Norfolk Southern reports record first-quarter 2017 results - Norfolk Southern (NYSE:NSC)

Achieved first-quarter record operating ratio, income from operations, and earnings per share

NORFOLK, Va., April 26, 2017 /PRNewswire/ -- Norfolk Southern Corporation NSC today reported first-quarter financial results.

First-quarter net income was $433 million, up 12 percent year-over-year, a result of a 7 percent rise in income from railway operations, as well as a lower effective income tax rate. Diluted earnings per share were $1.48, up 15 percent year-over-year and a first-quarter record.

"Norfolk Southern's record results for the first quarter demonstrate the efficacy of our strategic plan, under which we are enhancing our service quality and network performance while driving significant efficiency improvements," said James A. Squires, Norfolk Southern chairman, president and CEO. "Our focus on providing a superior service product has positioned us for growth and, coupled with our cost discipline, has contributed to a solid start to the year. Our strategy provides a strong foundation for growth at low incremental costs, a powerful formula for enhanced shareholder value."

First-quarter summary

Railway operating revenues of $2.6 billion increased 6 percent compared with first-quarter 2016, as overall volumes were 5 percent higher, reflecting growth within our major commodity categories of coal, intermodal, and merchandise.

Railway operating expenses increased $105 million, or 6 percent, to $1.8 billion as targeted expense reductions and efficiencies were offset by inflation, particularly within fuel expenses, which were higher by $64 million.

Income from railway operations was a first-quarter record $773 million, up 7 percent year-over-year.

The railway operating ratio, or operating expenses as a percentage of revenues, was 70.0 percent, a first-quarter record.

About Norfolk Southern
Norfolk Southern Corporation 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 operates the most extensive intermodal network in the East and is a major transporter of coal, automotive, and industrial products.

http://www.norfolksouthern.com

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

	First Quarter
	2017		2016
	($ in millions, except per share amounts)

Railway operating revenues
Merchandise	$	1,584	$	1,549
Intermodal		571		522
Coal		420		349
Total railway operating revenues		2,575		2,420

Railway operating expenses
Compensation and benefits		743		723
Purchased services and rents		377		379
Fuel		213		149
Depreciation		259		252
Materials and other		210		194

Total railway operating expenses		1,802		1,697

Income from railway operations		773		723

Other income – net		24		16
Interest expense on debt		142		139

Income before income taxes		655		600

Provision for income taxes
Current		166		169
Deferred		56		44
Total income taxes		222		213

Net income	$	433	$	387

Earnings per share
Basic	$	1.49	$	1.30
Diluted		1.48		1.29

Weighted average shares outstanding
Basic		290.3		297.2
Diluted		292.8		298.9

See accompanying notes to consolidated financial statements.

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

	First Quarter
	2017		2016
	($ in millions)

Net income	$	433	$	387
Other comprehensive income, before tax:
Reclassification adjustments for costs included in net income	7		7
Other comprehensive loss of equity investees	(2)		(1)

Other comprehensive income, before tax	5		6
Income tax expense related to reclassification adjustments
for costs included in net income	(3)		(3)

Other comprehensive income, net of tax	2		3

Total comprehensive income	$	435	$	390

See accompanying notes to consolidated financial statements.

Norfolk Southern Corporation and Subsidiaries Consolidated Balance Sheets (Unaudited)

	March 31,		December 31,
	2017		2016
	($ in millions)
Assets
Current assets:
Cash and cash equivalents	$	955	$	956
Accounts receivable – net		998		945
Materials and supplies		281		257
Other current assets		93		133
Total current assets		2,327		2,291

Investments		2,809		2,777
Properties less accumulated depreciation of $11,872 and
$11,737, respectively		29,927		29,751
Other assets		82		73

Total assets	$	35,145	$	34,892

Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	1,211	$	1,215
Short-term debt		—		100
Income and other taxes		379		245
Other current liabilities		303		229
Current maturities of long-term debt		550		550
Total current liabilities		2,443		2,339

Long-term debt		9,569		9,562
Other liabilities		1,407		1,442
Deferred income taxes		9,199		9,140

Total liabilities		22,618		22,483

Stockholders' equity:
Common stock $1.00 per share par value, 1,350,000,000 shares
authorized; outstanding 289,782,660 and 290,417,610 shares,
respectively, net of treasury shares		291		292
Additional paid-in capital		2,228		2,179
Accumulated other comprehensive loss		(485)		(487)
Retained income		10,493		10,425

Total stockholders' equity		12,527		12,409

Total liabilities and stockholders' equity	$	35,145	$	34,892

See accompanying notes to consolidated financial statements.

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

	First Quarter
	2017		2016
	($ in millions)
Cash flows from operating activities
Net income	$	433	$	387
Reconciliation of net income to net cash provided by operating activities:
Depreciation		260		253
Deferred income taxes		56		44
Gains and losses on properties		(9)		(2)
Changes in assets and liabilities affecting operations:
Accounts receivable		(53)		(15)
Materials and supplies		(24)		(44)
Other current assets		31		84
Current liabilities other than debt		188		200
Other – net		(36)		(28)

Net cash provided by operating activities		846		879

Cash flows from investing activities
Property additions		(438)		(398)
Property sales and other transactions		35		12
Investment purchases		(2)		(23)
Investment sales and other transactions		1		1

Net cash used in investing activities		(404)		(408)

Cash flows from financing activities
Dividends		(177)		(176)
Common stock transactions		34		(7)
Purchase and retirement of common stock		(200)		(200)
Debt repayments		(100)		(600)

Net cash used in financing activities		(443)		(983)

Net decrease in cash and cash equivalents		(1)		(512)

Cash and cash equivalents
At beginning of year		956		1,101

At end of period	$	955	$	589

Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest (net of amounts capitalized)	$	70	$	70
Income taxes (net of refunds)		12		2

See accompanying notes to consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:

Stock Repurchase Program
We repurchased and retired 1.7 million and 2.6 million shares of common stock under our stock repurchase program in the first quarters of 2017 and 2016, respectively, at a cost of $200 million in each period. Since the beginning of 2006, we have repurchased and retired 162.0 million shares at a total cost of $10.5 billion.

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SOURCE Norfolk Southern Corporation

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