Norfolk Southern reports second-quarter 2020 results

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Jul 29, 2020, 08:00 ET

NORFOLK, Va., July 29, 2020 /PRNewswire/ -- Norfolk Southern Corporation (NYSE: NSC) today reported second-quarter financial results.

Second-quarter net income was $392 million, diluted earnings per share were $1.53, and the operating ratio was 70.7 percent.

"In a period when working safely and delivering for our customers was abruptly redefined, our employees responded by protecting each other and innovating to serve rapidly evolving freight demand. Underscoring our commitment to shareholder value, we forged ahead with our ongoing transformation by further reducing our hump yard footprint, achieving fuel efficiency gains, and increasing train size. These are astounding achievements while managing the unprecedented economic disruption and public health crisis," said James A. Squires, Norfolk Southern chairman, president and CEO. "We are mobilized and driven to meet the challenges and opportunities that lie ahead, and we will continue to create collaborative change and relentlessly pursue increased productivity as a leading supply chain partner throughout the economic recovery and beyond."

Second-quarter summary

Railway operating revenues of $2.1 billion decreased 29 percent compared with second-quarter 2019, driven by a 26 percent decline in total volume.
Railway operating expenses of $1.5 billion decreased 21 percent compared with second-quarter 2019, driven by lower fuel, compensation and benefits, and purchased services expenses.
Income from railway operations was $610 million and the operating ratio was 70.7 percent.

About Norfolk Southern
Norfolk Southern Corporation (NYSE: NSC) is one of the nation's premier transportation companies. Its Norfolk Southern Railway Company subsidiary operates approximately 19,500 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 is a major transporter of industrial products, including chemicals, agriculture, and metals and construction materials. In addition, the railroad operates the most extensive intermodal network in the East and is a principal carrier of coal, automobiles, and automotive parts.

Forward-looking statements
This news release contains forward-looking statements that may be identified by the use of words like "believe," "expect," "anticipate," "estimate," "plan," "consider," "project," and similar references to the future. Forward-looking statements reflect our good-faith evaluation of information currently available. These forward-looking statements are subject to a number of risks and uncertainties, and our actual results may differ materially from those projected. Please refer to our annual and quarterly reports filed with the SEC for a full discussion of those risks and uncertainties we view as most important. Additional risks include the impact of the COVID-19 pandemic on us, our customers, our supply chain, and our operations. Forward-looking statements are not, and should not be relied upon as, a guarantee of future performance or results, nor will they necessarily prove to be accurate indications of the times at or by which any such performance or results will be achieved. As a result, actual outcomes and results may differ materially from those expressed in forward-looking statements. We undertake no obligation to update or revise forward-looking statements.

http://www.norfolksouthern.com

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

	Second Quarter				First Six Months
	2020		2019		2020		2019
	(in millions, except per share amounts)

Railway operating revenues
Merchandise	$	1,307	$	1,756	$	2,979	$	3,442
Intermodal	569		701		1,224		1,420
Coal	209		468		507		903
Total railway operating revenues	2,085		2,925		4,710		5,765

Railway operating expenses
Compensation and benefits	586		712		1,208		1,439
Purchased services and rents	372		418		775		842
Fuel	84		254		273		504
Depreciation	282		284		574		567
Materials and other	151		192		317		382
Loss on asset disposal	—		—		385		—
Total railway operating expenses	1,475		1,860		3,532		3,734

Income from railway operations	610		1,065		1,178		2,031

Other income – net	49		22		71		66
Interest expense on debt	156		153		310		302

Income before income taxes	503		934		939		1,795

Income taxes
Current	66		136		110		263
Deferred	45		76		56		133
Total income taxes	111		212		166		396

Net income	$	392	$	722	$	773	$	1,399

Earnings per share – diluted	$	1.53	$	2.70	$	3.00	$	5.21

Weighted average shares outstanding – diluted	256.7		267.1		257.7		268.3

See accompanying notes to consolidated financial statements

Norfolk Southern Corporation and Subsidiaries
Consolidated Balance Sheets
(Unaudited)

