Norfolk Southern reports record-setting 2013 fourth-quarter and full-year results

Jan 22, 2014, 08:00 ET from Norfolk Southern Corporation

NORFOLK, Va., Jan. 22, 2014 /PRNewswire/ -- Norfolk Southern (NYSE: NSC) reported record fourth-quarter 2013 net income of $513 million, or $1.64 per diluted share, 24 percent higher compared with $413 million, or $1.30 per diluted share, earned in the fourth quarter of 2012. The railway operating ratio, or operating expenses as a percentage of revenue, improved 5 percent to 69.4 percent.

Fourth-quarter 2013 records

  • Railway operating revenues totaled $2.9 billion, up 7 percent.
  • Income from railway operations was $881 million, 23 percent higher.
  • Net income totaled $513 million, up 24 percent.
  • Diluted earnings per share of $1.64 improved 26 percent.

2013 Records

  • Railway operating revenues reached $11.2 billion, up 2 percent.
  • Income from railway operations was $3.3 billion, 4 percent higher.
  • Net income totaled $1.9 billion, up 9 percent.
  • Diluted earnings per share of $6.04 improved 12 percent.
  • The railway operating ratio improved 1 percent to 71.0 percent.

"Norfolk Southern's team of safety and service-oriented employees drove our record-setting fourth-quarter results through increased productivity, efficient network operations, and continued revenue gains," said Norfolk Southern CEO Wick Moorman. "We're seeing the results of our investments in network capacity and technology enhance our ability to offer superior service to all of our customers.

Moorman continued: "In 2014, we plan to invest $2.2 billion, a 12 percent increase over 2013, to maintain safe railway operations, purchase locomotives and freight cars, and support growth and productivity initiatives."

Fourth Quarter 2013 Summary

Operating revenues increased to $2.9 billion, marking a 7 percent jump compared with fourth-quarter 2012. Strong intermodal, chemical, automotive, and agricultural shipments more than offset declines in coal traffic to drive total volumes up 4 percent.

Fourth-quarter revenue by commodity group

  • Chemicals up 21 percent.
  • Metals and construction up 12 percent.
  • Intermodal up 6 percent.
  • Agriculture up 9 percent.
  • Automotive up 10 percent.
  • Paper and forest products up 8 percent.
  • Coal down 2 percent.

General merchandise revenues were $1.6 billion, 12 percent higher than the same period last year. Strong crude by rail shipments and expanded automotive production helped boost traffic volume by 8 percent in the quarter.

Coal revenues were $641 million, 2 percent lower compared with the fourth quarter of 2012, the result of an 8 percent decline in volumes.

Intermodal revenues increased to $618 million, a 6 percent increase over 2012. Growth in domestic and international business pushed traffic volume up 6 percent in the quarter compared with the same period of 2012.

Railway operating expenses were $2 billion, 2 percent higher than in the same period of 2012. The operating ratio was 69.4 percent, a 5 percent improvement over the same quarter in 2012. Income from railway operations was $881 million, 23 percent higher compared with fourth-quarter 2012.

2013 Summary

  • Net income was $1.9 billion, or $6.04 per diluted share, 9 percent higher compared with $1.7 billion or $5.37 per diluted share in 2012.
  • Railway operating revenues reached $11.2 million, 2 percent higher compared with 2012, driven by a 3 percent increase in traffic volume.
  • General merchandise revenues rose 7 percent, and traffic volume increased by 4 percent.
  • Coal revenues declined 12 percent to $2.5 billion, due to a 5 percent decline in traffic volume compared with the same period of 2012.
  • Intermodal revenues increased to $2.4 billion, up 6 percent compared with 2012. Growth in domestic and international intermodal business drove traffic volume 6 percent higher for 2013 compared with the same period of 2012.
  • Railway operating expenses were $8 billion, up 1 percent compared with 2012.
  • The operating ratio for the year was 71.0 percent, a 1 percent improvement over 2012.
  • Income from railway operations was $3.3 billion for 2013, 4 percent higher compared with 2012.

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)

Fourth Quarter

Years ended December 31,

2013

2012

2013

2012

(in millions, except per share amounts)

Railway operating revenues

    Coal

$

641

$

657

$

2,543

$

2,879

    General merchandise

1,622

1,443

6,318

5,920

    Intermodal

618

584

2,384

2,241

        Total railway operating revenues

2,881

2,684

11,245

11,040

Railway operating expenses

    Compensation and benefits

761

726

3,002

2,960

    Purchased services and rents

406

418

1,629

1,604

    Fuel

403

395

1,613

1,577

    Depreciation

233

233

916

916

    Materials and other

197

198

828

859

       Total railway operating expenses

2,000

1,970

7,988

7,916

       Income from railway operations

881

714

3,257

3,124

Other income – net (note 1)

39

36

233

129

Interest expense on debt

137

129

525

495

    Income before income taxes

783

621

2,965

2,758

Provision for income taxes

    Current

223

121

793

643

    Deferred

47

87

262

366

        Total income taxes

270

208

1,055

1,009

       Net income

$

513

$

413

$

1,910

$

1,749

Earnings per share (notes 1 & 2)

    Basic

$

1.66

$

1.31

$

6.10

$

5.42

    Diluted

1.64

1.30

6.04

5.37

Weighted average shares outstanding (note 3)

 Basic

308.7

314.8

311.9

320.9

 Diluted

312.3

318.6

315.5

325.2

See accompanying notes to consolidated financial statements.

