Market Overview

Norfolk Southern reports second-quarter 2018 results

Share:

Norfolk Southern reports second-quarter 2018 results

Records for second-quarter operating income, operating ratio, net income and earnings per share

PR Newswire

NORFOLK, Va., July 25, 2018 /PRNewswire/ -- Norfolk Southern Corporation (NYSE:NSC) today reported record second-quarter financial results.

Net income was $710 million, up 43 percent year-over-year, a result of an 18 percent increase in income from railway operations and a lower effective income tax rate. Diluted earnings per share were $2.50, up 46 percent year-over-year and a second-quarter record.

"Our second-quarter results reflect strong growth in our business and our sustained commitment to improving financial performance," said James A. Squires, Norfolk Southern chairman, president and CEO. "We are committed to delivering financial results that benefit our shareholders and service that benefits our customers."

Second-quarter summary

  • Railway operating revenues of $2.9 billion increased 10 percent compared with second-quarter 2017, as overall volumes were up 6 percent reflecting growth in all three major commodity categories of intermodal, merchandise and coal.   
  • Railway operating expenses increased $107 million, or 6 percent, to $1.9 billion compared with the same period last year largely a result of higher fuel prices, higher incentive compensation, and increased costs associated with overall lower network velocity offset, in part, by refund claims for prior years' employment taxes paid on equity awards.    
  • Income from railway operations was $1.0 billion, an increase of 18 percent year-over-year, a record for any quarter. The railway operating ratio, or operating expenses as a percentage of revenues, was 64.6 percent, a second-quarter record. 

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

Forward-looking statements
This 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)



Second Quarter


First Six Months


2018


2017


2018


2017


($ in millions, except per share amounts)













Railway operating revenues












Merchandise

$

1,718




$

1,597




$

3,323




$

3,181



Intermodal


714





593





1,392





1,164



Coal


466





447





900





867



Total railway operating revenues


2,898





2,637





5,615





5,212















Railway operating expenses












Compensation and benefits


706





719





1,443





1,478



Purchased services and rents


430





392





831





769



Fuel


272





190





538





403



Depreciation


273





264





545





523



Materials and other


191





200





397





410















Total railway operating expenses


1,872





1,765





3,754





3,583















Income from railway operations


1,026





872





1,861





1,629















Other income – net


29





48





37





88



Interest expense on debt


131





140





267





282















Income before income taxes


924





780





1,631





1,435















Income taxes












Current


170





225





280





391



Deferred


44





58





89





114



Total income taxes


214





283





369





505















Net income

$

710




$

497




$

1,262




$

930















Earnings per share - diluted

$

2.50




$

1.71




$

4.43




$

3.18



















Weighted average shares outstanding - diluted


283.7




291.2




284.8




292.0



See accompanying notes to consolidated financial statements.

 

 

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income

(Unaudited)



Second Quarter


First Six Months


2018


2017


2018


2017


($ in millions)













Net income

$

710


$

497


$

1,262


$

930

Other comprehensive income, before tax:












Pension and other postretirement benefit


8



7



1



14

Other comprehensive income (loss) of












equity investees


1



1



2



(1)

Other comprehensive income, before tax


9



8



3



13













Income tax expense related to items of












other comprehensive income


(2)



(3)





(6)













Other comprehensive income, net of tax


7



5



3



7













Total comprehensive income

$

717


$

502


$

1,265


$

937


See accompanying notes to consolidated financial statements.  

