NORFOLK, Va., Oct. 26, 2016 /PRNewswire/ -- Norfolk
Southern Corporation (NYSE: NSC) today reported financial results
for third-quarter 2016. Net income was $460
million, 2 percent higher compared with $452 million during the same period of 2015.
Diluted earnings per share were $1.55, 4 percent higher compared with
$1.49 per diluted share earned in the
third quarter last year.
"Our continued focus on efficiency and asset utilization,
balanced with our commitment to customer service, drove an
operating ratio of 67.5 percent for the quarter and a record 68.7
percent for the first nine months, setting us well on the way to
achieving productivity savings of about $250 million and an operating ratio below 70
percent for the year -- even in the face of economic headwinds,"
said Chairman, President and CEO James A.
Squires. "As we move forward, we are well positioned for
growth opportunities longer term and confident in our ability to
drive shareholder value."
Third-quarter summary
- Railway operating revenues were $2.5
billion, down 7 percent compared with third-quarter 2015,
due to reduced volumes and lower fuel surcharge revenues. Overall
volume declined 4 percent to 1.9 million units for the
quarter.
- General merchandise revenues were $1.6
billion, 4 percent lower than the same period last year.
Volume declined 4 percent, due to fewer crude oil, vehicles,
pulpboard, and feed market shipments. The five merchandise
commodity groups reported the following year-over-year revenue
results:
- Chemicals: $408 million, down 10
percent
- Agriculture: $380 million,
even
- Metals/Construction: $337
million, up 2 percent
- Automotive: $236 million, down 4
percent
- Paper/Forest: $191 million, down
6 percent
- Intermodal revenues were $575
million, 7 percent lower compared with third-quarter 2015.
Volume declined one percent due to lower Triple Crown Services
volume, a result of last year's restructuring. Domestic volume,
excluding Triple Crown Services, and International volume were up 8
percent and one percent, respectively.
- Coal revenues were $397 million,
18 percent lower compared with the same quarter last year.
Above-normal stockpiles and low natural gas prices combined to
decrease volume by 15 percent.
- Railway operating expenses declined 10 percent to $1.7 billion, primarily due to targeted expense
reduction initiatives, reduced fuel expenses, the absence of last
year's restructuring costs, and gains from the disposition of
operating property. These decreases were partially offset by higher
incentive compensation expense related to improved operating
results.
- Income from railway operations was $820
million, flat compared with third-quarter 2015.
- The composite service metric, which measures train performance,
terminal operations, and operating plan adherence, improved 8
percent in the quarter, and 14 percent for the first nine months,
compared with the same periods last year.
- The railway operating ratio, or operating expenses as a
percentage of revenue, was 67.5 percent, a 220 basis point
improvement compared with 69.7 percent in the third quarter of last
year.
About Norfolk Southern
Norfolk Southern Corporation (NYSE: NSC) is one of the
nation's premier transportation companies. Its Norfolk Southern
Railway Company subsidiary operates approximately 20,000 route
milesin 22 states and the District of
Columbia, serves every major container port in the eastern
United States, and provides
efficient connections to other rail carriers. Norfolk Southern
operates the most extensive intermodal network in the East and is a
major transporter of coal, automotive, and industrial products.