 

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income

(Unaudited)

Fourth Quarter

Years ended December 31,

2013

2012

2013

2012

($ in millions)

Net income

$

513

$

413

$

1,910

$

1,749

Other comprehensive income (loss), before tax:

    Pension and other postretirement benefits

1,012

(211)

1,122

(114)

    Other comprehensive income (loss) of equity investees

40

(9)

42

(13)

Other comprehensive income (loss), before tax

1,052

(220)

1,164

(127)

Income tax benefit (expense) related to items of other   

  comprehensive income (loss)

(393)

82

(436)

44

Other comprehensive income (loss), net of tax

659

(138)

728

(83)

        Total comprehensive income

$

1,172

$

275

$

2,638

$

1,666

See accompanying notes to consolidated financial statements.

 

Norfolk Southern Corporation and Subsidiaries

Consolidated Balance Sheets

(Unaudited)

December 31,

December 31,

2013

2012

($ in millions)

Assets

Current assets:

    Cash and cash equivalents

$

1,443

$

653

    Short-term investments

118

15

    Accounts receivable - net

1,024

1,109

    Materials and supplies

223

216

    Deferred income taxes

180

167

    Other current assets

87

82

        Total current assets

3,075

2,242

Investments

2,439

2,300

Properties less accumulated depreciation of $10,387 and

  $9,922, respectively

26,645

25,736

Other assets

324

64

        Total assets

$

32,483

$

30,342

Liabilities and stockholders' equity

Current liabilities:

    Accounts payable

$

1,265

$

1,362

    Short-term debt

100

200

    Income and other taxes

225

206

    Other current liabilities

270

263

    Current maturities of long-term debt

445

50

        Total current liabilities

2,305

2,081

Long-term debt

8,903

8,432

Other liabilities

1,444

2,237

Deferred income taxes

8,542

7,832

        Total liabilities

21,194

20,582

Stockholders' equity:

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

     authorized; outstanding 308,878,402 and 314,034,174 shares,

     respectively, net of treasury shares

310

315

    Additional paid-in capital

2,021

1,911

    Accumulated other comprehensive loss

(381)

(1,109)

    Retained income

9,339

8,643

        Total stockholders' equity

11,289

9,760

       Total liabilities and stockholders' equity

$

32,483

$

30,342

See accompanying notes to consolidated financial statements.

 

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

Years ended December 31,

2013

2012

($ in millions)

Cash flows from operating activities

    Net income

$

1,910

$

1,749

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

        Depreciation

922

922

        Deferred income taxes

262

366

        Gains and losses on properties and investments (note 1)

(104)

(6)

        Changes in assets and liabilities affecting operations:

            Accounts receivable

85

(64)

            Materials and supplies

(7)

(7)

            Other current assets

(5)

(6)

            Current liabilities other than debt

5

82

     Other – net

10

29

             Net cash provided by operating activities

3,078

3,065

Cash flows from investing activities

    Property additions

(1,971)

(2,241)

    Property sales and other transactions

144

192

    Investments, including short-term

(130)

(23)

    Investment sales and other transactions

63

78

            Net cash used in investing activities

(1,894)

(1,994)

Cash flows from financing activities

    Dividends

(637)

(624)

    Common stock issued – net

131

89

    Purchase and retirement of common stock (note 3)

(627)

(1,288)

    Proceeds from borrowings – net

989

1,491

    Debt repayments

(250)

(362)

          Net cash used in financing activities

(394)

(694)

          Net increase in cash and cash equivalents

790

377

Cash and cash equivalents

    At beginning of year

653

276

    At end of year

$

1,443

$

653

Supplemental disclosures of cash flow information

    Cash paid during the period for:

      Interest (net of amounts capitalized)

$

492

$

473

      Income taxes (net of refunds)

735

618

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. Earnings Per Share For basic earnings per share, income available to common stockholders reflects reductions for the effect of dividend equivalent payments made to holders of stock options and restricted stock units as follows:  for the fourth quarter, $2 million in both 2013 and 2012; and for the year, $7 million in 2013 and $9 million in 2012.      

For diluted earnings per share, income available to common stockholders reflects reductions for the effect of dividend equivalent payments made to holders of stock options and restricted stock units as follows:  for the fourth quarter, $1 million in 2013 and 2012; and for the year, $4 million in 2013 and 2012.

3. Stock Repurchase Program We repurchased and retired 8.3 million shares of common stock in 2013, at a cost of $627 million, and 18.8 million shares at a cost of $1.3 billion in 2012.  We have remaining authorization from our Board of Directors to repurchase up to 38.3 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 136.7 million shares at a total cost of $8.1 billion

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SOURCE Norfolk Southern Corporation



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