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Norfolk Southern reports first-quarter 2019 results

Achieves record first-quarter railway operating revenues, operating income, operating ratio, net income and earnings per share

NORFOLK, Va., April 24, 2019 /PRNewswire/ -- Norfolk Southern Corporation (NSC) today reported first-quarter financial results.

First-quarter net income was $677 million, up 23 percent year-over-year, a result of a 16 percent increase in income from railway operations and an increase in other income. Diluted earnings per share were $2.51, up 30 percent year-over-year and a first-quarter record.

"Our first-quarter results reflect the initial steps in the implementation of our new strategic plan that are transforming our company," said James A. Squires, Norfolk Southern chairman, president and CEO. "We set company records for many financial measures in the first quarter, while improving our service product for our customers. We are intensely focused on the execution of the initiatives in our strategic plan that will drive shareholder value."

First-quarter summary

  • Railway operating revenues of $2.8 billion, a first-quarter record, increased 5 percent compared with prior year, due to an increase in revenue per unit, resulting from increased rates as well as higher fuel surcharge revenue.   
  • Railway operating expenses were $1.9 billion, a decrease of $8 million, compared with the same period last year as fuel price declines and lower compensation and benefits expenses were offset by increased purchased services and rents.      
  • Income from railway operations was $966 million, an increase of 16 percent year-over-year, and a first-quarter record. The railway operating ratio, or operating expenses as a percentage of revenues, was 66.0 percent, also 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 is a major transporter of industrial products, including chemicals, agriculture, and metals and construction materials. In addition, the railroad operates the most extensive intermodal network in the East and is a principal carrier of coal, automobiles, and automotive parts.

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)



First Quarter


2019


2018


($ in millions, except per share amounts)







Railway operating revenues






Merchandise

$

1,686


$

1,605

Intermodal


719



678

Coal


435



434

Total railway operating revenues


2,840



2,717







Railway operating expenses






Compensation and benefits


727



737

Purchased services and rents


424



401

Fuel


250



266

Depreciation


283



272

Materials and other


190



206

Total railway operating expenses


1,874



1,882







Income from railway operations


966



835







Other income – net


44



8

Interest expense on debt


149



136







Income before income taxes


861



707







Income taxes






Current


127



110

Deferred


57



45

Total income taxes


184



155







Net income

$

677


$

552







Earnings per share – diluted

$

2.51


$

1.93









Weighted average shares outstanding – diluted


269.4



285.9




See accompanying notes to consolidated financial statements.

 

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income

(Unaudited)



First Quarter


2019


2018


($ in millions)







Net income

$

677


$

552

Other comprehensive income (loss), before tax:






Pension and other postretirement benefits (expense)


5



(7)

Other comprehensive income (loss) of






equity investees


(1)



1

Other comprehensive income (loss), before tax


4



(6)









Income tax benefit (expense) related to items of






other comprehensive income (loss)


(1)



2







Other comprehensive income (loss), net of tax


3



(4)







Total comprehensive income

$

680


$

548




See accompanying notes to consolidated financial statements.

 

Norfolk Southern Corporation and Subsidiaries

Consolidated Balance Sheets

(Unaudited)



March 31,


December 31,


2019


2018


($ in millions)

Assets








Current assets:








Cash and cash equivalents

$


411


$


358

Accounts receivable – net



1,048




1,009

Materials and supplies



228




207

Other current assets



235




288

Total current assets



1,922




1,862









Investments



3,198




3,109

Properties less accumulated depreciation of $12,374 at








both periods



31,158




31,091

Other assets



784




177









Total assets

$


37,062


$


36,239









Liabilities and stockholders' equity








Current liabilities:








Accounts payable

$


1,334


$


1,505

Short-term debt



250




Income and other taxes



338




255

Other current liabilities



378




246

Current maturities of long-term debt



585




585

Total current liabilities



2,885




2,591









Long-term debt



10,569




10,560

Other liabilities



1,759




1,266

Deferred income taxes



6,518




6,460









Total liabilities



21,731




20,877









Stockholders' equity:








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








  authorized; outstanding 265,967,039 and 268,098,472 shares,








  respectively, net of treasury shares



267




269

Additional paid-in capital



2,213




2,216

Accumulated other comprehensive loss



(560)




(563)

Retained income



13,411




13,440









Total stockholders' equity



15,331




15,362









Total liabilities and stockholders' equity

$


37,062


$


36,239




See accompanying notes to consolidated financial statements.

