Norfolk Southern reports third-quarter 2013 earnings

Oct 23, 2013

NORFOLK, Va., Oct. 23, 2013 /PRNewswire/ --

For 2013 vs. 2012

Railway operating revenues increased 5 percent to $2.8 billion.
Income from railway operations was $849 million, up 16 percent.
Net income increased 20 percent to $482 million.
Diluted earnings per share were $1.53, up 23 percent.
The railway operating ratio improved 3 percentage points to 69.9 percent.

Norfolk Southern (NYSE: NSC) reported third-quarter net income of $482 million, 20 percent higher than $402 million for the same period of 2012. Diluted earnings per share were $1.53, up 23 percent compared with $1.24 per diluted share in the third quarter last year.

"Norfolk Southern delivered strong results, led by growth in our chemicals, metals/construction, intermodal, and automotive businesses, combined with ongoing productivity improvements," said CEO Wick Moorman. "Even in the face of continuing weakness in the coal markets, our focus on service efficiency and velocity allowed us to provide superior performance for our customers and excellent results for our shareholders."

Railway operating revenues were $2.8 billion, 5 percent higher compared with third-quarter 2012, with shipment volumes increasing 4 percent.

For the third quarter, general merchandise revenues were $1.6 billion, 11 percent higher compared with the third quarter of 2012, primarily as a result of a 6 percent growth in shipments.

Coal revenues were $641 million, 9 percent lower compared with the third quarter last year, due to lower average revenue per unit and a 2 percent decline in volumes.

Intermodal revenues were $605 million, a 7 percent increase compared with third-quarter 2012. Volumes increased 5 percent due to continued domestic and international growth.

Railway operating expenses for the third quarter totaled $2.0 billion, 1 percent higher compared with the same period of 2012.

Income from railway operations for the third quarter was $849 million, 16 percent higher compared with the same period last year.

The railway operating ratio for the third quarter improved 3 percentage points to 69.9 percent compared with 72.9 percent in the same quarter last year.

Norfolk Southern Corporation 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 Consolidated Statements of Income (Unaudited)

	Third Quarter				First Nine Months
	2013		2012		2013		2012
	(in millions, except per share amounts)

Railway operating revenues
Coal	$	641	$	701	$	1,902	$	2,222
General merchandise		1,578		1,425		4,696		4,477
Intermodal		605		567		1,766		1,657
Total railway operating revenues		2,824		2,693		8,364		8,356

Railway operating expenses
Compensation and benefits		735		724		2,241		2,234
Purchased services and rents		420		403		1,223		1,186
Fuel		390		379		1,210		1,182
Depreciation		230		230		683		683
Materials and other		200		226		631		661
Total railway operating expenses		1,975		1,962		5,988		5,946

Income from railway operations		849		731		2,376		2,410

Other income – net (note 1)		30		33		194		93
Interest expense on debt		131		124		388		366

Income before income taxes		748		640		2,182		2,137

Provision for income taxes
Current		194		97		570		522
Deferred		72		141		215		279
Total income taxes		266		238		785		801

Net income	$	482	$	402	$	1,397	$	1,336

Earnings per share (notes 1 & 2)
Basic	$	1.55	$	1.26	$	4.45	$	4.12
Diluted		1.53		1.24		4.40		4.07

Weighted average shares outstanding (note 3)
Basic		310.4		317.7		313.0		322.9
Diluted		313.9		321.8		316.6		327.4

See accompanying notes to consolidated financial statements.


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

	Third Quarter				First Nine Months
	2013		2012		2013		2012
	($ in millions)

Net income	$	482	$	402	$	1,397	$	1,336
Other comprehensive income, before tax:
Pension and other postretirement benefits		38		33		110		97
Other comprehensive income (loss) of equity investees		-		-		2		(4)
Other comprehensive income, before tax		38		33		112		93
Income tax expense related to items of other
comprehensive income		(15)		(13)		(43)		(38)
Other comprehensive income, net of tax		23		20		69		55

Total comprehensive income	$	505	$	422	$	1,466	$	1,391

See accompanying notes to consolidated financial statements.


