Norfolk Southern reports second-quarter 2015 results

Jul 27, 2015, 08:00 ET from Norfolk Southern Corporation

NORFOLK, Va., July 27, 2015 /PRNewswire/ --

SECOND-QUARTER 2015 RESULTS

  • Railway operating revenues totaled $2.7 billion.
  • Income from railway operations was $814 million.
  • Net income totaled $433 million.
  • Diluted earnings per share were $1.41.
  • The railway operating ratio was 70.0 percent.

Norfolk Southern Corporation (NYSE: NSC) today reported financial results for second-quarter 2015. Net income for the quarter was $433 million, 23 percent lower compared with the $562 million record results from the same period of 2014. Diluted earnings per share were $1.41 compared with $1.79 per diluted share earned in the second quarter last year.

"While we face short-term pressure, particularly as we clear fuel surcharge revenue and coal headwinds, Norfolk Southern is well positioned to continue improving service, which will reduce costs and add value to our customers," said CEO James A. Squires. "Growth within the intermodal franchise, consumer spending, housing-related momentum and improved manufacturing activity all support an optimistic longer-term outlook. We have a strong legacy of success, and we are taking the right steps to continue value creation for our customers, the communities we serve, our employees, and our shareholders."

SECOND-QUARTER SUMMARY

  • Railway operating revenues were $2.7 billion, 11 percent lower compared with second-quarter 2014, a result of lower fuel surcharges and coal volumes. Total volume decreased 2 percent, or about 46,000 units. Gains in intermodal and merchandise traffic were offset by losses in coal.
  • General merchandise revenues were $1.6 billion, 5 percent lower than the same period last year, reflecting lower fuel surcharges. Volume grew by 1 percent, with strong growth in chemicals offsetting declines in steel. Automotive and paper volume increased with higher vehicle production and strength in pulpboard and lumber. The five general merchandise commodity groups reported mostly lower revenue results on a year-over-year basis:
    • Chemicals: $454 million, about even with 2014
    • Agriculture: $ 379 million, down 2 percent
    • Metals/Construction: $344 million, down 16 percent
    • Automotive: $254 million, down 6 percent
    • Paper/Forest: $196 million, down 2 percent
  • Intermodal revenues were $633 million, 3 percent lower compared with second-quarter 2014, as lower fuel surcharges more than offset volume gains. Higher shipments in our international business drove overall volume growth of 2 percent in the quarter compared with the same period of 2014.
  • Coal revenues were $453 million, 33 percent lower compared with the second quarter of 2014. Coal revenues were affected by continuing low natural gas prices and declining fuel surcharges. Volume was down 21 percent, driven by declines of 23 percent in domestic utility and 38 percent in export.
  • Railway operating expenses declined 6 percent to $1.9 billion, primarily due to lower fuel costs, compared with the same period of 2014.
  • Income from railway operations was $814 million, 20 percent lower compared with second-quarter 2014.
  • The operating ratio, or operating expenses as a percentage of revenue, was 70.0 percent, compared with 66.5 percent in the same quarter of 2014.

About Norfolk Southern

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)

Second Quarter

First Six Months

2015

2014

2015

2014

($ in millions, except per share amounts)

Railway operating revenues

Coal

$

453

$

672

$

908

$

1,213

General merchandise

1,627

1,720

3,147

3,272

Intermodal

633

650

1,225

1,246

Total railway operating revenues

2,713

3,042

5,280

5,731

Railway operating expenses

Compensation and benefits

724

715

1,507

1,455

Purchased services and rents

438

414

861

806

Fuel

255

408

519

840

Depreciation

247

238

492

475

Materials and other

235

248

481

469

Total railway operating expenses

1,899

2,023

3,860

4,045

Income from railway operations

814

1,019

1,420

1,686

Other income – net

19

18

40

44

Interest expense on debt

134

139

266

278

Income before income taxes

699

898

1,194

1,452

Provision for income taxes

Current

243

311

416

505

Deferred

23

25

35

17

Total income taxes

266

336

451

522

Net income

$

433

$

562

$

743

$

930

Earnings per share

Basic

$

1.43

$

1.81

$

2.43

$

2.99

Diluted

1.41

1.79

2.41

2.97

Weighted average shares outstanding (note 1)

Basic

302.9

309.5

304.8

309.5

Diluted

305.5

312.8

307.5

312.7

See accompanying notes to consolidated financial statements.

