July 27, 2016 - 8:00 AM EDT
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Norfolk Southern reports second-quarter 2016 results

NORFOLK, Va., July 27, 2016 /PRNewswire/ --

Second-quarter 2016 results

  • Diluted earnings per share were $1.36.
  • Operating ratio improved to 68.6 percent, reflecting an 11 percent reduction in operating expenses coupled with a 10 percent decline in operating revenues.

Norfolk Southern Corporation (NYSE: NSC) today reported financial results for second-quarter 2016. Net income was $405 million, compared with $433 million during the same period of 2015. Diluted earnings per share were $1.36, 4 percent lower compared with $1.41 per diluted share earned in the second quarter last year.

"Our second-quarter results reflect our unwavering focus on cost-control, steadfast commitment to customer service, and significant improvements in network performance," said Chairman, President, and CEO James A. Squires. "We are on track to achieve productivity savings of at least $200 million for 2016, and our record first half operating ratio of 69.4 percent gives us confidence we'll achieve a full-year operating ratio below 70 percent. Through the continued execution of our strategic plan, we remain confident in our ability to drive superior shareholder value through excellent customer service that positions us for future revenue growth, combined with network efficiency and asset utilization."

Second-quarter summary

  • Railway operating revenues were $2.5 billion, down 10 percent compared with second-quarter 2015, due to reduced volumes and lower fuel surcharge revenues. Overall volume declined 7 percent to 1.8 million units for the quarter.
  • Merchandise revenues were $1.6 billion, 3 percent lower than the same period last year. Volume declined 3 percent, largely due to fewer chemicals shipments resulting from continued low oil prices. The five merchandise commodity groups reported the following year-over-year revenue results:
    • Chemicals: $426 million, down 6 percent
    • Agriculture: $383 million, up 1 percent
    • Metals/Construction: $334 million, down 3 percent
    • Automotive: $248 million, down 2 percent
    • Paper/Forest: $186 million, down 5 percent
  • Intermodal revenues were $538 million, 15 percent lower compared with second-quarter 2015. Volume declined 5 percent primarily due to the restructuring of the company's Triple Crown Services subsidiary.
  • Coal revenues were $339 million, 25 percent lower compared with second-quarter 2015. High stockpiles, limited coal burn due to mild winter weather, and sustained low natural gas prices combined to decrease volume by 24 percent.
  • Railway operating expenses declined 11 percent to $1.7 billion, primarily due to cost reduction initiatives as well as lower fuel costs, compared with the same period of 2015.
  • Income from railway operations was $770 million, 5 percent lower compared with second-quarter 2015.
  • The composite service metric improved 13 percent in the quarter and 18 percent for the first six months of 2016, compared with the same periods last year.
  • The operating ratio, or operating expenses as a percentage of revenue, was 68.6 percent, a 140 basis point improvement compared with 70.0 percent in the second quarter of last year.

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.

http://www.norfolksouthern.com

 

 

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Income

(Unaudited)



Second Quarter


First Six Months


2016


2015


2016


2015


($ in millions, except per share amounts)













Railway operating revenues












Merchandise

$

1,577



$

1,627



$

3,126



$

3,147


Intermodal


538




633




1,060




1,225


Coal


339




453




688




908


Total railway operating revenues


2,454




2,713




4,874




5,280














Railway operating expenses












Compensation and benefits


667




724




1,390




1,507


Purchased services and rents


384




438




763




861


Fuel


174




255




323




519


Depreciation


257




247




509




492


Materials and other


202




235




396




481














Total railway operating expenses


1,684




1,899




3,381




3,860














Income from railway operations


770




814




1,493




1,420














Other income – net


4




19




20




40


Interest expense on debt


138




134




277




266














Income before income taxes


636




699




1,236




1,194














Provision for income taxes












Current


174




243




343




416


Deferred


57




23




101




35


Total income taxes


231




266




444




451














Net income

$

405



$

433



$

792



$

743














Earnings per share












Basic

$

1.37



$

1.43



$

2.67



$

2.43


Diluted


1.36




1.41




2.65




2.41














Weighted average shares outstanding (note 1)












Basic


294.7




302.9




296.0




304.8


Diluted


296.6




305.5




297.7




307.5



See accompanying notes to consolidated financial statements.

 

 

 

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income

(Unaudited)



Second Quarter


First Six Months


2016


2015


2016


2015


($ in millions)













Net income

$

405



$

433



$

792



$

743


Other comprehensive income, before tax:












Pension and other postretirement benefits


6




11




13




21


Other comprehensive income (loss) of












equity investees


1










(4)














Other comprehensive income, before tax


7




11




13




17


Income tax expense related to items of other












comprehensive income


(2)




(5)




(5)




(8)














Other comprehensive income, net of tax


5




6




8




9














Total comprehensive income

$

410



$

439



$

800



$

752



See accompanying notes to consolidated financial statements.

