Norfolk Southern reports third-quarter 2015 results
NORFOLK, Va., Oct. 28, 2015 /PRNewswire/ --
THIRD-QUARTER 2015 RESULTS
- Railway operating revenues totaled $2.7 billion.
- Income from railway operations was $822 million.
- Net income totaled $452 million.
- Diluted earnings per share were $1.49.
- The railway operating ratio was 69.7 percent.
Norfolk Southern Corporation (NYSE: NSC) today reported financial results for third-quarter 2015. Net income for the quarter was $452 million, or $1.49 per diluted share, compared with $559 million, or $1.79 per diluted share earned in the third quarter last year.
Third-quarter results included $37 million of expenses associated with restructuring the company's Triple Crown Services subsidiary and closing NS' Roanoke, Va., office, which together reduced net income by $23 million, or $0.08 per diluted share.
"Norfolk Southern's third-quarter results reflect commodities markets that continue to soften, as well as costs associated with restructuring initiatives to strengthen our company going forward. These pressures will linger in the fourth quarter, while traffic volume to date continues to lag last year. However, looking ahead to 2016, we are confident that with a reasonably stable economy and our own intense focus on service, returns, and growth, we are poised for better results," said Chairman, President and CEO James A. Squires.
THIRD-QUARTER SUMMARY
- Railway operating revenues declined 10 percent to $2.7 billion, largely due to reductions in fuel surcharge revenues in each of NS' three commodity groups, and continued reductions in coal shipments. Overall volume declined 3 percent to 1.9 million units for the quarter.
- General merchandise revenues were $1.6 billion, 7 percent lower than the same period last year. Volume declined 1 percent largely due to a 9 percent decline in metals and construction traffic due to softer steel production. Four of the five general merchandise commodity groups reported lower revenue results on a year-over-year basis, principally the result of lower fuel surcharge revenue:
- Chemicals: $451 million, down 8 percent
- Agriculture: $380 million, up 4 percent
- Metals/Construction: $330 million, down 20 percent
- Automotive: $246 million, down 3 percent
- Paper/Forest: $203 million, down 3 percent
- Intermodal revenues were $621 million, 7 percent lower compared with third-quarter 2014, as lower fuel surcharges and fewer domestic shipments combined to reduce revenues. Total volume declined 1 percent.
- Coal revenues were $482 million, 23 percent lower compared with the third quarter of 2014. A weak global export market and lower natural gas prices in the utility market combined to decrease volume by 16 percent.
- Railway operating expenses declined 7 percent to $1.9 billion, primarily due to lower fuel costs, compared with the same period of 2014.
- Income from railway operations was $822 million, 18 percent lower compared with third-quarter 2014.
- The railway operating ratio, or operating expenses as a percentage of revenue, was 69.7 percent, compared with 67.0 percent in the same quarter last year.
About Norfolk Southern
Norfolk Southern Corporation (NYSE: NSC) is one of the nation's premier transportation companies. Its Norfolk Southern Railway Company subsidiary operates approximately 20,000 route miles in 22 states and the District of Columbia, serves every major container port in the eastern United States, and provides efficient connections to other rail carriers. Norfolk Southern operates the most extensive intermodal network in the East and is a major transporter of coal, automotive, and industrial products.