Norfolk Southern
Corporation and Subsidiaries
Consolidated Statements of Income
(Unaudited)
|
|
|
Third
Quarter
|
|
First Nine
Months
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
($ in millions,
except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
Railway operating
revenues
|
|
|
|
|
|
|
|
|
|
|
|
Merchandise
|
$
|
1,552
|
|
|
$
|
1,610
|
|
|
$
|
4,678
|
|
|
$
|
4,757
|
|
Intermodal
|
|
575
|
|
|
|
621
|
|
|
|
1,635
|
|
|
|
1,846
|
|
Coal
|
|
397
|
|
|
|
482
|
|
|
|
1,085
|
|
|
|
1,390
|
|
Total railway
operating revenues
|
|
2,524
|
|
|
|
2,713
|
|
|
|
7,398
|
|
|
|
7,993
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Railway operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and
benefits
|
|
691
|
|
|
|
702
|
|
|
|
2,081
|
|
|
|
2,209
|
|
Purchased services
and rents
|
|
386
|
|
|
|
451
|
|
|
|
1,149
|
|
|
|
1,312
|
|
Fuel
|
|
181
|
|
|
|
221
|
|
|
|
504
|
|
|
|
740
|
|
Depreciation
|
|
258
|
|
|
|
275
|
|
|
|
767
|
|
|
|
767
|
|
Materials and
other
|
|
188
|
|
|
|
242
|
|
|
|
584
|
|
|
|
723
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total railway
operating expenses
|
|
1,704
|
|
|
|
1,891
|
|
|
|
5,085
|
|
|
|
5,751
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from
railway operations
|
|
820
|
|
|
|
822
|
|
|
|
2,313
|
|
|
|
2,242
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income –
net
|
|
29
|
|
|
|
39
|
|
|
|
49
|
|
|
|
79
|
|
Interest expense on
debt
|
|
144
|
|
|
|
137
|
|
|
|
421
|
|
|
|
403
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income
taxes
|
|
705
|
|
|
|
724
|
|
|
|
1,941
|
|
|
|
1,918
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income
taxes
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
169
|
|
|
|
251
|
|
|
|
512
|
|
|
|
667
|
|
Deferred
|
|
76
|
|
|
|
21
|
|
|
|
177
|
|
|
|
56
|
|
Total income
taxes
|
|
245
|
|
|
|
272
|
|
|
|
689
|
|
|
|
723
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
$
|
460
|
|
|
$
|
452
|
|
|
$
|
1,252
|
|
|
$
|
1,195
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per
share
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
1.56
|
|
|
$
|
1.50
|
|
|
$
|
4.23
|
|
|
$
|
3.93
|
|
Diluted
|
|
1.55
|
|
|
|
1.49
|
|
|
|
4.21
|
|
|
|
3.90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
292.7
|
|
|
|
300.1
|
|
|
|
294.9
|
|
|
|
303.2
|
|
Diluted
|
|
294.7
|
|
|
|
302.5
|
|
|
|
296.7
|
|
|
|
305.8
|
|
See accompanying notes to consolidated financial
statements.
Norfolk Southern
Corporation and Subsidiaries
Consolidated Statements of Comprehensive Income
(Unaudited)
|
|
|
Third
Quarter
|
|
First Nine
Months
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
($ in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
$
|
460
|
|
|
$
|
452
|
|
|
$
|
1,252
|
|
|
$
|
1,195
|
|
Other comprehensive
income, before tax:
|
|
|
|
|
|
|
|
|
|
|
|
Pension and other
postretirement benefits
|
|
7
|
|
|
|
10
|
|
|
|
20
|
|
|
|
31
|
|
Other comprehensive
loss of
|
|
|
|
|
|
|
|
|
|
|
|
equity
investees
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive
income, before tax
|
|
7
|
|
|
|
10
|
|
|
|
20
|
|
|
|
27
|
|
Income tax expense
related to items of other
|
|
|
|
|
|
|
|
|
|
|
|
comprehensive
income
|
|
(3)
|
|
|
|
(3)
|
|
|
|
(8)
|
|
|
|
(11)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive
income, net of tax
|
|
4
|
|
|
|
7
|
|
|
|
12
|
|
|
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
comprehensive income
|
$
|
464
|
|
|
$
|
459
|
|
|
$
|
1,264
|
|
|
$
|
1,211
|
|
See accompanying notes to consolidated financial
statements.
