News Releases
Norfolk Southern reports second-quarter 2015 results

NORFOLK, Va., July 27, 2015 /PRNewswire/ --

SECOND-QUARTER 2015 RESULTS

  • Railway operating revenues totaled $2.7 billion.
  • Income from railway operations was $814 million.
  • Net income totaled $433 million.
  • Diluted earnings per share were $1.41.
  • The railway operating ratio was 70.0 percent.

Norfolk Southern Corporation (NYSE: NSC) today reported financial results for second-quarter 2015. Net income for the quarter was $433 million, 23 percent lower compared with the $562 million record results from the same period of 2014. Diluted earnings per share were $1.41 compared with $1.79 per diluted share earned in the second quarter last year.

"While we face short-term pressure, particularly as we clear fuel surcharge revenue and coal headwinds, Norfolk Southern is well positioned to continue improving service, which will reduce costs and add value to our customers," said CEO James A. Squires. "Growth within the intermodal franchise, consumer spending, housing-related momentum and improved manufacturing activity all support an optimistic longer-term outlook. We have a strong legacy of success, and we are taking the right steps to continue value creation for our customers, the communities we serve, our employees, and our shareholders."

SECOND-QUARTER SUMMARY

  • Railway operating revenues were $2.7 billion, 11 percent lower compared with second-quarter 2014, a result of lower fuel surcharges and coal volumes. Total volume decreased 2 percent, or about 46,000 units. Gains in intermodal and merchandise traffic were offset by losses in coal.
  • General merchandise revenues were $1.6 billion, 5 percent lower than the same period last year, reflecting lower fuel surcharges. Volume grew by 1 percent, with strong growth in chemicals offsetting declines in steel. Automotive and paper volume increased with higher vehicle production and strength in pulpboard and lumber. The five general merchandise commodity groups reported mostly lower revenue results on a year-over-year basis:
    • Chemicals: $454 million, about even with 2014
    • Agriculture: $ 379 million, down 2 percent
    • Metals/Construction: $344 million, down 16 percent
    • Automotive: $254 million, down 6 percent
    • Paper/Forest: $196 million, down 2 percent
  • Intermodal revenues were $633 million, 3 percent lower compared with second-quarter 2014, as lower fuel surcharges more than offset volume gains. Higher shipments in our international business drove overall volume growth of 2 percent in the quarter compared with the same period of 2014.
  • Coal revenues were $453 million, 33 percent lower compared with the second quarter of 2014. Coal revenues were affected by continuing low natural gas prices and declining fuel surcharges. Volume was down 21 percent, driven by declines of 23 percent in domestic utility and 38 percent in export.
  • Railway operating expenses declined 6 percent to $1.9 billion, primarily due to lower fuel costs, compared with the same period of 2014.
  • Income from railway operations was $814 million, 20 percent lower compared with second-quarter 2014.
  • The operating ratio, or operating expenses as a percentage of revenue, was 70.0 percent, compared with 66.5 percent in the same quarter of 2014.

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.

 


 

Norfolk Southern Corporation and Subsidiaries 

 Consolidated Statements of Income  

(Unaudited)






Second Quarter


First Six Months


2015


2014


2015


2014


($ in millions, except per share amounts)













Railway operating revenues












Coal

$

453



$

672



$

908



$

1,213


General merchandise


1,627




1,720




3,147




3,272


Intermodal


633




650




1,225




1,246


Total railway operating revenues


2,713




3,042




5,280




5,731














Railway operating expenses












Compensation and benefits


724




715




1,507




1,455


Purchased services and rents


438




414




861




806


Fuel


255




408




519




840


Depreciation


247




238




492




475


Materials and other


235




248




481




469














Total railway operating expenses


1,899




2,023




3,860




4,045














Income from railway operations


814




1,019




1,420




1,686














Other income – net


19




18




40




44


Interest expense on debt


134




139




266




278














Income before income taxes


699




898




1,194




1,452














Provision for income taxes












Current


243




311




416




505


Deferred


23




25




35




17


Total income taxes


266




336




451




522














Net income

$

433



$

562



$

743



$

930














Earnings per share












Basic

$

1.43



$

1.81



$

2.43



$

2.99


Diluted


1.41




1.79




2.41




2.97














Weighted average shares outstanding (note 1)












Basic


302.9




309.5




304.8




309.5


Diluted


305.5




312.8




307.5




312.7














See accompanying notes to consolidated financial statements.









 



 

Norfolk Southern Corporation and Subsidiaries 

Consolidated Statements of Comprehensive Income  

(Unaudited)






Second Quarter


First Six Months


2015


2014


2015


2014


($ in millions)













Net income

$

433



$

562



$

743



$

930


Other comprehensive income, before tax:












Pension and other postretirement benefits


11




7




21




306


Other comprehensive income (loss) of












equity investees


—




7




(4)




10














Other comprehensive income, before tax


11




14




17




316


Income tax expense related to items of other












comprehensive income


(5)




(4)




(8)




(118)














Other comprehensive income, net of tax


6




10




9




198














Total comprehensive income

$

439



$

572



$

752



$

1,128


















See accompanying notes to consolidated financial statements.











