Norfolk Southern reports record second-quarter 2014 results

NORFOLK, Va., July 23, 2014 /PRNewswire/ -- For the second quarter of 2014 Norfolk Southern (NYSE: NSC) reported record net income of $562 million, 21 percent higher compared with $465 million in second-quarter 2013. Diluted earnings per share increased 23 percent to a record $1.79, compared with $1.46 per diluted share in the same period last year. The railway operating ratio, or operating expenses as a percentage of revenue, improved 5 percent to 66.5 percent.

All-time Quarter Records

  • Railway operating revenues increased 9 percent to $3.0 billion.
  • Income from railway operations improved 22 percent to $1.0 billion.
  • Net income increased 21 percent to $562 million.
  • Diluted earnings per share rose 23 percent to $1.79.
  • The railway operating ratio was 66.5 percent, a 5 percent improvement.

"Norfolk Southern delivered excellent financial performance during the second quarter, reporting the highest railway operating revenues in its history," said CEO Wick Moorman. "We see continued strength across most of our business segments and are optimistic that overall economic conditions will drive growth. Our focus remains unchanged. We are committed to running the safest railroad, providing superior service, increasing efficiency, and driving superior returns to our shareholders."

Second-quarter railway operating revenues increased to a record $3.0 billion, 9 percent higher compared with the same period of 2013, driven by an 8 percent increase in volume.

General merchandise revenues increased 8 percent to a record $1.7 billion compared with the second quarter of 2013. Shipments of metals and construction, chemicals, and agricultural products fueled a 7 percent increase in traffic volume.

Second-Quarter Revenue by Commodity Group

  • Intermodal up 11 percent
  • Metals and Construction up 17 percent
  • Coal up 7 percent
  • Chemicals up 10 percent
  • Agriculture up 5 percent
  • Automotive up 3 percent
  • Paper up 2 percent  

Coal revenues increased 7 percent to $672 million in the second quarter compared with the same period of 2013, with volume up 3 percent, the result of increased demand for utility coal from stockpile replenishment in response to a severe winter and higher natural gas prices, which offset lower export volume.

Intermodal revenues increased 11 percent to a record $650 million compared with the second-quarter 2013. Volume increased 11 percent, the result of continued domestic growth coupled with new international business.

Railway operating expenses were $2.0 billion, 3 percent higher compared with second-quarter 2013, principally due to costs associated with higher business volumes.

Income from railway operations for the second quarter was a record $1.0 billion, 22 percent higher compared with the same period of 2013.

The railway operating ratio, or operating expenses as a percentage of revenue, was a record 66.5 percent, a 5 percent improvement compared with the same period of 2013.

Norfolk Southern Corporation (NYSE: NSC) is one of the nation's premier transportation companies. Its Norfolk Southern Railway Company 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


2014


2013


2014


2013


(in millions, except per share amounts)













Railway operating revenues












    Coal

$

672


$

626


$

1,213


$

1,261

    General merchandise


1,720



1,588



3,272



3,118

    Intermodal


650



588



1,246



1,161

        Total railway operating revenues


3,042



2,802



5,731



5,540













Railway operating expenses












    Compensation and benefits


715



726



1,455



1,506

    Purchased services and rents


414



410



806



803

    Fuel


408



391



840



820

    Depreciation


238



226



475



453

    Materials and other


248



213



469



431

        Total railway operating expenses


2,023



1,966



4,045



4,013













        Income from railway operations


1,019



836



1,686



1,527













Other income – net (note 1)


18



29



44



164

Interest expense on debt


139



128



278



257













    Income before income taxes


898



737



1,452



1,434













Provision for income taxes












    Current


311



203



505



376

    Deferred


25



69



17



143

            Total income taxes


336



272



522



519













            Net income

$

562


$

465


$

930


$

915













Earnings per share (note 1)












        Basic

$

1.81


$

1.47


$

2.99


$

2.90

        Diluted


1.79



1.46



2.97



2.87













Weighted average shares outstanding (note 2)












    Basic


309.5



314.1



309.5



314.3

    Diluted


312.8



317.8



312.7



317.9

 

See accompanying notes to consolidated financial statements.

