NORFOLK SOUTHERN CORPORATION NORFOLK, Va., Jan. 25, 2017 /PRNewswire/ -- Norfolk Southern Corporation (NYSE: NSC) today reported fourth-quarter and 2016 financial results.
Net income for the quarter was $416 million, a 15 percent increase compared with $361 million during the same period of 2015. Diluted earnings per share were $1.42, up 18 percent compared with $1.20 diluted earnings per share in the fourth quarter last year. Norfolk Southern announced Tuesday that it increased its quarterly dividend to $0.61 per share, reflecting a 2 cent, or 3 percent, increase over the previous quarter's dividend.
For 2016, net income was $1.7 billion, up 7 percent compared with $1.6 billion in 2015. Diluted earnings per share increased 10 percent to $5.62 compared with $5.10 per diluted share in the prior year. Results for 2015 included restructuring expenses that reduced fourth-quarter 2015 net income by $31 million, or $0.10 per diluted share, and lowered 2015 net income by $58 million, or $0.19 per diluted share for the full year.
"2016 was a pivotal year as Norfolk Southern began implementing its new Strategic Plan. We delivered $250 million of productivity savings and recorded our best ever operating ratio, notwithstanding challenging business conditions," said James A. Squires, Norfolk Southern chairman, president and CEO. "With the dedication and support of Norfolk Southern's talented employees, we improved service for customers while positioning the company for further growth in 2017 and beyond. We are poised to continue building on our success and deliver an additional $100 million of productivity savings in 2017 on the way to our goal of $650 million of annual savings by 2020. We remain steadfast in our commitment to delivering superior shareholder value through the execution of our Strategic Plan."
FOURTH-QUARTER SUMMARY
-- Railway operating revenues of $2.5 billion declined 1 percent compared
with fourth-quarter 2015, reflecting lower merchandise and coal traffic
volume, as well as reduced fuel surcharges. These declines were offset
in part by intermodal volume growth that eclipsed the effects of the
2015 Triple Crown restructuring.
-- General merchandise revenues were $1.5 billion, 1 percent lower than the
same period last year. Volume was 3% lower overall, as growth in steel
and agriculture was offset by declines in energy markets, vehicles, and
paper and forest products. Norfolk Southern's five merchandise commodity
groups reported the following year-over-year revenue results:
-- Agriculture: $399 million, up 4 percent
-- Chemicals: $395 million, down 7 percent
-- Metals/Construction: $296 million, up 6 percent
-- Automotive: $237 million, down 5 percent
-- Paper/Forest: $177 million, down 5 percent
Intermodal revenues increased to $583 million, a 4 percent gain compared with fourth-quarter 2015. Volumes increased 7 percent, with growth in domestic and international traffic offsetting the Triple Crown restructuring.
Coal revenues declined 7 percent to $403 million compared with fourth-quarter 2015. Volume fell 4 percent with an increase in export coal softening the decline in the utility market.
Railway operating expenses declined $147 million, or 8 percent, to $1.7 billion compared with same period last year due to targeted expense reductions and the absence of last year's restructuring costs.
Income from railway operations was $761 million, an increase of 19 percent compared with fourth-quarter 2015.
The composite service metric, which measures train performance, terminal operations, and operating plan adherence, was 80 percent, a 200 basis point improvement compared with 78 percent in the same quarter last year.
The railway operating ratio, or operating expenses as a percentage of revenues, was 69.4 percent, a 510 basis point improvement compared with 74.5 percent in the fourth quarter of 2015.
2016 SUMMARY
-- Railway operating revenues were $9.9 billion, 6 percent lower compared
with 2015. The decrease was driven by a 3 percent volume decline due to
reductions in energy-related markets and the Triple Crown restructuring,
as well as reduced fuel surcharges.
-- General merchandise revenues were $6.2 billion, a 2 percent decrease
compared with the prior year. Volume declined 2 percent, primarily due
to reduced demand in energy markets, and fuel surcharges were lower.
-- Intermodal revenues totaled $2.2 billion, 8 percent lower compared with
2015, reflecting the Triple Crown restructuring, as well as reduced fuel
surcharges. International and domestic growth more than offset the
volume decline from the Triple Crown restructuring.
