Norfolk Southern reports first-quarter 2018 results
Achieves record first-quarter operating income, operating ratio, net income and earnings per share

NORFOLK, Va., April 25, 2018 /PRNewswire/ -- Norfolk Southern Corporation (NYSE: NSC) today reported first-quarter financial results.

First-quarter net income was $552 million, up 27 percent year-over-year, a result of a 10 percent increase in income from railway operations and a lower effective income tax rate. Diluted earnings per share were $1.93, up 30 percent year-over-year and a first-quarter record.

"We are pleased with the continued improvement in our financial performance and the growth in our business," said James A. Squires, Norfolk Southern chairman, president and CEO. "We are focused on improving service for our customers to position us for future growth and efficiency that will benefit both our customers and shareholders. The outlook for 2018 is promising, and we are increasing our expected annual share repurchases to $1.5 billion, confident that we will deliver strong financial performance."  

First-quarter summary

  • Railway operating revenues of $2.7 billion increased 6 percent compared with first-quarter 2017, as overall volumes were up 3 percent, reflecting 8 percent growth in our intermodal category that offset declines in merchandise and coal volumes.  

  • Railway operating expenses increased $64 million, or 4 percent, to $1.9 billion compared with the same period last year, as higher fuel prices and increased costs associated with overall lower network velocity were offset, in part, by efficiency gains.   

  • Income from railway operations was $835 million, an increase of 10 percent year-over-year, a first-quarter record. The railway operating ratio, or operating expenses as a percentage of revenues, was 69.3 percent, also a first-quarter 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.

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. 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.

http://www.norfolksouthern.com

 

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Income

(Unaudited)



First Quarter


2018


2017


($ in millions, except per share amounts)







Railway operating revenues






Merchandise

$

1,605


$

1,584

Intermodal


678



571

Coal


434



420

Total railway operating revenues


2,717



2,575







Railway operating expenses






Compensation and benefits


737



759

Purchased services and rents


401



377

Fuel


266



213

Depreciation


272



259

Materials and other


206



210







Total railway operating expenses


1,882



1,818







Income from railway operations


835



757







Other income – net


8



40

Interest expense on debt


136



142







Income before income taxes


707



655







Income taxes






Current


110



166

Deferred


45



56

Total income taxes


155



222







Net income

$

552


$

433







Earnings per sharediluted

$

1.93


$

1.48







Weighted average shares outstandingdiluted


285.9



292.8






See accompanying notes to consolidated financial statements.

 

 

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income

(Unaudited)



First Quarter


2018


2017


($ in millions)







Net income

$

552


$

433

Other comprehensive income (loss), before tax:






Pension and other post retirement benefit (expense)


(7)



7

Other comprehensive income (loss) of equity investees


1



(2)

Other comprehensive income (loss), before tax


(6)



5







Income tax benefit (expense) related to items of






other comprehensive income (loss)


2



(3)







Other comprehensive income (loss), net of tax


(4)



2







Total comprehensive income

$

548


$

435






See accompanying notes to consolidated financial statements.

 

 

Norfolk Southern Corporation and Subsidiaries

Consolidated Balance Sheets

(Unaudited)



March 31,


December 31,


2018


2017


($ in millions)

Assets








Current assets:








Cash and cash equivalents

$


1,072


$


690

Accounts receivable – net



973




955

Materials and supplies



245




222

Other current assets



189




282

Total current assets



2,479




2,149









Investments



3,020




2,981

Properties less accumulated depreciation of $12,076 and








$11,909, respectively



30,396




30,330

Other assets



267




251









Total assets

$


36,162


$


35,711









Liabilities and stockholders' equity








Current liabilities:








Accounts payable

$


1,217


$


1,401

Short-term debt



50




100

Income and other taxes



217




211

Other current liabilities



304




233

Current maturities of long-term debt



600




600

Total current liabilities



2,388




2,545









Long-term debt



9,637




9,136

Other liabilities



1,352




1,347

Deferred income taxes



6,367




6,324

Total liabilities



19,744




19,352









Stockholders' equity:








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








  authorized; outstanding 282,541,886 and 284,157,187 shares,








  respectively, net of treasury shares



284




285

Additional paid-in capital



2,255




2,254

Accumulated other comprehensive loss



(448)




(356)

Retained income



14,327




14,176









Total stockholders' equity



16,418




16,359









Total liabilities and stockholders' equity

$


36,162


$


35,711






See accompanying notes to consolidated financial statements.

 

 

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)



First Three Months


2018


2017


($ in millions)

Cash flows from operating activities






Net income

$

552


$

433

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






Depreciation


272



260

Deferred income taxes


45



56

Gains and losses on properties


(8)



(9)

Changes in assets and liabilities affecting operations:






Accounts receivable


(26)



(53)

Materials and supplies


(23)



(24)

Other current assets


13



31

Current liabilities other than debt


12



188

Other – net


(21)



(36)







Net cash provided by operating activities


816



846







Cash flows from investing activities






Property additions


(383)



(438)

Property sales and other transactions


13



35

Investment purchases


(2)



(2)

Investment sales and other transactions


1



1







Net cash used in investing activities


(371)



(404)







Cash flows from financing activities






Dividends


(205)



(177)

Common stock transactions


(1)



34

Purchase and retirement of common stock


(300)



(200)

Proceeds from borrowings – net of issuance costs


543



Debt repayments


(100)



(100)







Net cash used in financing activities


(63)



(443)







Net increase (decrease) in cash and cash equivalents


382



(1)







Cash and cash equivalents






At beginning of year


690



956







At end of period

$

1,072


$

955







Supplemental disclosures of cash flow information






Cash paid during the period for:






Interest (net of amounts capitalized)

$

69


$

70

Income taxes (net of refunds)


7



12






See accompanying notes to consolidated financial statements.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:

  1. Pension and Other Postretirement Benefits
    We adopted Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) 2017-07 on January 1, 2018.  The retrospective application resulted in the reclassification of $16 million of pension and other postretirement benefits from the "Compensation and benefits" line item within "Railway operating expenses" to "Other income - net" on the Consolidated Statements of Income for the quarter ended March 31, 2017.

  2. Stock Repurchase Program
    We repurchased and retired 2.1 million and 1.7 million shares of common stock under our stock repurchase program in the first quarters of 2018 and 2017, respectively, at a cost of $300 million and $200 million, respectively.  Since the beginning of 2006, we have repurchased and retired 170.6 million shares at a total cost of $11.6 billion.

  3. Reclassification of Stranded Tax Effects
    In February 2018, the FASB issued ASU 2018-02, "Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income." This update is intended to reclassify the stranded tax effects resulting from the Tax Cuts and Jobs Act that was enacted on December 22, 2017 from accumulated other comprehensive income to retained earnings.  In the first quarter of 2018, we adopted the provisions of ASU 2018-02 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

For further information: Media Inquiries: Susan Terpay, 757-823-5204 (susan.terpay@nscorp.com); Investor Inquiries: Clay Moore, 757-629-2861 (clay.moore@nscorp.com)