Norfolk Southern reports third-quarter 2019 results

Achieves record third-quarter operating ratio

Published

NORFOLK, Va., Oct. 23, 2019 /PRNewswire/ -- Norfolk Southern Corporation (NYSE: NSC) today reported third-quarter financial results.

Third-quarter net income was $657 million and diluted earnings per share were $2.49. The operating ratio for the quarter was 64.9%, a third-quarter record for NS. These results include a $32 million write-off of a receivable resulting from a legal dispute, which unfavorably impacted the operating ratio by 110 basis points and earnings per share by $0.09.

"Our team achieved a record third-quarter operating ratio while successfully rolling out the first phase of our TOP21 operating plan, followed by the swift transition to the plan's second phase. These efforts produced an 11% reduction in crew starts and recrews compared to the third-quarter last year, robustly outpacing the 6% volume decline while maintaining resilient service that supported an 11th consecutive quarter of year-over-year revenue per unit growth," said James A. Squires, Norfolk Southern chairman, president and CEO. "Initiatives to reimagine mechanical operations while maintaining a more efficient fleet of locomotives and railcars also progressed, as these and other efforts delivered significant cost savings this quarter. Looking ahead, additional productivity will be generated as we advance to the third phase of TOP21 and execute initiatives surrounding fuel efficiency, distributed power, intermodal operations, and our mechanical network, just to name a few. Norfolk Southern remains fully dedicated to our strategic plan for the creation of shareholder value through sweeping productivity improvements while maintaining a superior service product for our customers."

Third-quarter summary and highlights

  • Railway operating revenues of $2.8 billion decreased 4% compared with third-quarter 2018, as a 2% increase in average revenue per unit partially offset a 6% decline in total volume.  
  • Railway operating expenses were $1.8 billion, a decrease of $82 million compared with the same period last year. Lower compensation and benefits, equipment rents, and fuel prices were partially offset by a $32 million write-off of a receivable resulting from a legal dispute and increased depreciation expense.  
  • Income from railway operations was $1.0 billion, a decrease of $24 million year-over-year. The railway operating ratio was a third-quarter record 64.9%, despite the unfavorable impact of 110 basis points related to a legal dispute. 
  • Increased quarterly dividend by 9% from $0.86 to $0.94 per share.

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 19,500 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 is a major transporter of industrial products, including chemicals, agriculture, and metals and construction materials. In addition, the railroad operates the most extensive intermodal network in the East and is a principal carrier of coal, automobiles, and automotive parts.

Forward-looking statementsThis news release contains forward-looking statements that may be identified by the use of words like "believe," "expect," "anticipate," "estimate," "plan," "consider," "project," and similar references to the future. Forward-looking statements reflect our good-faith evaluation of information currently available. These forward-looking statements are subject to a number of risks and uncertainties, and our actual results may differ materially from those projected. Please refer to our annual and quarterly reports filed with the SEC for a full discussion of those risks and uncertainties we view as most important. Forward-looking statements are not, and should not be relied upon as, a guarantee of future performance or results, nor will they necessarily prove to be accurate indications of the times at or by which any such performance or results will be achieved. As a result, actual outcomes and results may differ materially from those expressed in forward-looking statements. We undertake no obligation to update or revise forward-looking statements.

 

 

Norfolk Southern Corporation and Subsidiaries Consolidated Statements of Income (Unaudited)
Third Quarter First Nine Months
2019 2018 2019 2018
(in millions, except per share amounts)
Railway operating revenues
Merchandise $ 1,731 $ 1,737 $ 5,173 $ 5,060
Intermodal 707 746 2,127 2,138
Coal 403 464 1,306 1,364
Total railway operating revenues 2,841 2,947 8,606 8,562
Railway operating expenses
Compensation and benefits 682 725 2,121 2,168
Purchased services and rents 423 450 1,265 1,281
Fuel 226 274 730 812
Depreciation 286 276 853 821
Materials and other 228 202 610 599
Total railway operating expenses 1,845 1,927 5,579 5,681
Income from railway operations 996 1,020 3,027 2,881
Other income – net 22 30 88 67
Interest expense on debt 150 142 452 409
Income before income taxes 868 908 2,663 2,539
Income taxes
Current 119 157 382 437
Deferred 92 49 225 138
Total income taxes 211 206 607 575
Net income $ 657 $ 702 $ 2,056 $ 1,964
Earnings per share - diluted $ 2.49 $ 2.52 $ 7.70 $ 6.95
Weighted average shares outstanding - diluted 264.3 278.2 266.9 282.6
See accompanying notes to consolidated financial statements.