Norfolk Southern
Corporation and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
|
|
|
September
30,
|
|
December
31,
|
|
2016
|
|
2015
|
|
($ in
millions)
|
Assets
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
|
984
|
|
|
$
|
|
1,101
|
|
Accounts receivable –
net
|
|
|
960
|
|
|
|
|
946
|
|
Materials and
supplies
|
|
|
301
|
|
|
|
|
271
|
|
Other current
assets
|
|
|
72
|
|
|
|
|
194
|
|
Total current
assets
|
|
|
2,317
|
|
|
|
|
2,512
|
|
|
|
|
|
|
|
|
|
Investments
|
|
|
2,779
|
|
|
|
|
2,572
|
|
Properties less
accumulated depreciation of $11,663 and
|
|
|
|
|
|
|
|
$11,478,
respectively
|
|
|
29,467
|
|
|
|
|
28,992
|
|
Other
assets
|
|
|
69
|
|
|
|
|
63
|
|
|
|
|
|
|
|
|
|
Total
assets
|
$
|
|
34,632
|
|
|
$
|
|
34,139
|
|
|
|
|
|
|
|
|
|
Liabilities and
stockholders' equity
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
Accounts
payable
|
$
|
|
1,131
|
|
|
$
|
|
1,091
|
|
Short-term
debt
|
|
|
—
|
|
|
|
|
200
|
|
Income and other
taxes
|
|
|
218
|
|
|
|
|
203
|
|
Other current
liabilities
|
|
|
333
|
|
|
|
|
237
|
|
Current maturities of
long-term debt
|
|
|
550
|
|
|
|
|
500
|
|
Total current
liabilities
|
|
|
2,232
|
|
|
|
|
2,231
|
|
|
|
|
|
|
|
|
|
Long-term
debt
|
|
|
9,555
|
|
|
|
|
9,393
|
|
Other
liabilities
|
|
|
1,322
|
|
|
|
|
1,385
|
|
Deferred income
taxes
|
|
|
9,127
|
|
|
|
|
8,942
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
22,236
|
|
|
|
|
21,951
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
|
|
Common stock $1.00
per share par value, 1,350,000,000 shares
|
|
|
|
|
|
|
|
authorized; outstanding 291,942,235 and 297,795,016
shares,
|
|
|
|
|
|
|
|
respectively, net of
treasury shares
|
|
|
293
|
|
|
|
|
299
|
|
Additional paid-in
capital
|
|
|
2,169
|
|
|
|
|
2,143
|
|
Accumulated other
comprehensive loss
|
|
|
(433)
|
|
|
|
|
(445)
|
|
Retained
income
|
|
|
10,367
|
|
|
|
|
10,191
|
|
|
|
|
|
|
|
|
|
Total stockholders'
equity
|
|
|
12,396
|
|
|
|
|
12,188
|
|
|
|
|
|
|
|
|
|
Total liabilities
and stockholders' equity
|
$
|
|
34,632
|
|
|
$
|
|
34,139
|
|
See accompanying notes to consolidated financial
statements.
Norfolk Southern
Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
|
|
|
First Nine
Months
|
|
2016
|
|
2015
|
|
($ in
millions)
|
Cash flows from
operating activities
|
|
|
|
|
|
Net income
|
$
|
1,252
|
|
|
$
|
1,195
|
|
Reconciliation of net
income to net cash provided
|
|
|
|
|
|
by operating
activities:
|
|
|
|
|
|
Depreciation
|
|
770
|
|
|
|
770
|
|
Deferred income
taxes
|
|
177
|
|
|
|
56
|
|
Gains and losses on
properties and investments
|
|
(38)
|
|
|
|
(20)
|
|
Changes in assets and
liabilities affecting operations:
|
|
|
|
|
|
Accounts
receivable
|
|
8
|
|
|
|
(48)
|
|
Materials and
supplies
|
|
(30)
|
|
|
|
(52)
|
|
Other current
assets
|
|
130
|
|
|
|
295
|
|
Current liabilities
other than debt
|
|
149
|
|
|
|
88
|
|
Other –
net
|
|
(106)
|
|
|
|
(76)
|
|
|
|
|
|
|
|
Net cash provided by
operating activities
|
|
2,312
|
|
|
|
2,208
|
|
|
|
|
|
|
|
Cash flows from
investing activities
|
|
|
|
|
|
Property
additions
|
|
(1,304)
|
|
|
|
(1,777)
|
|
Property sales and
other transactions
|
|
87
|
|
|
|
43
|
|
Investment
purchases
|
|
(119)
|
|
|
|
(5)
|
|
Investment sales and
other transactions
|
|
6
|
|
|
|
32
|
|
|
|
|
|
|
|
Net cash used in
investing activities
|
|
(1,330)
|
|
|
|
(1,707)
|
|
|
|
|
|
|
|
Cash flows from
financing activities
|
|
|
|
|
|
Dividends
|
|
(523)
|
|
|
|
(537)
|
|
Common stock
transactions
|
|
33
|
|
|
|
1
|
|
Purchase and
retirement of common stock
|
|
(603)
|
|
|
|
(997)
|
|
Proceeds from
borrowings – net
|
|
594
|
|
|
|
594
|
|
Debt
repayments
|
|
(600)
|
|
|
|
(102)
|
|
|
|
|
|