-- Coal revenues were $1.5 billion, down 18 percent year-over-year. Reduced
utility volumes combined with a weak global export market lowered total
volume by 16 percent.
-- Railway operating expenses declined $813 million, or 11 percent, to $6.8
billion primarily due to targeted expense reduction initiatives, lower
fuel expenses, the absence of last year's restructuring cost, and
service improvements.
-- Income from railway operations was $3.1 billion, a 7 percent increase
compared with the previous year.
-- The composite service metric was 80 percent, an 800 basis point
improvement compared with 72 percent last year.
-- The operating ratio for the year was a record 68.9 percent, a 370 basis
point improvement compared with 72.6 percent in the prior year.
For 2017, Norfolk Southern plans to invest $1.9 billion to maintain the safety of its rail network, enhance service, improve operational efficiency, and support growth opportunities, which is consistent with Norfolk Southern's total capital investment of $1.9 billion in 2016.
About Norfolk Southern
Norfolk Southern Corporation (NYSE: NSC) is one of the nation's premier transportation companies. Its Norfolk Southern Railway Company subsidiary operates approximately 20,000 route miles in 22 states and the District of Columbia, serves every major container port in the eastern United States, and provides efficient connections to other rail carriers. Norfolk Southern operates the most extensive intermodal network in the East and is a major transporter of coal, automotive, and industrial products.
Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Income
(Unaudited)
Fourth Quarter Years Ended December 31,
2016 2015 2016 2015
---- ---- ---- ----
($ in millions, except per share amounts)
Railway operating revenues
Merchandise $1,504 $1,522 $6,182 $6,279
Intermodal 583 563 2,218 2,409
Coal 403 433 1,488 1,823
--- ----- -----
Total railway operating revenues 2,490 2,518 9,888 10,511
----- ----- ----- ------
Railway operating expenses
Compensation and benefits 662 702 2,743 2,911
Purchased services and rents 399 440 1,548 1,752
Fuel 194 194 698 934
Depreciation 259 287 1,026 1,054
Materials and other 215 253 799 976
--- --- --- ---
Total railway operating expenses 1,729 1,876 6,814 7,627
----- ----- ----- -----
Income from railway operations 761 642 3,074 2,884
Other income - net 22 24 71 103
Interest expense on debt 142 142 563 545
--- --- --- ---
Income before income taxes 641 524 2,582 2,442
Provision for income taxes
Current 175 (101) 687 566
Deferred 50 264 227 320
--- --- ---
Total income taxes 225 163 914 886
--- --- --- ---
Net income $416 $361 $1,668 $1,556
==== ==== ====== ======
Earnings per share
Basic $1.43 $1.21 $5.66 $5.13
Diluted 1.42 1.20 5.62 5.10
Weighted average shares outstanding
Basic 291.2 297.9 293.9 301.9
Diluted 293.7 300.4 296.0 304.4
See accompanying notes to consolidated financial statements.
Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Comprehensive Income
(Unaudited)
Fourth Quarter Years Ended December 31,
2016 2015 2016 2015
---- ---- ---- ----
($ in millions)
Net income $416 $361 $1,668 $1,556
Other comprehensive loss, before tax:
Pension and other postretirement benefits (94) (107) (74) (76)
Other comprehensive income (loss) of
equity investees 5 4 5 -
--- --- --- ---
Other comprehensive loss, before tax (89) (103) (69) (76)
Income tax benefit related to items of other
comprehensive loss 35 40 27 29
--- --- --- ---
Other comprehensive loss, net of tax (54) (63) (42) (47)
--- --- --- ---
Total comprehensive income $362 $298 $1,626 $1,509
==== ==== ====== ======
See accompanying notes to consolidated financial statements.
