Norfolk Southern reports first-quarter 2019 results

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Income

(Unaudited)

First Quarter

2019

2018

($ in millions, except per share amounts)

Railway operating revenues

Merchandise

$

1,686

$

1,605

Intermodal

719

678

Coal

435

434

Total railway operating revenues

2,840

2,717

Railway operating expenses

Compensation and benefits

727

737

Purchased services and rents

424

401

Fuel

250

266

Depreciation

283

272

Materials and other

190

206

Total railway operating expenses

1,874

1,882

Income from railway operations

966

835

Other income – net

44

8

Interest expense on debt

149

136

Income before income taxes

861

707

Income taxes

Current

127

110

Deferred

57

45

Total income taxes

184

155

Net income

$

677

$

552

Earnings per share – diluted

$

2.51

$

1.93

Weighted average shares outstanding – diluted

269.4

285.9

See accompanying notes to consolidated financial statements.

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income

(Unaudited)

First Quarter

2019

2018

($ in millions)

Net income

$

677

$

552

Other comprehensive income (loss), before tax:

Pension and other postretirement benefits (expense)

5

(7)

Other comprehensive income (loss) of

equity investees

(1)

1

Other comprehensive income (loss), before tax

4

(6)

Income tax benefit (expense) related to items of

other comprehensive income (loss)

(1)

2

Other comprehensive income (loss), net of tax

3

(4)

Total comprehensive income

$

680

$

548

See accompanying notes to consolidated financial statements.

Norfolk Southern Corporation and Subsidiaries

Consolidated Balance Sheets

(Unaudited)

March 31,

December 31,

2019

2018

($ in millions)

Assets

Current assets:

Cash and cash equivalents

$

411

$

358

Accounts receivable – net

1,048

1,009

Materials and supplies

228

207

Other current assets

235

288

Total current assets

1,922

1,862

Investments

3,198

3,109

Properties less accumulated depreciation of $12,374 at

both periods

31,158

31,091

Other assets

784

177

Total assets

$

37,062

$

36,239

Liabilities and stockholders' equity

Current liabilities:

Accounts payable

$

1,334

$

1,505

Short-term debt

250

—

Income and other taxes

338

255

Other current liabilities

378

246

Current maturities of long-term debt

585

585

Total current liabilities

2,885

2,591

Long-term debt

10,569

10,560

Other liabilities

1,759

1,266

Deferred income taxes

6,518

6,460

Total liabilities

21,731

20,877

Stockholders' equity:

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

  authorized; outstanding 265,967,039 and 268,098,472 shares,

  respectively, net of treasury shares

267

269

Additional paid-in capital

2,213

2,216

Accumulated other comprehensive loss

(560)

(563)

Retained income

13,411

13,440

Total stockholders' equity

15,331

15,362

Total liabilities and stockholders' equity

$

37,062

$

36,239

See accompanying notes to consolidated financial statements.

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

First Three Months

2019

2018

($ in millions)

Cash flows from operating activities

Net income

$

677

$

552

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

Depreciation

283

272

Deferred income taxes

57

45

Gains and losses on properties

(18)

(8)

Changes in assets and liabilities affecting operations:

Accounts receivable

(39)

(26)

Materials and supplies

(21)

(23)

Other current assets

12

13

Current liabilities other than debt

(27)

12

Other – net

(43)

(21)

Net cash provided by operating activities

881

816

Cash flows from investing activities

Property additions

(467)

(383)

Property sales and other transactions

152

13

Investment purchases

(2)

(2)

Investment sales and other transactions

(33)

1

Net cash used in investing activities

(350)

(371)

Cash flows from financing activities

Dividends

(230)

(205)

Common stock transactions

2

(1)

Purchase and retirement of common stock

(500)

(300)

Proceeds from borrowings – net of issuance costs

250

543

Debt repayments

—

(100)

Net cash used in financing activities

(478)

(63)

Net increase in cash, cash equivalents, and restricted cash

53

382

Cash, cash equivalents, and restricted cash

At beginning of year

446

690

At end of period

$

499

$

1,072

Supplemental disclosures of cash flow information

Cash paid during the period for:

Interest (net of amounts capitalized)

$

112

$

69

Income taxes (net of refunds)

9

7

See accompanying notes to consolidated financial statements.

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Changes in Stockholders' Equity

(Unaudited)

Common

Stock

Additional

Paid-in

Capital

Accum. Other

Comprehensive

Loss

Retained

Income

Total

($ in millions, except per share amounts)

Balance at December 31, 2018

$

269

$

2,216

$

(563)

$

13,440

$

15,362

Comprehensive income:

Net income

677

677

Other comprehensive income

3

3

Total comprehensive income

680

Dividends on common stock,

$0.86 per share

(230)

(230)

Share repurchases

(3)

(22)

(475)

(500)

Stock-based compensation

1

19

(1)

19

Balance at March 31, 2019

$

267

$

2,213

$

(560)

$

13,411

$

15,331

Common
Stock

Additional
Paid-in
Capital

Accum. Other
Comprehensive
Loss

Retained
Income

Total

($ in millions, except per share amounts)

Balance at December 31, 2017

$

285

$

2,254

$

(356)

$

14,176

$

16,359

Comprehensive income:

Net income

552

552

Other comprehensive loss

(4)

(4)

Total comprehensive income

548

Dividends on common stock,

$0.72 per share

(205)

(205)

Share repurchases

(2)

(16)

(282)

(300)

Stock-based compensation

1

17

(2)

16

Reclassification of stranded

tax effects

(88)

88

—

Balance at March 31, 2018

$

284

$

2,255

$

(448)

$

14,327

$

16,418

See accompanying notes to consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:

1.

Stock Repurchase Program

     We repurchased and retired 2.9 million shares and 2.1 million shares of common stock under our stock
repurchase program in the first three months of 2019 and 2018, respectively, at a cost of $500 million and
$300 million, respectively.  Since the beginning of 2006, we have repurchased and retired 188.5 million shares
at a total cost of $14.6 billion.

2.

Leases

     On January 1, 2019, we adopted Financial Accounting Standards Board (FASB) Accounting Standards
Update (ASU) 2016-02, "Leases (Topic 842)" which requires lessees to recognize right-of-use (ROU) assets a
nd lease liabilities on the balance sheet for leases greater than twelve months.  As a result of the adoption, the
Consolidated Balance Sheet at March 31, 2019 includes the recognition of ROU assets of $593 million included
in "Other assets," current lease liabilities of $93 million included in "Other current liabilities," and non-current lease
liabilities of $500 million included in "Other liabilities."

3.

Restricted Cash

     The "Cash, cash equivalents, and restricted cash" line item in the Consolidated Statements of Cash Flows
includes restricted cash of $88 million at March 31, 2019 and December 31, 2018, reflecting deposits held by a
third-party bond agent as collateral for certain debt obligations maturing in 2019.  The restricted cash balance is
included as part of "Other current assets" on the Consolidated Balance Sheets in both periods.

4.

Reclassification of Stranded Tax Effects

     In February 2018, the FASB issued ASU 2018-02, "Reclassification of Certain Tax Effects from Accumulated
Other Comprehensive Income."  We adopted the provisions of ASU 2018-02 in the first quarter of 2018 resulting
in an increase to "Accumulated other comprehensive loss" of $88 million and a corresponding increase to "Retained i
ncome," with no impact on "Total stockholders' equity."