 

 

Norfolk Southern Corporation and Subsidiaries Consolidated Statements of Income (Unaudited) Norfolk Southern Corporation and Subsidiaries Consolidated Balance Sheets (Unaudited)
Third Quarter First Nine Months September 30, December 31,
2019 2018 2019 2018 2019 2018
(in millions, except per share amounts) ($ in millions)
Assets
Railway operating revenues Current assets:
Merchandise $ 1,731 $ 1,737 $ 5,173 $ 5,060 Cash and cash equivalents $ 452 $ 358
Intermodal 707 746 2,127 2,138 Accounts receivable – net 973 1,009
Coal 403 464 1,306 1,364 Materials and supplies 266 207
Total railway operating revenues 2,841 2,947 8,606 8,562 Other current assets 325 288
Total current assets 2,016 1,862
Railway operating expenses
Compensation and benefits 682 725 2,121 2,168 Investments 3,376 3,109
Purchased services and rents 423 450 1,265 1,281 Properties less accumulated depreciation of $12,381
Fuel 226 274 730 812 and $12,374, respectively 31,394 31,091
Depreciation 286 276 853 821 Other assets 714 177
Materials and other 228 202 610 599
Total railway operating expenses 1,845 1,927 5,579 5,681 Total assets $ 37,500 $ 36,239
Income from railway operations 996 1,020 3,027 2,881 Liabilities and stockholders' equity
Current liabilities:
Other income – net 22 30 88 67 Accounts payable $ 1,407 $ 1,505
Interest expense on debt 150 142 452 409 Short-term debt 350
Income and other taxes 202 255
Income before income taxes 868 908 2,663 2,539 Other current liabilities 401 246
Current maturities of long-term debt 401 585
Income taxes Total current liabilities 2,761 2,591
Current 119 157 382 437
Deferred 92 49 225 138 Long-term debt 11,085 10,560
Total income taxes 211 206 607 575 Other liabilities 1,727 1,266
Deferred income taxes 6,689 6,460
Net income $ 657 $ 702 $ 2,056 $ 1,964
Total liabilities 22,262 20,877
Earnings per share - diluted $ 2.49 $ 2.52 $ 7.70 $ 6.95
Stockholders' equity:
Weighted average shares outstanding - diluted 264.3 278.2 266.9 282.6 Common stock $1.00 per share par value, 1,350,000,000 shares
  authorized; outstanding 260,746,663 and 268,098,472 shares,
See accompanying notes to consolidated financial statements.   respectively, net of treasury shares 262 269
Additional paid-in capital 2,219 2,216
Accumulated other comprehensive loss (553) (563)
Retained income 13,310 13,440
Total stockholders' equity 15,238 15,362
Total liabilities and stockholders' equity $ 37,500 $ 36,239

