

Norfolk Southern Corporation and SubsidiariesConsolidated Statements of Cash Flows(Unaudited)

First Six Months

2017

2016

($ in millions)

Cash flows from operating activities

Net income

$

930

$

792

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

Depreciation

525

511

Deferred income taxes

114

101

Gains and losses on properties

(20)

(7)

Changes in assets and liabilities affecting operations:

Accounts receivable

(12)

(17)

Materials and supplies

(32)

(35)

Other current assets

48

103

Current liabilities other than debt

93

25

Other – net

(70)

(41)

Net cash provided by operating activities

1,576

1,432

Cash flows from investing activities

Property additions

(883)

(932)

Property sales and other transactions

60

40

Investment purchases

(4)

(23)

Investment sales and other transactions

3

3

Net cash used in investing activities

(824)

(912)

Cash flows from financing activities

Dividends

(354)

(350)

Common stock transactions

42

1

Purchase and retirement of common stock

(402)

(400)

Proceeds from borrowings – net

298

594

Debt repayments

(650)

(600)

Net cash used in financing activities

(1,066)

(755)

Net decrease in cash and cash equivalents

(314)

(235)

Cash and cash equivalents

At beginning of year

956

1,101

At end of period

$

642

$

866

Supplemental disclosures of cash flow information

Cash paid during the period for:

Interest (net of amounts capitalized)

$

270

$

260

Income taxes (net of refunds)

341

251

See accompanying notes to consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:

  1. Stock Repurchase ProgramWe repurchased and retired 3.4 million and 5.0 million shares of common stock under our stock repurchase program in the first six months of 2017 and 2016, respectively, at a cost of $402 million and $400 million, respectively. Since the beginning of 2006, we have repurchased and retired 163.7 million shares at a total cost of $10.7 billion.

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SOURCE Norfolk Southern Corporation

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