 

 

Norfolk Southern Corporation and Subsidiaries

Consolidated Balance Sheets

(Unaudited)



June 30,


December 31,


2018


2017


($ in millions)

Assets








Current assets:








Cash and cash equivalents

$


430




$


690



Accounts receivable – net



1,035






955



Materials and supplies



260






222



Other current assets



179






282



Total current assets



1,904






2,149











Investments



3,058






2,981



Properties less accumulated depreciation of $12,175 and








$11,909, respectively



30,540






30,330



Other assets



286






251











Total assets

$


35,788




$


35,711











Liabilities and stockholders' equity








Current liabilities:








Accounts payable

$


1,323




$


1,401



Short-term debt








100



Income and other taxes



269






211



Other current liabilities



260






233



Current maturities of long-term debt



500






600



Total current liabilities



2,352






2,545











Long-term debt



9,146






9,136



Other liabilities



1,317






1,347



Deferred income taxes



6,414






6,324











Total liabilities



19,229






19,352











Stockholders' equity:








Common stock $1.00 per share par value, 1,350,000,000 shares








  authorized; outstanding 280,029,764 and 284,157,187 shares,








  respectively, net of treasury shares



281






285



Additional paid-in capital



2,263






2,254



Accumulated other comprehensive loss



(441)






(356)



Retained income



14,456






14,176











Total stockholders' equity



16,559






16,359











Total liabilities and stockholders' equity

$


35,788




$


35,711




See accompanying notes to consolidated financial statements.

 

 

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)



First Six Months


2018


2017


($ in millions)

Cash flows from operating activities






Net income

$

1,262




$

930



Reconciliation of net income to net cash provided by operating activities:






Depreciation


546





525



Deferred income taxes


89





114



Gains and losses on properties


(14)





(20)



Changes in assets and liabilities affecting operations:






Accounts receivable


(92)





(12)



Materials and supplies


(38)





(32)



Other current assets


19





48



Current liabilities other than debt


134





93



Other – net


(80)





(70)









Net cash provided by operating activities


1,826





1,576









Cash flows from investing activities






Property additions


(836)





(883)



Property sales and other transactions


48





60



Investment purchases


(4)





(4)



Investment sales and other transactions


6





3









Net cash used in investing activities


(786)





(824)









Cash flows from financing activities






Dividends


(408)





(354)



Common stock transactions


15





42



Purchase and retirement of common stock


(700)





(402)



Proceeds from borrowings – net of issuance costs


543





298



Debt repayments


(750)





(650)









Net cash used in financing activities


(1,300)





(1,066)









Net decrease in cash and cash equivalents


(260)





(314)









Cash and cash equivalents






At beginning of year


690





956









At end of period

$

430




$

642









Supplemental disclosures of cash flow information






Cash paid during the period for:






Interest (net of amounts capitalized)

$

246




$

270



Income taxes (net of refunds)


126





341




See accompanying notes to consolidated financial statements.

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:

  1. Pension and Other Postretirement Benefits
    We adopted Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) 2017-07 on January 1, 2018.  The retrospective application resulted in the reclassification of $16 million and $32 million of pension and other postretirement benefits from the "Compensation and benefits" line item within "Railway operating expenses" to "Other income - net" on the Consolidated Statements of Income for the second quarter and first six months of 2017, respectively.
  2. Stock Repurchase Program
    We repurchased and retired 4.8 million and 3.4 million shares of common stock under our stock repurchase program in the first six months of 2018 and 2017, respectively, at a cost of $700 million and $402 million, respectively.  Since the beginning of 2006, we have repurchased and retired 173.3 million shares at a total cost of $12.0 billion.
  3. Reclassification of Stranded Tax Effects
    In February 2018, the FASB issued ASU 2018-02, "Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income." This update is intended to reclassify the stranded tax effects resulting from the Tax Cuts and Jobs Act that was enacted on December 22, 2017 from accumulated other comprehensive income to retained earnings.  In the first quarter of 2018, we adopted the provisions of ASU 2018-02 resulting in an increase to "Accumulated other comprehensive loss" of $88 million and a corresponding increase to "Retained income," with no impact on "Total stockholders' equity."

 

Cision View original content:http://www.prnewswire.com/news-releases/norfolk-southern-reports-second-quarter-2018-results-300686066.html

SOURCE Norfolk Southern Corporation

View Comments and Join the Discussion!