Norfolk Southern Corporation and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
At December 31,
2016 2015
---- ----
($ in millions)
Assets
Current assets:
Cash and cash equivalents $ 956 $ 1,101
Accounts receivable - net 945 946
Materials and supplies 257 271
Other current assets 133 194
--- ---
Total current assets 2,291 2,512
Investments 2,777 2,572
Properties less accumulated depreciation of $11,737 and
$11,478, respectively 29,751 28,992
Other assets 73 63
---
Total assets $ 34,892 $ 34,139
=== ====== === ======
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 1,215 $ 1,091
Short-term debt 100 200
Income and other taxes 245 203
Other current liabilities 229 237
Current maturities of long-term debt 550 500
--- ---
Total current liabilities 2,339 2,231
Long-term debt 9,562 9,393
Other liabilities 1,442 1,385
Deferred income taxes 9,140 8,942
----- -----
Total liabilities 22,483 21,951
Stockholders' equity:
Common stock $1.00 per share par value, 1,350,000,000 shares
authorized; outstanding 290,417,610 and 297,795,016 shares,
respectively, net of treasury shares 292 299
Additional paid-in capital 2,179 2,143
Accumulated other comprehensive loss (487) (445)
Retained income 10,425 10,191
------
Total stockholders' equity 12,409 12,188
------ ------
Total liabilities and stockholders' equity $ 34,892 $ 34,139
=== ====== === ======
See accompanying notes to consolidated financial statements.
Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
Years Ended December 31,
2016 2015
---- ----
($ in millions)
Cash flows from operating activities
Net income $1,668 $1,556
Reconciliation of net income to net cash provided
by operating activities:
Depreciation 1,030 1,059
Deferred income taxes 227 320
Gains and losses on properties and investments (46) (30)
Changes in assets and liabilities affecting operations:
Accounts receivable 23 109
Materials and supplies 42 (35)
Other current assets 82 192
Current liabilities other than debt 158 (152)
Other - net (150) (111)
---- ----
Net cash provided by operating activities 3,034 2,908
Cash flows from investing activities
Property additions (1,887) (2,385)
Property sales and other transactions 130 63
Investment purchases (123) (5)
Investment sales and other transactions 48 240
--- ---
Net cash used in investing activities (1,832) (2,087)
Cash flows from financing activities
Dividends (695) (713)
Common stock transactions 57 12
Purchase and retirement of common stock (803) (1,075)
Proceeds from borrowings - net 694 1,185
Debt repayments (600) (102)
---- ----
Net cash used in financing activities (1,347) (693)
------ ----
Net increase (decrease) in cash and cash equivalents (145) 128
Cash and cash equivalents
At beginning of year 1,101 973
----- ---
At end of year $956 $1,101
==== ======
Supplemental disclosures of cash flow information
Cash paid during the year for:
Interest (net of amounts capitalized) $543 $518
Income taxes (net of refunds) 593 386
See accompanying notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:
1. Stock Repurchase ProgramWe repurchased and retired 9.2 million and 11.3
million shares of common stock under our stock repurchase program in 2016
and 2015, respectively, at a cost of $803 million and $1.1 billion,
respectively. On August 1, 2012, our Board of Directors authorized the
repurchase of up to an additional 50 million shares of common stock
through December 31, 2017, and 14.7 million shares remain under this
authority as of December 31, 2016. 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 160.3
million shares at a total cost of $10.3 billion.
2. Restructuring CostsFourth quarter 2015 operating expenses include $49
million of costs associated with the restructuring of our Triple Crown
Services subsidiary and the closure of our Roanoke, Virginia, office
which reduced net income by $31 million, or $0.10 per diluted share. For
2015, results include $93 million of such costs, which reduced net income
by $58 million, or $0.19 per diluted share.
3. New Accounting Pronouncement- Deferred TaxesIn 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 retrospectively adopted the
provisions of this ASU during the first quarter of 2016 and presented the
December 31, 2015, Consolidated Balance Sheet to reflect the
reclassification of $121 million of deferred income tax assets from
current assets to "Deferred income taxes" in the long-term liabilities
section of the balance sheet.
4. New Accounting Pronouncement- Stock-Based CompensationIn 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 affected 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 $17 million recognized in the "Provision for income taxes" line item
for the year ended December 31, 2016. The classification requirements on
the Consolidated Statements of Cash Flows for the adoption of ASU 2016-09
resulted in a $34 million increase in operating activities and a
corresponding decrease in financing activities for the year ended
December 31, 2016. We retrospectively presented the Consolidated
Statements of Cash Flows for the year ended December 31, 2015 to reflect
a $31 million increase in operating activities and a corresponding
decrease in financing activities.
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/norfolk-southern-reports-fourth-quarter-and-full-year-2016-results-300396243.html
SOURCE Norfolk Southern Corporation