 

 

Norfolk Southern Corporation and Subsidiaries 

Consolidated Statements of Comprehensive Income  

(Unaudited)

Second Quarter

First Six Months

2015

2014

2015

2014

($ in millions)

Net income

$

433

$

562

$

743

$

930

Other comprehensive income, before tax:

Pension and other postretirement benefits

11

7

21

306

Other comprehensive income (loss) of

equity investees

7

(4)

10

Other comprehensive income, before tax

11

14

17

316

Income tax expense related to items of other

comprehensive income

(5)

(4)

(8)

(118)

Other comprehensive income, net of tax

6

10

9

198

Total comprehensive income

$

439

$

572

$

752

$

1,128

See accompanying notes to consolidated financial statements.

 

 

Norfolk Southern Corporation and Subsidiaries 

Consolidated Balance Sheets  

(Unaudited)

June 30,

December 31,

2015

2014

($ in millions)

Assets

Current assets:

Cash and cash equivalents

$

889

$

973

Accounts receivable – net

1,055

1,055

Materials and supplies

277

236

Deferred income taxes

125

167

Other current assets

67

347

Total current assets

2,413

2,778

Investments

2,724

2,679

Properties less accumulated depreciation of $11,188 and

$10,814, respectively

28,075

27,694

Other assets (note 2)

98

49

Total assets

$

33,310

$

33,200

Liabilities and stockholders' equity

Current liabilities:

Accounts payable

$

1,144

$

1,233

Short-term debt

100

Income and other taxes

295

217

Other current liabilities

264

228

Current maturities of long-term debt

500

2

Total current liabilities

2,203

1,780

Long-term debt (note 2)

8,890

8,883

Other liabilities

1,322

1,312

Deferred income taxes

8,818

8,817

Total liabilities

21,233

20,792

Stockholders' equity:

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

  authorized; outstanding 301,386,849 and 308,240,130 shares,

respectively, net of treasury shares

303

310

Additional paid-in capital

2,146

2,148

Accumulated other comprehensive loss

(389)

(398)

Retained income

10,017

10,348

Total stockholders' equity

12,077

12,408

Total liabilities and stockholders' equity

$

33,310

$

33,200

See accompanying notes to consolidated financial statements.

 

 

Norfolk Southern Corporation and Subsidiaries 

Consolidated Statements of Cash Flows  

(Unaudited)

First Six Months

2015

2014

($ in millions)

Cash flows from operating activities

Net income

$

743

$

930

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

Depreciation

494

478

Deferred income taxes

35

17

Gains and losses on properties and investments

(18)

(3)

Changes in assets and liabilities affecting operations:

Accounts receivable

(98)

Materials and supplies

(41)

(28)

Other current assets

282

30

Current liabilities other than debt

(1)

144

Other – net

(21)

(33)

Net cash provided by operating activities

1,473

1,437

Cash flows from investing activities

Property additions

(886)

(809)

Property sales and other transactions

32

44

Investments, including short-term

(3)

(3)

Investment sales and other transactions

5

121

Net cash used in investing activities

(852)

(647)

Cash flows from financing activities

Dividends

(360)

(335)

Common stock issued

28

82

Purchase and retirement of common stock (note 1)

(765)

(100)

Proceeds from borrowings – net

494

Debt repayments

(102)

(213)

Net cash used in financing activities

(705)

(566)

Net increase (decrease) in cash and cash equivalents

(84)

224

Cash and cash equivalents

At beginning of year

973

1,443

At end of period

$

889

$

1,667

Supplemental disclosures of cash flow information

Cash paid during the period for:

Interest (net of amounts capitalized)

$

249

$

255

Income taxes (net of refunds)

55

313

See accompanying notes to consolidated financial statements.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:

1.   Stock Repurchase Program

   We repurchased 7.4 million and 1.0 million shares of common stock in the first six months of 2015 and 2014, respectively, at a cost of $765 million and $100 million, respectively.  We have remaining authorization from our Board of Directors to repurchase up to 27.8 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 147.2 million shares at a total cost of $9.2 billion.

2.   New Accounting Pronouncement

   In April 2015, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2015-03, "Interest - Imputation of Interest (Subtopic 835-30):  Simplifying the Presentation of Debt Issuance Costs."  This update requires that debt issuance costs be presented in the balance sheet as a reduction from the related debt liability rather than as an asset, consistent with debt discounts.  The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this update.  We early adopted the provisions of this ASU during the second quarter of 2015 and applied it retrospectively.  The adoption of ASU 2015-03 resulted in the presentation of $43 million of debt issuance costs as a reduction of "Long-term debt" at June 30, 2015.  We retrospectively adjusted the December 31, 2014 consolidated balance sheet and related disclosures to reflect the reclassification of $41 million of debt issuance costs from "Other assets" to "Long-term debt."  There was no other impact on our consolidated financial statements from the adoption of ASU 2015-03.

SOURCE Norfolk Southern Corporation



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