Norfolk Southern Corporation and Subsidiaries |
|||||||||||||||
Third Quarter |
First Nine Months |
||||||||||||||
2015 |
2014 |
2015 |
2014 |
||||||||||||
($ in millions, except per share amounts) |
|||||||||||||||
Railway operating revenues |
|||||||||||||||
Coal |
$ |
482 |
$ |
626 |
$ |
1,390 |
$ |
1,839 |
|||||||
General merchandise |
1,610 |
1,730 |
4,757 |
5,002 |
|||||||||||
Intermodal |
621 |
667 |
1,846 |
1,913 |
|||||||||||
Total railway operating revenues |
2,713 |
3,023 |
7,993 |
8,754 |
|||||||||||
Railway operating expenses |
|||||||||||||||
Compensation and benefits |
702 |
728 |
2,209 |
2,183 |
|||||||||||
Purchased services and rents |
451 |
429 |
1,312 |
1,235 |
|||||||||||
Fuel |
221 |
387 |
740 |
1,227 |
|||||||||||
Depreciation |
275 |
236 |
767 |
711 |
|||||||||||
Materials and other |
242 |
245 |
723 |
714 |
|||||||||||
Total railway operating expenses (note 1) |
1,891 |
2,025 |
5,751 |
6,070 |
|||||||||||
Income from railway operations |
822 |
998 |
2,242 |
2,684 |
|||||||||||
Other income – net |
39 |
32 |
79 |
76 |
|||||||||||
Interest expense on debt |
137 |
138 |
403 |
416 |
|||||||||||
Income before income taxes |
724 |
892 |
1,918 |
2,344 |
|||||||||||
Provision for income taxes |
|||||||||||||||
Current |
251 |
329 |
667 |
834 |
|||||||||||
Deferred |
21 |
4 |
56 |
21 |
|||||||||||
Total income taxes |
272 |
333 |
723 |
855 |
|||||||||||
Net income |
$ |
452 |
$ |
559 |
$ |
1,195 |
$ |
1,489 |
|||||||
Earnings per share (note 1) |
|||||||||||||||
Basic |
$ |
1.50 |
$ |
1.80 |
$ |
3.93 |
$ |
4.80 |
|||||||
Diluted |
1.49 |
1.79 |
3.90 |
4.75 |
|||||||||||
Weighted average shares outstanding (note 2) |
|||||||||||||||
Basic |
300.1 |
309.4 |
303.2 |
309.5 |
|||||||||||
Diluted |
302.5 |
312.6 |
305.8 |
312.7 |
See accompanying notes to consolidated financial statements.
Norfolk Southern Corporation and Subsidiaries |
|||||||||||||||
Third Quarter |
First Nine Months |
||||||||||||||
2015 |
2014 |
2015 |
2014 |
||||||||||||
($ in millions) |
|||||||||||||||
Net income |
$ |
452 |
$ |
559 |
$ |
1,195 |
$ |
1,489 |
|||||||
Other comprehensive income, before tax: |
|||||||||||||||
Pension and other postretirement benefits |
10 |
8 |
31 |
314 |
|||||||||||
Other comprehensive income (loss) of |
|||||||||||||||
equity investees |
— |
— |
(4) |
10 |
|||||||||||
Other comprehensive income, before tax |
10 |
8 |
27 |
324 |
|||||||||||
Income tax expense related to items of other |
|||||||||||||||
comprehensive income |
(3) |
(3) |
(11) |
(121) |
|||||||||||
Other comprehensive income, net of tax |
7 |
5 |
16 |
203 |
|||||||||||
Total comprehensive income |
$ |
459 |
$ |
564 |
$ |
1,211 |
$ |
1,692 |
See accompanying notes to consolidated financial statements.
Norfolk Southern Corporation and Subsidiaries |
|||||||||
September 30, |
December 31, |
||||||||
2015 |
2014 |
||||||||
($ in millions) |
|||||||||
Assets |
|||||||||
Current assets: |
|||||||||
Cash and cash equivalents |
$ |
433 |
$ |
973 |
|||||
Accounts receivable – net |
1,103 |
1,055 |
|||||||
Materials and supplies |
288 |
236 |
|||||||
Deferred income taxes |
123 |
167 |
|||||||
Other current assets |
55 |
347 |
|||||||
Total current assets |
2,002 |
2,778 |
|||||||
Investments |
2,740 |
2,679 |
|||||||
Properties less accumulated depreciation of $11,344 and |
|||||||||
$10,814, respectively |
28,682 |
27,694 |
|||||||
Other assets (note 3) |
103 |
49 |
|||||||
Total assets |
$ |
33,527 |
$ |
33,200 |
|||||
Liabilities and stockholders' equity |
|||||||||
Current liabilities: |
|||||||||
Accounts payable |
$ |
1,160 |
$ |
1,233 |
|||||
Short-term debt |
100 |
100 |
|||||||
Income and other taxes |
273 |
217 |
|||||||
Other current liabilities |
334 |
228 |
|||||||
Current maturities of long-term debt |
500 |
2 |
|||||||
Total current liabilities |
2,367 |
1,780 |
|||||||
Long-term debt (note 3) |
8,896 |
8,883 |
|||||||
Other liabilities |
1,295 |
1,312 |
|||||||
Deferred income taxes |
8,840 |
8,817 |
|||||||
Total liabilities |
21,398 |
20,792 |
|||||||
Stockholders' equity: |
|||||||||
Common stock $1.00 per share par value, 1,350,000,000 shares |
|||||||||
authorized; outstanding 298,569,765 and 308,240,130 shares, |
|||||||||
respectively, net of treasury shares |
300 |
310 |
|||||||
Additional paid-in capital |
2,132 |
2,148 |
|||||||
Accumulated other comprehensive loss |
(382) |
(398) |
|||||||
Retained income |
10,079 |
10,348 |
|||||||
Total stockholders' equity |
12,129 |
12,408 |
|||||||
Total liabilities and stockholders' equity |
$ |
33,527 |
$ |
33,200 |
See accompanying notes to consolidated financial statements.