Norfolk Southern Corporation and Subsidiaries Consolidated Statements of Income (Unaudited) Norfolk Southern Corporation and Subsidiaries Consolidated Balance Sheets (Unaudited)
See accompanying notes to consolidated financial statements.
Third Quarter First Nine Months September 30, December 31,
2019 2018 2019 2018 2019 2018
(in millions, except per share amounts) ($ in millions)
Assets
Railway operating revenues Current assets:
Merchandise $ 1,731 $ 1,737 $ 5,173 $ 5,060 Cash and cash equivalents $ 452 $ 358
Intermodal 707 746 2,127 2,138 Accounts receivable – net 973 1,009
Coal 403 464 1,306 1,364 Materials and supplies 266 207
Total railway operating revenues 2,841 2,947 8,606 8,562 Other current assets 325 288
Total current assets 2,016 1,862
Railway operating expenses
Compensation and benefits 682 725 2,121 2,168 Investments 3,376 3,109
Purchased services and rents 423 450 1,265 1,281 Properties less accumulated depreciation of $12,381
Fuel 226 274 730 812 and $12,374, respectively 31,394 31,091
Depreciation 286 276 853 821 Other assets 714 177
Materials and other 228 202 610 599
Total railway operating expenses 1,845 1,927 5,579 5,681 Total assets $ 37,500 $ 36,239
Income from railway operations 996 1,020 3,027 2,881 Liabilities and stockholders' equity
Current liabilities:
Other income – net 22 30 88 67 Accounts payable $ 1,407 $ 1,505
Interest expense on debt 150 142 452 409 Short-term debt 350
Income and other taxes 202 255
Income before income taxes 868 908 2,663 2,539 Other current liabilities 401 246
Current maturities of long-term debt 401 585
Income taxes Total current liabilities 2,761 2,591
Current 119 157 382 437
Deferred 92 49 225 138 Long-term debt 11,085 10,560
Total income taxes 211 206 607 575 Other liabilities 1,727 1,266
Deferred income taxes 6,689 6,460
Net income $ 657 $ 702 $ 2,056 $ 1,964
Total liabilities 22,262 20,877
Earnings per share - diluted $ 2.49 $ 2.52 $ 7.70 $ 6.95
Stockholders' equity:
Weighted average shares outstanding - diluted 264.3 278.2 266.9 282.6 Common stock $1.00 per share par value, 1,350,000,000 shares
  authorized; outstanding 260,746,663 and 268,098,472 shares,
See accompanying notes to consolidated financial statements.   respectively, net of treasury shares 262 269
Additional paid-in capital 2,219 2,216
Accumulated other comprehensive loss (553) (563)
Retained income 13,310 13,440
Total stockholders' equity 15,238 15,362
Total liabilities and stockholders' equity $ 37,500 $ 36,239

 

 