Norfolk Southern Corporation and Subsidiaries Consolidated Balance Sheets (Unaudited)

	September 30,			December 31,
	2013			2012
	($ in millions)
Assets
Current assets:
Cash and cash equivalents		$	984		$	653
Short-term investments			20			15
Accounts receivable - net			1,083			1,109
Materials and supplies			224			216
Deferred income taxes			149			167
Other current assets			34			82
Total current assets			2,494			2,242

Investments			2,395			2,300
Properties less accumulated depreciation of $10,271 and
$9,922, respectively			26,413			25,736
Other assets			63			64

Total assets		$	31,365		$	30,342

Liabilities and stockholders' equity
Current liabilities:
Accounts payable		$	1,267		$	1,362
Short-term debt			-			200
Income and other taxes			241			206
Other current liabilities			377			263
Current maturities of long-term debt			447			50
Total current liabilities			2,332			2,081

Long-term debt			8,499			8,432
Other liabilities			2,166			2,237
Deferred income taxes			8,074			7,832
Total liabilities			21,071			20,582

Stockholders' equity:
Common stock $1.00 per share par value, 1,350,000,000 shares
authorized; outstanding 308,910,329 and 314,034,174 shares,
respectively, net of treasury shares			310			315
Additional paid-in capital			1,979			1,911
Accumulated other comprehensive loss			(1,040)			(1,109)
Retained income			9,045			8,643

Total stockholders' equity			10,294			9,760

Total liabilities and stockholders' equity		$	31,365		$	30,342

See accompanying notes to consolidated financial statements.


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

	First Nine Months
	2013		2012
	($ in millions)
Cash flows from operating activities
Net income	$	1,397	$	1,336
Reconciliation of net income to net cash provided by operating activities:
Depreciation		687		688
Deferred income taxes		215		279
Gains and losses on properties and investments (note 1)		(100)		(4)
Changes in assets and liabilities affecting operations:
Accounts receivable		26		(56)
Materials and supplies		(8)		(27)
Other current assets		48		43
Current liabilities other than debt		121		183
Other – net		18		34
Net cash provided by operating activities		2,404		2,476

Cash flows from investing activities
Property additions		(1,470)		(1,522)
Property sales and other transactions		109		47
Investments, including short-term		(29)		(14)
Investment sales and other transactions		21		37
Net cash used in investing activities		(1,369)		(1,452)

Cash flows from financing activities
Dividends		(476)		(467)
Common stock issued – net		92		77
Purchase and retirement of common stock (note 3)		(564)		(1,150)
Proceeds from borrowings – net		492		1,291
Debt repayments		(248)		(358)
Net cash used in financing activities		(704)		(607)

Net increase in cash and cash equivalents		331		417

Cash and cash equivalents
At beginning of period		653		276

At end of period	$	984	$	693

Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest (net of amounts capitalized)	$	305	$	297
Income taxes (net of refunds)		485		536

See accompanying notes to consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:

1. Other Income — Net
          In first quarter 2013, we recognized a $97 million gain on a land sale, which increased net income by
    $60 million or $0.19 per share.

2. Earnings Per Share
          For basic earnings per share, income available to common stockholders reflects reductions for the
    effect of dividend equivalent payments made to holders of stock options and restricted stock units as follows:
    for the third quarter, $2 million in 2013 and $3 million in 2012; and for the first nine months, $5 million in 2013
    and $7 million in 2012.
          For diluted earnings per share, income available to common stockholders reflects reductions for the
    effect of dividend equivalent payments made to holders of stock options and restricted stock units as follows:
    for the third quarter, $1 million in both 2013 and 2012; and for the first nine months, $3 million in both 2013
    and 2012.

3. Stock Repurchase Program
          We repurchased and retired 7.5 million shares of common stock in the first nine months of 2013, at a cost
    of $564 million, and 16.5 million shares at a cost of $1.2 billion for the same period of 2012. On August 1, 2012,
    our Board of Directors authorized the repurchase of up to an additional 50 million shares of common stock
    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 135.9 million shares at a total cost of $8.1 billion.

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SOURCE Norfolk Southern Corporation