Norfolk Southern Corporation and Subsidiaries |
|||||||
First Nine Months |
|||||||
2015 |
2014 |
||||||
($ in millions) |
|||||||
Cash flows from operating activities: |
|||||||
Net income |
$ |
1,195 |
$ |
1,489 |
|||
Reconciliation of net income to net cash provided by operating activities: |
|||||||
Depreciation |
770 |
715 |
|||||
Deferred income taxes |
56 |
21 |
|||||
Gains and losses on properties and investments |
(20) |
(13) |
|||||
Changes in assets and liabilities affecting operations: |
|||||||
Accounts receivable |
(48) |
(79) |
|||||
Materials and supplies |
(52) |
(26) |
|||||
Other current assets |
295 |
47 |
|||||
Current liabilities other than debt |
59 |
258 |
|||||
Other – net |
(76) |
(66) |
|||||
Net cash provided by operating activities |
2,179 |
2,346 |
|||||
Cash flows from investing activities: |
|||||||
Property additions |
(1,777) |
(1,379) |
|||||
Property sales and other transactions |
43 |
69 |
|||||
Investments, including short-term |
(5) |
(4) |
|||||
Investment sales and other transactions |
32 |
60 |
|||||
Net cash used in investing activities |
(1,707) |
(1,254) |
|||||
Cash flows from financing activities: |
|||||||
Dividends |
(537) |
(511) |
|||||
Common stock issued |
30 |
119 |
|||||
Purchase and retirement of common stock (note 2) |
(997) |
(166) |
|||||
Proceeds from borrowings – net |
594 |
100 |
|||||
Debt repayments |
(102) |
(645) |
|||||
Net cash used in financing activities |
(1,012) |
(1,103) |
|||||
Net decrease in cash and cash equivalents |
(540) |
(11) |
|||||
Cash and cash equivalents: |
|||||||
At beginning of year |
973 |
1,443 |
|||||
At end of period |
$ |
433 |
$ |
1,432 |
|||
Supplemental disclosures of cash flow information: |
|||||||
Cash paid during the period for: |
|||||||
Interest (net of amounts capitalized) |
$ |
320 |
$ |
340 |
|||
Income taxes (net of refunds) |
350 |
733 |
See accompanying notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:
1. Restructuring Costs
Third quarter 2015 results include $37 million of costs associated with the restructuring of our Triple Crown Services subsidiary and the closure of our Roanoke, Virginia, office, which reduced net income by $23 million, or $0.08 per diluted share.
2. Stock Repurchase Program
We repurchased 10.3 million and 1.7 million shares of common stock in the first nine months of 2015 and 2014, respectively, at a cost of $997 million and $166 million, respectively. We have remaining authorization from our Board of Directors to repurchase up to 24.9 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 150.1 million shares at a total cost of $9.4 billion.
3. 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 $42 million of debt issuance costs as a reduction of "Long-term debt" at September 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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