Norfolk Southern reports first-quarter 2015 results

Apr 29, 2015

NORFOLK, Va., April 29, 2015 /PRNewswire/ -- Norfolk Southern Corporation (NYSE: NSC) today reported financial results for first-quarter 2015. Net income for the quarter was $310 million, 16 percent lower compared with $368 million during the same period of 2014. Diluted earnings per share were $1.00 compared with $1.17 per diluted share earned in the first quarter last year.

"Our first quarter results reflected continued weakness in our coal markets along with a slowdown in network velocity in part caused by severe winter weather which impacted both our expenses and our volumes," said CEO Wick Moorman. "Looking ahead, while the market uncertainties remain, the resources that we are deploying are driving improved network performance, and we expect our service levels will be significantly higher in the second half."

FIRST-QUARTER 2015 RESULTS

Railway operating revenues totaled $2.6 billion.
Income from railway operations was $606 million.
Net income totaled $310 million.
Diluted earnings per share were $1.00.
The railway operating ratio was 76.4 percent.

FIRST-QUARTER SUMMARY

Railway operating revenues were $2.6 billion, 5 percent lower compared with first-quarter 2014, due to lower fuel surcharge revenue in each of NS' three commodity groups, lower coal volumes and lower average revenue per unit related to the mix of business. Total volume increased 2 percent, or about 40,000 units, reflecting gains in intermodal and merchandise traffic.
General merchandise revenues were $1.5 billion, 2 percent lower than the same period last year. Volume grew by 3 percent, led by increases in chemicals and automotive shipments. The five general merchandise commodity groups reported mixed revenue results on a year-over-year basis:
- Chemicals: $432 million, down 2 percent
- Agriculture: $374 million, up 4 percent
- Metals/Construction: $310 million, down 6 percent
- Automotive: $219 million, down 4 percent
- Paper/Forest: $185 million, down 3 percent
Intermodal revenues were $592 million, 1 percent lower compared with first-quarter 2014. Growth in international and domestic business pushed traffic volume up 5 percent in the quarter compared with the same period of 2014.
Coal revenues were $455 million, 16 percent lower compared with the first quarter of 2014. A weak global export market and fewer shipments of coal to utilities combined to decrease volume by 7 percent.
Railway operating expenses declined 3 percent to $2.0 billion, primarily due to lower fuel costs, compared with the same period of 2014.
Income from railway operations was $606 million, 9 percent lower compared with first-quarter 2014.
The operating ratio, or operating expenses as a percentage of revenue, was 76.4 percent, compared with 75.2 percent in the same quarter in 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)

	First Quarter
	2015		2014
	($ in millions, except per share amounts)

Railway operating revenues
Coal	$	455	$	541
General merchandise		1,520		1,552
Intermodal		592		596
Total railway operating revenues		2,567		2,689

Railway operating expenses
Compensation and benefits		783		740
Purchased services and rents		423		392
Fuel		264		432
Depreciation		245		237
Materials and other		246		221

Total railway operating expenses		1,961		2,022

Income from railway operations		606		667

Other income – net		21		26
Interest expense on debt		132		139

Income before income taxes		495		554

Provision for income taxes
Current		173		194
Deferred		12		(8)
Total income taxes		185		186

Net income	$	310	$	368

Earnings per share
Basic	$	1.01	$	1.18
Diluted		1.00		1.17

Weighted average shares outstanding (note 1)
Basic		306.8		309.5
Diluted		309.6		312.6

See accompanying notes to consolidated financial statements.

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

	First Quarter
	2015		2014
	($ in millions)

Net income	$	310	$	368
Other comprehensive income, before tax:
Pension and other postretirement benefits		10		299
Other comprehensive income (loss) of equity investees		(4)		3

Other comprehensive income, before tax		6		302
Income tax expense related to items of other
comprehensive income		(3)		(114)

Other comprehensive income, net of tax		3		188

Total comprehensive income	$	313	$	556

See accompanying notes to consolidated financial statements.

Norfolk Southern Corporation and Subsidiaries
Consolidated Balance Sheets
(Unaudited)

	March 31,		December 31,
	2015		2014
	($ in millions)
Assets
Current assets:
Cash and cash equivalents	$	524	$	973
Accounts receivable – net		1,032		1,055
Materials and supplies		268		236
Deferred income taxes		118		167
Other current assets		173		347
Total current assets		2,115		2,778

Investments		2,701		2,679
Properties less accumulated depreciation of $11,020 and
$10,814, respectively		27,829		27,694
Other assets		130		90

Total assets	$	32,775	$	33,241

Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	1,094	$	1,233
Short-term debt		—		100
Income and other taxes		210		217
Other current liabilities		298		228
Current maturities of long-term debt		501		2
Total current liabilities		2,103		1,780

Long-term debt		8,429		8,924
Other liabilities		1,302		1,312
Deferred income taxes		8,783		8,817

Total liabilities		20,617		20,833

Stockholders' equity:
Common stock $1.00 per share par value, 1,350,000,000 shares
authorized; outstanding 304,849,454 and 308,240,130 shares,
respectively, net of treasury shares		306		310
Additional paid-in capital		2,160		2,148
Accumulated other comprehensive loss		(395)		(398)
Retained income		10,087		10,348

Total stockholders' equity		12,158		12,408

Total liabilities and stockholders' equity	$	32,775	$	33,241

See accompanying notes to consolidated financial statements.

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

	First Quarter
	2015		2014
	($ in millions)
Cash flows from operating activities
Net income	$	310	$	368
Reconciliation of net income to net cash provided by operating activities:
Depreciation		246		238
Deferred income taxes		12		(8)
Gains and losses on properties and investments		(5)		(2)
Changes in assets and liabilities affecting operations:
Accounts receivable		23		(85)
Materials and supplies		(32)		(17)
Other current assets		176		17
Current liabilities other than debt		(97)		86
Other – net		(28)		(9)

Net cash provided by operating activities		605		588

Cash flows from investing activities
Property additions		(392)		(381)
Property sales and other transactions		16		22
Investments, including short-term		(3)		(3)
Investment sales and other transactions		1		108

Net cash used in investing activities		(378)		(254)

Cash flows from financing activities
Dividends		(181)		(167)
Common stock issued		21		62
Purchase and retirement of common stock (note 1)		(415)		(50)
Debt repayments		(101)		(100)

Net cash used in financing activities		(676)		(255)

Net increase (decrease) in cash and cash equivalents		(449)		79

Cash and cash equivalents
At beginning of year		973		1,443

At end of period	$	524	$	1,522

Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest (net of amounts capitalized)	$	71	$	75
Income taxes (net of refunds)		12		60

See accompanying notes to consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:

Stock Repurchase Program

We repurchased 3.9 million and 0.5 million shares of common stock in the first quarters of 2015 and 2014, respectively, at a cost of $415 million and $50 million, respectively. We have remaining authorization from our Board of Directors to repurchase up to 31.3 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 143.7 million shares at a total cost of $8.8 billion.

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SOURCE Norfolk Southern Corporation