 

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)



First Three Months


2019


2018


($ in millions)

Cash flows from operating activities






Net income

$

677


$

552

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






Depreciation


283



272

Deferred income taxes


57



45

Gains and losses on properties


(18)



(8)

Changes in assets and liabilities affecting operations:






Accounts receivable


(39)



(26)

Materials and supplies


(21)



(23)

Other current assets


12



13

Current liabilities other than debt


(27)



12

Other – net


(43)



(21)







Net cash provided by operating activities


881



816







Cash flows from investing activities






Property additions


(467)



(383)

Property sales and other transactions


152



13

Investment purchases


(2)



(2)

Investment sales and other transactions


(33)



1







Net cash used in investing activities


(350)



(371)







Cash flows from financing activities






Dividends


(230)



(205)

Common stock transactions


2



(1)

Purchase and retirement of common stock


(500)



(300)

Proceeds from borrowings – net of issuance costs


250



543

Debt repayments




(100)







Net cash used in financing activities


(478)



(63)







Net increase in cash, cash equivalents, and restricted cash


53



382







Cash, cash equivalents, and restricted cash






At beginning of year


446



690







At end of period

$

499


$

1,072







Supplemental disclosures of cash flow information






Cash paid during the period for:






Interest (net of amounts capitalized)

$

112


$

69

Income taxes (net of refunds)


9



7




See accompanying notes to consolidated financial statements.

 

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Changes in Stockholders' Equity

(Unaudited)




Common

Stock


Additional

Paid-in

Capital


Accum. Other

Comprehensive

Loss


Retained

Income


Total


($ in millions, except per share amounts)











Balance at December 31, 2018

$

269


$

2,216


$

(563)


$

13,440


$

15,362











Comprehensive income:










Net income







677


677

Other comprehensive income





3




3

Total comprehensive income









680

Dividends on common stock,










$0.86 per share







(230)


(230)

Share repurchases

(3)


(22)




(475)


(500)

Stock-based compensation

1


19




(1)


19











Balance at March 31, 2019

$

267


$

2,213


$

(560)


$

13,411


$

15,331




Common
Stock


Additional
Paid-in
Capital


Accum. Other
Comprehensive
Loss


Retained
Income


Total


($ in millions, except per share amounts)











Balance at December 31, 2017

$

285


$

2,254


$

(356)


$

14,176


$

16,359











Comprehensive income:










Net income







552


552

Other comprehensive loss





(4)




(4)

Total comprehensive income









548

Dividends on common stock,










$0.72 per share







(205)


(205)

Share repurchases

(2)


(16)




(282)


(300)

Stock-based compensation

1


17




(2)


16

Reclassification of stranded










tax effects





(88)


88












Balance at March 31, 2018

$

284


$

2,255


$

(448)


$

14,327


$

16,418




See accompanying notes to consolidated financial statements.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:





1.

Stock Repurchase Program


     We repurchased and retired 2.9 million shares and 2.1 million shares of common stock under our stock
repurchase program in the first three months of 2019 and 2018, respectively, at a cost of $500 million and
$300 million, respectively.  Since the beginning of 2006, we have repurchased and retired 188.5 million shares
at a total cost of $14.6 billion.



2.

Leases



     On January 1, 2019, we adopted Financial Accounting Standards Board (FASB) Accounting Standards
Update (ASU) 2016-02, "Leases (Topic 842)" which requires lessees to recognize right-of-use (ROU) assets a
nd lease liabilities on the balance sheet for leases greater than twelve months.  As a result of the adoption, the
Consolidated Balance Sheet at March 31, 2019 includes the recognition of ROU assets of $593 million included
in "Other assets," current lease liabilities of $93 million included in "Other current liabilities," and non-current lease
liabilities of $500 million included in "Other liabilities."



3.

Restricted Cash



     The "Cash, cash equivalents, and restricted cash" line item in the Consolidated Statements of Cash Flows
includes restricted cash of $88 million at March 31, 2019 and December 31, 2018, reflecting deposits held by a
third-party bond agent as collateral for certain debt obligations maturing in 2019.  The restricted cash balance is
included as part of "Other current assets" on the Consolidated Balance Sheets in both periods.



4.

Reclassification of Stranded Tax Effects



     In February 2018, the FASB issued ASU 2018-02, "Reclassification of Certain Tax Effects from Accumulated
Other Comprehensive Income."  We adopted the provisions of ASU 2018-02 in the first quarter of 2018 resulting
in an increase to "Accumulated other comprehensive loss" of $88 million and a corresponding increase to "Retained i
ncome," with no impact on "Total stockholders' equity."

 

Cision

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