|
|
Net cash used in
financing activities
|
|
(1,099)
|
|
|
|
(1,041)
|
|
|
|
|
|
|
|
Net decrease in cash
and cash equivalents
|
|
(117)
|
|
|
|
(540)
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
|
|
|
|
At beginning of
year
|
|
1,101
|
|
|
|
973
|
|
|
|
|
|
|
|
At end of
period
|
$
|
984
|
|
|
$
|
433
|
|
|
|
|
|
|
|
Supplemental
disclosures of cash flow information
|
|
|
|
|
|
Cash paid during the
period for:
|
|
|
|
|
|
Interest (net of
amounts capitalized)
|
$
|
337
|
|
|
$
|
320
|
|
Income taxes (net of
refunds)
|
|
409
|
|
|
|
350
|
|
See accompanying notes to consolidated financial
statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:
- Stock Repurchase Program
We repurchased and retired
7.2 million and 10.3 million shares of common stock under our stock
repurchase program in the first nine months of 2016 and 2015,
respectively, at a cost of $603
million and $997 million,
respectively. 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 158.3 million shares at a total cost of
$10.1 billion.
- Restructuring Costs
Third quarter 2015 operating
expenses 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.
- New Accounting Pronouncement- Deferred Taxes
In
November 2015, the Financial
Accounting Standards Board (FASB) issued Accounting Standards
Update (ASU) No. 2015-17, "Balance Sheet Classification of
Deferred Taxes." This update requires that deferred tax
liabilities and assets be classified as noncurrent on the balance
sheet rather than as separate current and noncurrent amounts.
We adopted the provisions of this ASU during the first quarter of
2016 and applied it retrospectively. The adoption of ASU
2015-17 resulted in the presentation of $121
million of current deferred income tax assets as a reduction
of "Deferred income taxes" in the long-term liabilities section of
the Consolidated Balance Sheet at September
30, 2016. We retrospectively presented the
December 31, 2015, Consolidated Balance Sheet to reflect the
reclassification of $121 million of deferred income tax assets
from "Deferred income taxes" in the current assets section of the
balance sheet to "Deferred income taxes" in the long-term
liabilities section of the balance sheet.
- New Accounting Pronouncement- Stock-Based
Compensation
In March 2016,
the FASB issued ASU No. 2016-09, "Improvements to Employee
Share-Based Payment Accounting." We adopted the provisions of
this ASU during the first quarter of 2016. This update
principally affects the recognition of excess tax benefits and
deficiencies and the cash flow classification of share-based
compensation-related transactions. The requirement to
recognize excess tax benefits and deficiencies as income tax
expense or benefit in the income statement was applied
prospectively, with a benefit of $12 million recognized in the
"Provision for income taxes" line item for the nine months ended
September 30, 2016. The
classification requirements on the Consolidated Statements of Cash
Flows for the adoption of ASU 2016-09 resulted in a
$29 million increase in "Current liabilities other than debt"
within the operating activities section and a corresponding
decrease in "Common stock transactions" within the financing
activities section for the first nine months of 2016. We
retrospectively presented the Consolidated Statements of Cash Flows
for the first nine months of 2015 to reflect a $29 million increase in "Current liabilities
other than debt" within the operating activities section and a
corresponding decrease in "Common stock transactions" within the
financing activities section.
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SOURCE Norfolk Southern Corporation