Norfolk Southern reports record second-quarter 2014 results

23 Jul, 2014, 08:00 ET from Norfolk Southern Corporation

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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