Norfolk Southern Corporation and Subsidiaries Consolidated Statements of Income (Unaudited) Norfolk Southern Corporation and Subsidiaries Consolidated Balance Sheets (Unaudited) Norfolk Southern Corporation and SubsidiariesConsolidated Statements of Cash Flows(Unaudited)
See accompanying notes to consolidated financial statements.
Third Quarter First Nine Months September 30, December 31, First Nine Months
2019 2018 2019 2018 2019 2018 2019 2018
(in millions, except per share amounts) ($ in millions) ($ in millions)
Assets Cash flows from operating activities
Railway operating revenues Current assets: Net income $ 2,056 $ 1,964
Merchandise $ 1,731 $ 1,737 $ 5,173 $ 5,060 Cash and cash equivalents $ 452 $ 358 Reconciliation of net income to net cash provided by operating activities:
Intermodal 707 746 2,127 2,138 Accounts receivable – net 973 1,009 Depreciation 854 822
Coal 403 464 1,306 1,364 Materials and supplies 266 207 Deferred income taxes 225 138
Total railway operating revenues 2,841 2,947 8,606 8,562 Other current assets 325 288 Gains and losses on properties (4) (26)
Total current assets 2,016 1,862 Changes in assets and liabilities affecting operations:
Railway operating expenses Accounts receivable 34 (102)
Compensation and benefits 682 725 2,121 2,168 Investments 3,376 3,109 Materials and supplies (59) (45)
Purchased services and rents 423 450 1,265 1,281 Properties less accumulated depreciation of $12,381 Other current assets 40 45
Fuel 226 274 730 812 and $12,374, respectively 31,394 31,091 Current liabilities other than debt (72) 173
Depreciation 286 276 853 821 Other assets 714 177 Other – net (77) (85)
Materials and other 228 202 610 599
Total railway operating expenses 1,845 1,927 5,579 5,681 Total assets $ 37,500 $ 36,239 Net cash provided by operating activities 2,997 2,884
Income from railway operations 996 1,020 3,027 2,881 Liabilities and stockholders' equity Cash flows from investing activities
Current liabilities: Property additions (1,494) (1,326)
Other income – net 22 30 88 67 Accounts payable $ 1,407 $ 1,505 Property sales and other transactions 282 93
Interest expense on debt 150 142 452 409 Short-term debt 350 Investment purchases (12) (4)
Income and other taxes 202 255 Investment sales and other transactions (99) 96
Income before income taxes 868 908 2,663 2,539 Other current liabilities 401 246
Current maturities of long-term debt 401 585 Net cash used in investing activities (1,323) (1,141)
Income taxes Total current liabilities 2,761 2,591
Current 119 157 382 437 Cash flows from financing activities
Deferred 92 49 225 138 Long-term debt 11,085 10,560 Dividends (705) (627)
Total income taxes 211 206 607 575 Other liabilities 1,727 1,266 Common stock transactions 21 38
Deferred income taxes 6,689 6,460 Purchase and retirement of common stock (1,550) (2,300)
Net income $ 657 $ 702 $ 2,056 $ 1,964 Proceeds from borrowings – net of issuance costs 1,404 2,023
Total liabilities 22,262 20,877 Debt repayments (750) (750)
Earnings per share - diluted $ 2.49 $ 2.52 $ 7.70 $ 6.95
Stockholders' equity: Net cash used in financing activities (1,580) (1,616)
Weighted average shares outstanding - diluted 264.3 278.2 266.9 282.6 Common stock $1.00 per share par value, 1,350,000,000 shares
  authorized; outstanding 260,746,663 and 268,098,472 shares, Net increase in cash, cash equivalents, and restricted cash 94 127
See accompanying notes to consolidated financial statements.   respectively, net of treasury shares 262 269
Additional paid-in capital 2,219 2,216 Cash, cash equivalents, and restricted cash
Accumulated other comprehensive loss (553) (563) At beginning of year 446 690
Retained income 13,310 13,440
At end of period $ 540 $ 817
Total stockholders' equity 15,238 15,362
Supplemental disclosures of cash flow information
Total liabilities and stockholders' equity $ 37,500 $ 36,239 Cash paid during the period for:
Interest (net of amounts capitalized) $ 392 $ 327
Income taxes (net of refunds) 404 314