	June 30,		December 31,
	2020		2019
	($ in millions)
Assets
Current assets:
Cash and cash equivalents	$	1,143	$	580
Accounts receivable – net	822		920
Materials and supplies	257		244
Other current assets	128		337
Total current assets	2,350		2,081

Investments	3,590		3,428
Properties less accumulated depreciation of $11,823
and $11,982, respectively	31,217		31,614
Other assets	805		800

Total assets	$	37,962	$	37,923

Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	1,268	$	1,428
Income and other taxes	239		229
Other current liabilities	343		327
Current maturities of long-term debt	85		316
Total current liabilities	1,935		2,300

Long-term debt	12,612		11,880
Other liabilities	1,680		1,744
Deferred income taxes	6,874		6,815

Total liabilities	23,101		22,739

Stockholders' equity:
Common stock $1.00 per share par value, 1,350,000,000 shares
authorized; outstanding 255,109,247 and 257,904,956 shares,
respectively, net of treasury shares	256		259
Additional paid-in capital	2,217		2,209
Accumulated other comprehensive loss	(475)		(491)
Retained income	12,863		13,207

Total stockholders' equity	14,861		15,184

Total liabilities and stockholders' equity	$	37,962	$	37,923

See accompanying notes to consolidated financial statements

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

	First Six Months
	2020		2019
	($ in millions)
Cash flows from operating activities
Net income	$	773	$	1,399
Reconciliation of net income to net cash provided by operating activities:
Depreciation	574		567
Deferred income taxes	56		133
Gains and losses on properties	(11)		(7)
Loss on asset disposal	385		—
Changes in assets and liabilities affecting operations:
Accounts receivable	98		(30)
Materials and supplies	(13)		(49)
Other current assets	30		55
Current liabilities other than debt	—		(30)
Other – net	(134)		(86)

Net cash provided by operating activities	1,758		1,952

Cash flows from investing activities
Property additions	(735)		(979)
Property sales and other transactions	258		214
Investment purchases	(5)		(12)
Investment sales and other transactions	(58)		(75)

Net cash used in investing activities	(540)		(852)

Cash flows from financing activities
Dividends	(482)		(458)
Common stock transactions	26		18
Purchase and retirement of common stock	(669)		(1,050)
Proceeds from borrowings	784		1,054
Debt repayments	(314)		(750)

Net cash used in financing activities	(655)		(1,186)

Net increase (decrease) in cash, cash equivalents, and restricted cash	563		(86)

Cash, cash equivalents, and restricted cash
At beginning of year	580		446

At end of period	$	1,143	$	360

Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest (net of amounts capitalized)	$	287	$	271
Income taxes (net of refunds)	1		215

See accompanying notes to consolidated financial statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:

1. Stock Repurchase Program
We repurchased and retired 3.9 million and 5.7 million shares of common stock under our stock repurchase program during the first six months of 2020 and 2019, respectively, at a cost of $669 million and $1.1 billion, respectively.

2. Loss on Asset Disposal
In the first quarter of 2020, we committed to a plan to dispose of certain locomotives deemed excess and no longer needed for railroad operations. Specifically, during the first six months of 2020, the Company recorded a charge related to the loss on the sale of approximately 450 locomotives disposed of in the first six months, and a write-down of approximately 250 additional locomotives that we are actively marketing to sell. Accordingly, a $385 million loss was recorded to adjust their carrying amount to their estimated fair value. The loss on asset disposal reduced "Earnings per share – diluted" for the first six months by $1.11.

3. Restricted Cash
The "Cash, cash equivalents, and restricted cash" line item on the Consolidated Statements of Cash Flows includes restricted cash of $88 million in 2019, reflecting deposits held by a third-party bond agent as collateral for certain debt obligations which matured on October 1, 2019.

SOURCE Norfolk Southern Corporation