 



 

Norfolk Southern Corporation and Subsidiaries 

Consolidated Balance Sheets  

(Unaudited)






June 30,


December 31,


2015


2014


($ in millions)

Assets








Current assets:








Cash and cash equivalents

$


889



$


973


Accounts receivable – net



1,055





1,055


Materials and supplies



277





236


Deferred income taxes



125





167


Other current assets



67





347


Total current assets



2,413





2,778










Investments



2,724





2,679


Properties less accumulated depreciation of $11,188 and








$10,814, respectively



28,075





27,694


Other assets (note 2)



98





49










Total assets

$


33,310



$


33,200










Liabilities and stockholders' equity








Current liabilities:








Accounts payable

$


1,144



$


1,233


Short-term debt



—





100


Income and other taxes



295





217


Other current liabilities



264





228


Current maturities of long-term debt



500





2


Total current liabilities



2,203





1,780










Long-term debt (note 2)



8,890





8,883


Other liabilities



1,322





1,312


Deferred income taxes



8,818





8,817










Total liabilities



21,233





20,792










Stockholders' equity:








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








  authorized; outstanding 301,386,849 and 308,240,130 shares,








respectively, net of treasury shares



303





310


Additional paid-in capital



2,146





2,148


Accumulated other comprehensive loss



(389)





(398)


Retained income



10,017





10,348










Total stockholders' equity



12,077





12,408










Total liabilities and stockholders' equity

$


33,310



$


33,200












See accompanying notes to consolidated financial statements.








 



 

Norfolk Southern Corporation and Subsidiaries 

Consolidated Statements of Cash Flows  

(Unaudited)




First Six Months


2015


2014


($ in millions)

Cash flows from operating activities






Net income

$

743



$

930


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






Depreciation


494




478


Deferred income taxes


35




17


Gains and losses on properties and investments


(18)




(3)


Changes in assets and liabilities affecting operations:






Accounts receivable


—




(98)


Materials and supplies


(41)




(28)


Other current assets


282




30


Current liabilities other than debt


(1)




144


Other – net


(21)




(33)








Net cash provided by operating activities


1,473




1,437








Cash flows from investing activities






Property additions


(886)




(809)


Property sales and other transactions


32




44


Investments, including short-term


(3)




(3)


Investment sales and other transactions


5




121








Net cash used in investing activities


(852)




(647)








Cash flows from financing activities






Dividends


(360)




(335)


Common stock issued


28




82


Purchase and retirement of common stock (note 1)


(765)




(100)


Proceeds from borrowings – net


494




—


Debt repayments


(102)




(213)








Net cash used in financing activities


(705)




(566)








Net increase (decrease) in cash and cash equivalents


(84)




224








Cash and cash equivalents






At beginning of year


973




1,443








At end of period

$

889



$

1,667








Supplemental disclosures of cash flow information






Cash paid during the period for:






Interest (net of amounts capitalized)

$

249



$

255


Income taxes (net of refunds)


55




313










See accompanying notes to consolidated financial statements.







 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:

1.   Stock Repurchase Program

   We repurchased 7.4 million and 1.0 million shares of common stock in the first six months of 2015 and 2014, respectively, at a cost of $765 million and $100 million, respectively.  We have remaining authorization from our Board of Directors to repurchase up to 27.8 million shares through December 31, 2017.  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 147.2 million shares at a total cost of $9.2 billion.

2.   New Accounting Pronouncement

   In April 2015, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2015-03, "Interest - Imputation of Interest (Subtopic 835-30):  Simplifying the Presentation of Debt Issuance Costs."  This update requires that debt issuance costs be presented in the balance sheet as a reduction from the related debt liability rather than as an asset, consistent with debt discounts.  The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this update.  We early adopted the provisions of this ASU during the second quarter of 2015 and applied it retrospectively.  The adoption of ASU 2015-03 resulted in the presentation of $43 million of debt issuance costs as a reduction of "Long-term debt" at June 30, 2015.  We retrospectively adjusted the December 31, 2014 consolidated balance sheet and related disclosures to reflect the reclassification of $41 million of debt issuance costs from "Other assets" to "Long-term debt."  There was no other impact on our consolidated financial statements from the adoption of ASU 2015-03.

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SOURCE Norfolk Southern Corporation

For further information: Media Inquiries: Frank Brown, 757-629-2710 (fsbrown@nscorp.com), Investor Inquiries: Katie Cook, 757-629-2861 (InvestorRelations@nscorp.com)