Norfolk Southern Corporation and Subsidiaries Consolidated Statements of Income (Unaudited) Norfolk Southern Corporation and Subsidiaries Consolidated Balance Sheets (Unaudited) Norfolk Southern Corporation and SubsidiariesConsolidated Statements of Cash Flows(Unaudited)
See accompanying notes to consolidated financial statements. See accompanying notes to consolidated financial statements.
Third Quarter First Nine Months September 30, December 31, First Nine Months
2019 2018 2019 2018 2019 2018 2019 2018
(in millions, except per share amounts) ($ in millions) ($ in millions)
Assets Cash flows from operating activities
Railway operating revenues Current assets: Net income $ 2,056 $ 1,964
Merchandise $ 1,731 $ 1,737 $ 5,173 $ 5,060 Cash and cash equivalents $ 452 $ 358 Reconciliation of net income to net cash provided by operating activities:
Intermodal 707 746 2,127 2,138 Accounts receivable – net 973 1,009 Depreciation 854 822
Coal 403 464 1,306 1,364 Materials and supplies 266 207 Deferred income taxes 225 138
Total railway operating revenues 2,841 2,947 8,606 8,562 Other current assets 325 288 Gains and losses on properties (4) (26)
Total current assets 2,016 1,862 Changes in assets and liabilities affecting operations:
Railway operating expenses Accounts receivable 34 (102)
Compensation and benefits 682 725 2,121 2,168 Investments 3,376 3,109 Materials and supplies (59) (45)
Purchased services and rents 423 450 1,265 1,281 Properties less accumulated depreciation of $12,381 Other current assets 40 45
Fuel 226 274 730 812 and $12,374, respectively 31,394 31,091 Current liabilities other than debt (72) 173
Depreciation 286 276 853 821 Other assets 714 177 Other – net (77) (85)
Materials and other 228 202 610 599
Total railway operating expenses 1,845 1,927 5,579 5,681 Total assets $ 37,500 $ 36,239 Net cash provided by operating activities 2,997 2,884
Income from railway operations 996 1,020 3,027 2,881 Liabilities and stockholders' equity Cash flows from investing activities
Current liabilities: Property additions (1,494) (1,326)
Other income – net 22 30 88 67 Accounts payable $ 1,407 $ 1,505 Property sales and other transactions 282 93
Interest expense on debt 150 142 452 409 Short-term debt 350 Investment purchases (12) (4)
Income and other taxes 202 255 Investment sales and other transactions (99) 96
Income before income taxes 868 908 2,663 2,539 Other current liabilities 401 246
Current maturities of long-term debt 401 585 Net cash used in investing activities (1,323) (1,141)
Income taxes Total current liabilities 2,761 2,591
Current 119 157 382 437 Cash flows from financing activities
Deferred 92 49 225 138 Long-term debt 11,085 10,560 Dividends (705) (627)
Total income taxes 211 206 607 575 Other liabilities 1,727 1,266 Common stock transactions 21 38
Deferred income taxes 6,689 6,460 Purchase and retirement of common stock (1,550) (2,300)
Net income $ 657 $ 702 $ 2,056 $ 1,964 Proceeds from borrowings – net of issuance costs 1,404 2,023
Total liabilities 22,262 20,877 Debt repayments (750) (750)
Earnings per share - diluted $ 2.49 $ 2.52 $ 7.70 $ 6.95
Stockholders' equity: Net cash used in financing activities (1,580) (1,616)
Weighted average shares outstanding - diluted 264.3 278.2 266.9 282.6 Common stock $1.00 per share par value, 1,350,000,000 shares
  authorized; outstanding 260,746,663 and 268,098,472 shares, Net increase in cash, cash equivalents, and restricted cash 94 127
See accompanying notes to consolidated financial statements.   respectively, net of treasury shares 262 269
Additional paid-in capital 2,219 2,216 Cash, cash equivalents, and restricted cash
Accumulated other comprehensive loss (553) (563) At beginning of year 446 690
Retained income 13,310 13,440
At end of period $ 540 $ 817
Total stockholders' equity 15,238 15,362
Supplemental disclosures of cash flow information
Total liabilities and stockholders' equity $ 37,500 $ 36,239 Cash paid during the period for:
Interest (net of amounts capitalized) $ 392 $ 327
Income taxes (net of refunds) 404 314

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:

1.  Stock Repurchase ProgramWe repurchased and retired 8.4 million shares of common stock under our stock repurchase program during the first nine months of 2019, at a cost of $1.6 billion.  During the first nine months of 2018, we repurchased and retired 12.8 million shares (5.7 million under an accelerated share repurchase program and 7.1 million shares under our ongoing program) at a cost of $2.1 billion.  Since the beginning of 2006, we have repurchased and retired 194.0 million shares at a total cost of $15.7 billion.

2.  LeasesOn January 1, 2019, we adopted Financial Accounting Standards Board Accounting Standards Update 2016-02, "Leases (Topic 842)" which requires lessees to recognize right-of-use (ROU) assets and lease liabilities on the balance sheet for leases greater than twelve months.  As a result of the adoption, the Consolidated Balance Sheet at September 30, 2019 includes the recognition of ROU assets of $561 million included in "Other assets," current lease liabilities of $97 million included in "Other current liabilities," and non-current lease liabilities of $464 million included in "Other liabilities."

3.  Restricted CashThe "Cash, cash equivalents, and restricted cash" line item on the Consolidated Statements of Cash Flows includes restricted cash of $88 million at both September 30, 2019 and December 31, 2018, reflecting deposits held by a third-party bond agent as collateral for certain debt obligations maturing in October 2019.  The restricted cash balance is included as part of "Other current assets" on the Consolidated Balance Sheets in both periods.

 

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SOURCE Norfolk Southern Corporation

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