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.
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SOURCE Norfolk Southern Corporation