 

 

 

Norfolk Southern Corporation and Subsidiaries

Consolidated Balance Sheets

(Unaudited)



June 30,


December 31,


2016


2015


($ in millions)

Assets








Current assets:








Cash and cash equivalents

$


866



$


1,101


Accounts receivable – net



985





946


Materials and supplies



306





271


Other current assets



82





194


Total current assets (note 2)



2,239





2,512










Investments



2,639





2,572


Properties less accumulated depreciation of $11,586 and








$11,478, respectively



29,387





28,992


Other assets



69





63










Total assets

$


34,334



$


34,139










Liabilities and stockholders' equity








Current liabilities:








Accounts payable

$


1,085



$


1,091


Short-term debt







200


Income and other taxes



205





203


Other current liabilities



267





237


Current maturities of long-term debt



550





500


Total current liabilities



2,107





2,231










Long-term debt



9,549





9,393


Other liabilities



1,358





1,385


Deferred income taxes (note 2)



9,047





8,942










Total liabilities



22,061





21,951










Stockholders' equity:








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








  authorized; outstanding 293,549,767 and 297,795,016 shares,








respectively, net of treasury shares



295





299


Additional paid-in capital



2,146





2,143


Accumulated other comprehensive loss



(437)





(445)


Retained income



10,269





10,191










Total stockholders' equity



12,273





12,188










Total liabilities and stockholders' equity

$


34,334



$


34,139



See accompanying notes to consolidated financial statements.

 

 

 

Norfolk Southern Corporation and Subsidiaries 

Consolidated Statements of Cash Flows  

(Unaudited)



First Six Months


2016


2015


($ in millions)

Cash flows from operating activities






Net income

$

792



$

743


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






Depreciation


511




494


Deferred income taxes


101




35


Gains and losses on properties


(7)




(18)


Changes in assets and liabilities affecting operations:






Accounts receivable


(17)





Materials and supplies


(35)




(41)


Other current assets


103




282


Current liabilities other than debt (note 3)


25




27


Other – net


(41)




(21)








Net cash provided by operating activities


1,432




1,501








Cash flows from investing activities






Property additions


(932)




(886)


Property sales and other transactions


40




32


Investment purchases


(23)




(3)


Investment sales and other transactions


3




5








Net cash used in investing activities


(912)




(852)








Cash flows from financing activities






Dividends


(350)




(360)


Common stock transactions (note 3)


1





Purchase and retirement of common stock (note 1)


(400)




(765)


Proceeds from borrowings – net


594




494


Debt repayments


(600)




(102)








Net cash used in financing activities


(755)




(733)








Net decrease in cash and cash equivalents


(235)




(84)








Cash and cash equivalents






At beginning of year


1,101




973








At end of period

$

866



$

889








Supplemental disclosures of cash flow information






Cash paid during the period for:






Interest (net of amounts capitalized)

$

260



$

249


Income taxes (net of refunds)


251




55



See accompanying notes to consolidated financial statements.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:

  1. Stock Repurchase Program 
    We repurchased and retired 5.0 million and 7.4 million shares of common stock under our stock repurchase program in the first six months of 2016 and 2015, respectively, at a cost of $400 million and $765 million, respectively.  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 156.1 million shares at a total cost of $9.9 billion.
  2. New Accounting Pronouncement- Deferred Taxes 
    In November 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2015-17, "Balance Sheet Classification of Deferred Taxes."   This update requires that deferred tax liabilities and assets be classified as noncurrent on the balance sheet rather than as separate current and noncurrent amounts.  We adopted the provisions of this ASU during the first quarter of 2016 and applied it retrospectively.  The adoption of ASU 2015-17 resulted in the presentation of $110 million of current deferred income tax assets as a reduction of "Deferred income taxes" in the long-term liabilities section of the Consolidated Balance Sheet at June 30, 2016.  We retrospectively presented the December 31, 2015, Consolidated Balance Sheet and related disclosures to reflect the reclassification of $121 million of deferred income tax assets from "Deferred income taxes" in the current assets section of the balance sheet to "Deferred income taxes" in the long-term liabilities section of the balance sheet.
  3. New Accounting Pronouncement- Stock-Based Compensation 
    In March 2016, the FASB issued ASU No. 2016-09, "Improvements to Employee Share-Based Payment Accounting." We adopted the provisions of this ASU during the first quarter of 2016.  This update principally affects the recognition of excess tax benefits and deficiencies and the cash flow classification of share-based compensation-related transactions.  The requirement to recognize excess tax benefits and deficiencies as income tax expense or benefit in the income statement was applied prospectively, with a benefit of $6 million recognized in the "Provision for income taxes" line item for the six months ended June 30, 2016.  The classification requirements on the Consolidated Statements of Cash Flows for the adoption of ASU 2016-09 resulted in a $23 million increase in "Current liabilities other than debt" within the operating activities section and a corresponding decrease in "Common stock transactions" within the financing activities section for the first six months of 2016.  We retrospectively presented the Consolidated Statements of Cash Flows for the first six months of 2015 to reflect a $28 million increase in "Current liabilities other than debt" within the operating activities section and a corresponding decrease in "Common stock transactions" within the financing activities section.

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/norfolk-southern-reports-second-quarter-2016-results-300304417.html

SOURCE Norfolk Southern Corporation


Source: PR Newswire (July 27, 2016 - 8:00 AM EDT)

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