NORFOLK SOUTHERN CORPORATION NORFOLK, Va., Oct. 26, 2016 /PRNewswire/ -- Norfolk Southern Corporation (NYSE: NSC) today reported financial results for third-quarter 2016. Net income was $460 million, 2 percent higher compared with $452 million during the same period of 2015. Diluted earnings per share were $1.55, 4 percent higher compared with $1.49 per diluted share earned in the third quarter last year.
"Our continued focus on efficiency and asset utilization, balanced with our commitment to customer service, drove an operating ratio of 67.5 percent for the quarter and a record 68.7 percent for the first nine months, setting us well on the way to achieving productivity savings of about $250 million and an operating ratio below 70 percent for the year -- even in the face of economic headwinds," said Chairman, President and CEO James A. Squires. "As we move forward, we are well positioned for growth opportunities longer term and confident in our ability to drive shareholder value."
Third-quarter summary
-- Railway operating revenues were $2.5 billion, down 7 percent compared
with third-quarter 2015, due to reduced volumes and lower fuel surcharge
revenues. Overall volume declined 4 percent to 1.9 million units for the
quarter.
-- General merchandise revenues were $1.6 billion, 4 percent lower than the
same period last year. Volume declined 4 percent, due to fewer crude
oil, vehicles, pulpboard, and feed market shipments. The five
merchandise commodity groups reported the following year-over-year
revenue results:
-- Chemicals: $408 million, down 10 percent
-- Agriculture: $380 million, even
-- Metals/Construction: $337 million, up 2 percent
-- Automotive: $236 million, down 4 percent
-- Paper/Forest: $191 million, down 6 percent
-- Intermodal revenues were $575 million, 7 percent lower compared with
third-quarter 2015. Volume declined one percent due to lower Triple
Crown Services volume, a result of last year's restructuring. Domestic
volume, excluding Triple Crown Services, and International volume were
up 8 percent and one percent, respectively.
-- Coal revenues were $397 million, 18 percent lower compared with the same
quarter last year. Above-normal stockpiles and low natural gas prices
combined to decrease volume by 15 percent.
-- Railway operating expenses declined 10 percent to $1.7 billion,
primarily due to targeted expense reduction initiatives, reduced fuel
expenses, the absence of last year's restructuring costs, and gains from
the disposition of operating property. These decreases were partially
offset by higher incentive compensation expense related to improved
operating results.
-- Income from railway operations was $820 million, flat compared with
third-quarter 2015.
-- The composite service metric, which measures train performance, terminal
operations, and operating plan adherence, improved 8 percent in the
quarter, and 14 percent for the first nine months, compared with the
same periods last year.
-- The railway operating ratio, or operating expenses as a percentage of
revenue, was 67.5 percent, a 220 basis point improvement compared with
69.7 percent in the third quarter of last year.
About Norfolk Southern
Norfolk Southern Corporation (NYSE: NSC) is one of the nation's premier transportation companies. Its Norfolk Southern Railway Company subsidiary operates approximately 20,000 route milesin 22 states and the District of Columbia, serves every major container port in the eastern United States, and provides efficient connections to other rail carriers. Norfolk Southern operates the most extensive intermodal network in the East and is a major transporter of coal, automotive, and industrial products.
Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Income
(Unaudited)
Third Quarter First Nine Months
2016 2015 2016 2015
---- ---- ---- ----
($ in millions, except per share amounts)
Railway operating revenues
Merchandise $1,552 $1,610 $4,678 $4,757
Intermodal 575 621 1,635 1,846
Coal 397 482 1,085 1,390
--- ----- -----
Total railway operating revenues 2,524 2,713 7,398 7,993
----- ----- ----- -----
Railway operating expenses
Compensation and benefits 691 702 2,081 2,209
Purchased services and rents 386 451 1,149 1,312
Fuel 181 221 504 740
Depreciation 258 275 767 767
Materials and other 188 242 584 723
--- --- --- ---
Total railway operating expenses 1,704 1,891 5,085 5,751
----- ----- ----- -----
Income from railway operations 820 822 2,313 2,242
Other income - net 29 39 49 79
Interest expense on debt 144 137 421 403
--- --- --- ---
Income before income taxes 705 724 1,941 1,918
Provision for income taxes
Current 169 251 512 667
Deferred 76 21 177 56
--- --- ---
Total income taxes 245 272 689 723
--- --- --- ---
Net income $460 $452 $1,252 $1,195
==== ==== ====== ======
Earnings per share
Basic $1.56 $1.50 $4.23 $3.93
Diluted 1.55 1.49 4.21 3.90
Weighted average shares outstanding
Basic 292.7 300.1 294.9 303.2
Diluted 294.7 302.5 296.7 305.8
See accompanying notes to consolidated financial statements.
Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Comprehensive Income
(Unaudited)
Third Quarter First Nine Months
2016 2015 2016 2015
---- ---- ---- ----
($ in millions)
Net income $460 $452 $1,252 $1,195
Other comprehensive income, before tax:
Pension and other postretirement benefits 7 10 20 31
Other comprehensive loss of
equity investees - - - (4)
--- --- --- ---
Other comprehensive income, before tax 7 10 20 27
Income tax expense related to items of other
comprehensive income (3) (3) (8) (11)
--- --- --- ---
Other comprehensive income, net of tax 4 7 12 16
--- --- --- ---
Total comprehensive income $464 $459 $1,264 $1,211
==== ==== ====== ======
See accompanying notes to consolidated financial statements.
Norfolk Southern Corporation and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
September 30, December 31,
2016 2015
---- ----
($ in millions)
Assets
Current assets:
Cash and cash equivalents $ 984 $ 1,101
Accounts receivable - net 960 946
Materials and supplies 301 271
Other current assets 72 194
--- ---
Total current assets 2,317 2,512
Investments 2,779 2,572
Properties less accumulated depreciation of $11,663 and
$11,478, respectively 29,467 28,992
Other assets 69 63
---
Total assets $ 34,632 $ 34,139
=== ====== === ======
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 1,131 $ 1,091
Short-term debt - 200
Income and other taxes 218 203
Other current liabilities 333 237
Current maturities of long-term debt 550 500
--- ---
Total current liabilities 2,232 2,231
Long-term debt 9,555 9,393
Other liabilities 1,322 1,385
Deferred income taxes 9,127 8,942
----- -----
Total liabilities 22,236 21,951
Stockholders' equity:
Common stock $1.00 per share par value, 1,350,000,000 shares
authorized; outstanding 291,942,235 and 297,795,016 shares,
respectively, net of treasury shares 293 299
Additional paid-in capital 2,169 2,143
Accumulated other comprehensive loss (433) (445)
Retained income 10,367 10,191
------
Total stockholders' equity 12,396 12,188
------ ------
Total liabilities and stockholders' equity $ 34,632 $ 34,139
=== ====== === ======
See accompanying notes to consolidated financial statements.
Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
First Nine Months
2016 2015
---- ----
($ in millions)
Cash flows from operating
activities
Net income $1,252 $1,195
Reconciliation of net income to
net cash provided
by operating activities:
Depreciation 770 770
Deferred income taxes 177 56
Gains and losses on properties and
investments (38) (20)
Changes in assets and liabilities
affecting operations:
Accounts receivable 8 (48)
Materials and supplies (30) (52)
Other current assets 130 295
Current liabilities other than
debt 149 88
Other - net (106) (76)
---- ---
Net cash provided by operating
activities 2,312 2,208
Cash flows from investing
activities
Property additions (1,304) (1,777)
Property sales and other
transactions 87 43
Investment purchases (119) (5)
Investment sales and other
transactions 6 32
--- ---
Net cash used in investing
activities (1,330) (1,707)
Cash flows from financing
activities
Dividends (523) (537)
Common stock transactions 33 1
Purchase and retirement of common
stock (603) (997)
Proceeds from borrowings - net 594 594
Debt repayments (600) (102)
---- ----
Net cash used in financing
activities (1,099) (1,041)
------ ------
Net decrease in cash and cash
equivalents (117) (540)
Cash and cash equivalents
At beginning of year 1,101 973
----- ---
At end of period $984 $433
==== ====
Supplemental disclosures of cash
flow information
Cash paid during the period for:
Interest (net of
amounts
capitalized) $337 $320
Income taxes (net of refunds) 409 350
See accompanying notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:
1. Stock Repurchase ProgramWe repurchased and retired 7.2 million and 10.3
million shares of common stock under our stock repurchase program in the
first nine months of 2016 and 2015, respectively, at a cost of $603
million and $997 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
158.3 million shares at a total cost of $10.1 billion.
2. Restructuring CostsThird quarter 2015 operating expenses include $37
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 $23 million, or $0.08 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 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 $121 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 September 30, 2016. We retrospectively presented the December
31, 2015, Consolidated Balance Sheet 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.
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 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 $12 million recognized in the "Provision for income taxes" line item
for the nine months ended September 30, 2016. The classification
requirements on the Consolidated Statements of Cash Flows for the
adoption of ASU 2016-09 resulted in a $29 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 nine months of 2016. We
retrospectively presented the Consolidated Statements of Cash Flows for
the first nine months of 2015 to reflect a $29 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-third-quarter-2016-results-300351286.html
SOURCE Norfolk Southern Corporation