 

 

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






Second Quarter


First Six Months


2014


2013


2014


2013


($ in millions)













Net income

$

562


$

465


$

930


$

915

Other comprehensive income, before tax:












    Pension and other postretirement benefits


7



36



306



72

    Other comprehensive income of equity investees


7



1



10



2

Other comprehensive income, before tax


14



37



316



74

Income tax expense related to items of other   












    comprehensive income


(4)



(14)



(118)



(28)

Other comprehensive income, net of tax


10



23



198



46













    Total comprehensive income

$

572


$

488


$

1,128


$

961

See accompanying notes to consolidated financial statements.

 

 

Norfolk Southern Corporation and Subsidiaries
Consolidated Balance Sheets
(Unaudited)






June 30,


December 31,


2014


2013


($ in millions)

Assets








Current assets:








   Cash and cash equivalents


$

1,667



$

1,443

   Short-term investments



-




118

   Accounts receivable - net



1,122




1,024

   Materials and supplies



251




223

   Deferred income taxes



161




180

   Other current assets



65




87

      Total current assets



3,266




3,075









Investments



2,505




2,439

Properties less accumulated depreciation of $10,634 and








    $10,387, respectively



26,927




26,645

Other assets



342




324









       Total assets


$

33,040



$

32,483









Liabilities and stockholders' equity








Current liabilities:








    Accounts payable


$

1,245



$

1,265

    Short-term debt



-




100

    Income and other taxes



359




225

    Other current liabilities



331




270

    Current maturities of long-term debt



433




445

        Total current liabilities



2,368




2,305









Long-term debt



8,814




8,903

Other liabilities



1,122




1,444

Deferred income taxes



8,659




8,542

        Total liabilities



20,963




21,194









Stockholders' equity:








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








     authorized; outstanding 309,515,208 and 308,878,402 shares,








     respectively, net of treasury shares



311




310

    Additional paid-in capital



2,113




2,021

    Accumulated other comprehensive loss



(183)




(381)

    Retained income



9,836




9,339









        Total stockholders' equity



12,077




11,289









        Total liabilities and stockholders' equity


$

33,040



$

32,483

See accompanying notes to consolidated financial statements.

 

 


Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)




First Six Months


2014


2013


($ in millions)

Cash flows from operating activities






    Net income

$

930


$

915

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






    Depreciation


478



456

    Deferred income taxes


17



143

    Gains and losses on properties and investments (note 1)


(3)



(99)

    Changes in assets and liabilities affecting operations:






    Accounts receivable


(98)



37

    Materials and supplies


(28)



(12)

    Other current assets


30



28

    Current liabilities other than debt


144



6

 Other – net


(33)



32

        Net cash provided by operating activities


1,437



1,506







Cash flows from investing activities






    Property additions


(809)



(884)

    Property sales and other transactions


44



68

    Investments, including short-term


(3)



(7)

    Investment sales and other transactions


121



16

        Net cash used in investing activities


(647)



(807)







Cash flows from financing activities






    Dividends


(335)



(315)

    Common stock issued – net


82



80

    Purchase and retirement of common stock (note 2)


(100)



(314)

    Debt repayments


(213)



(216)

        Net cash used in financing activities


(566)



(765)







        Net increase (decrease) in cash and cash equivalents


224



(66)







Cash and cash equivalents






    At beginning of period


1,443



653







    At end of period

$

1,667


$

587







Supplemental disclosures of cash flow information






    Cash paid during the period for:






        Interest (net of amounts capitalized)

$

255


$

244

        Income taxes (net of refunds)


313



238

See accompanying notes to consolidated financial statements.

 

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:

1. Other Income – Net


     In first quarter 2013, we recognized a $97 million gain on a land sale, which increased net income by $60 million or $0.19 per share.

2. Stock Repurchase Program


     We repurchased 1.0 million shares of common stock in the first six months of 2014, totaling $100 million, and 4.2 million shares at a cost of $314 million for the same period of 2013. We have remaining authorization from our Board of Directors to repurchase up to 37.2 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 137.8 million shares at a total cost of $8.2 billion.

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SOURCE Norfolk Southern Corporation



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