Norfolk Southern reports second-quarter 2019 results
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 SouthernNorfolk 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 statementsThis 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) | |||||||||||||||||||
CommonStock | AdditionalPaid-in Capital | Accum. OtherComprehensive Loss | RetainedIncome | 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 ProgramWe 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. LeasesOn 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 CashThe "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 EffectsIn 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."
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SOURCE Norfolk Southern Corporation