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Norfolk Southern reports first-quarter 2014 results

NSC | April 23, 2014

NORFOLK, Va., April 23, 2014 /PRNewswire/ -- Norfolk Southern (NYSE: NSC) reported first-quarter net income of $368 million, or $1.17 per diluted share, compared with $450 million, or $1.41 per diluted share, earned in the same period of 2013. First-quarter 2013 net income included a $60 million, or $0.19 per diluted share, gain from a land sale.

First-Quarter 2014 Results

Railway operating revenues totaled $2.7 billion.
Income from railway operations was $667 million.
Net income totaled $368 million.
Diluted earnings per share of $1.17.
The railway operating ratio was 75.2 percent.

"Following the extreme winter weather across the U.S. rail network which impacted first-quarter results, we are seeing a rebound in shipments across all of our business," said Norfolk Southern CEO Wick Moorman. "Our people responded admirably to meet the challenges of the harsh conditions, and we remain focused on delivering superior service to our customers."

Railway operating revenues were $2.7 billion, 2 percent lower compared with first-quarter 2013, and shipment volumes decreased 1 percent.

First-Quarter Revenue by Commodity

Chemicals, up 12 percent.
Intermodal, up 4 percent.
Agriculture, even.
Metals/Construction, down 1 percent.
Paper/Forest, down 3 percent.
Automotive, down 7 percent
Coal, down 15 percent.

For the first quarter, general merchandise revenues were $1.6 billion, 1 percent higher than the same period last year, despite overall volume declining 1 percent. Increased crude and liquefied petroleum gas shipments were offset by declines in automotive, metals/construction, and paper/forest shipments.

Intermodal revenues improved 4 percent, to $596 million, compared with first-quarter 2013. Growth primarily in domestic business pushed traffic volume up 3 percent in the quarter compared with the same period of 2013.

First-quarter coal revenues were $541 million, 15 percent lower compared with the same quarter of 2013, the result of a 13 percent volume decrease due primarily to lower utility and export shipments.

Railway operating expenses for the first quarter were $2 billion, 1 percent lower than in the same period of 2013.

Income from railway operations was $667 million, 3 percent lower compared with first-quarter 2013.

The quarterly railway operating ratio, or operating expenses as a percentage of revenue, was 75.2 percent versus 74.8 percent in the same period of 2013.

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.

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Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Income
(Unaudited)

	First Quarter
	2014		2013
	($ in millions, except per share amounts)

Railway operating revenues
Coal	$	541	$	635
General merchandise		1,552		1,530
Intermodal		596		573
Total railway operating revenues		2,689		2,738

Railway operating expenses
Compensation and benefits		740		780
Purchased services and rents		392		393
Fuel		432		429
Depreciation		237		227
Materials and other		221		218
Total railway operating expenses		2,022		2,047

Income from railway operations		667		691

Other income – net (note 1)		26		135
Interest expense on debt		139		129

Income before income taxes		554		697

Provision for income taxes
Current		194		173
Deferred		(8)		74
Total income taxes		186		247

Net income	$	368	$	450

Earnings per share (note 1)
Basic	$	1.18	$	1.43
Diluted		1.17		1.41

Weighted average shares outstanding (note 2)
Basic		309.5		314.5
Diluted		312.6		318.1

See accompanying notes to consolidated financial statements.

Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Comprehensive Income
(Unaudited)

	First Quarter
	2014		2013
	($ in millions)

Net income	$	368	$	450
Other comprehensive income, before tax:
Pension and other postretirement benefits		299		36
Other comprehensive income of equity investees		3		1
Other comprehensive income, before tax		302		37
Income tax expense related to items of other
comprehensive income		(114)		(14)
Other comprehensive income, net of tax		188		23

Total comprehensive income	$	556	$	473

See accompanying notes to consolidated financial statements.

Norfolk Southern Corporation and Subsidiaries
Consolidated Balance Sheets
(Unaudited)

	March 31,		December 31,
	2014		2013
	($ in millions)
Assets
Current assets:
Cash and cash equivalents	$	1,522	$	1,443
Short-term investments		10		118
Accounts receivable – net		1,109		1,024
Materials and supplies		240		223
Deferred income taxes		179		180
Other current assets		70		87
Total current assets		3,130		3,075

Investments		2,466		2,439
Properties less accumulated depreciation of $10,512 and $10,387,
respectively		26,768		26,645
Other assets		336		324

Total assets	$	32,700	$	32,483

Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	1,194	$	1,265
Short-term debt		-		100
Income and other taxes		323		225
Other current liabilities		359		270
Current maturities of long-term debt		445		445
Total current liabilities		2,321		2,305

Long-term debt		8,909		8,903
Other liabilities		1,130		1,444
Deferred income taxes		8,647		8,542
Total liabilities		21,007		21,194

Stockholders' equity:
Common stock $1.00 per share par value, 1,350,000,000 shares
authorized; outstanding 309,646,086 and 308,878,402 shares,
respectively, net of treasury shares		311		310
Additional paid-in capital		2,085		2,021
Accumulated other comprehensive loss		(193)		(381)
Retained income		9,490		9,339

Total stockholders' equity		11,693		11,289

Total liabilities and stockholders' equity	$	32,700	$	32,483

See accompanying notes to consolidated financial statements.

Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)

	First Quarter
	2014		2013
	($ in millions)
Cash flows from operating activities
Net income	$	368	$	450
Reconciliation of net income to net cash provided by operating activities:
Depreciation		238		228
Deferred income taxes		(8)		74
Gains and losses on properties and investments (note 1)		(2)		(99)
Changes in assets and liabilities affecting operations:
Accounts receivable		(85)		(49)
Materials and supplies		(17)		(30)
Other current assets		17		17
Current liabilities other than debt		86		96
Other – net		(9)		36
Net cash provided by operating activities		588		723

Cash flows from investing activities
Property additions		(381)		(379)
Property sales and other transactions		22		19
Investments, including short-term		(3)		(5)
Investment sales and other transactions		108		(1)
Net cash used in investing activities		(254)		(366)

Cash flows from financing activities
Dividends		(167)		(157)
Common stock issued – net		62		55
Purchase and retirement of common stock (note 2)		(50)		(33)
Debt repayments		(100)		(203)
Net cash used in financing activities		(255)		(338)

Net increase in cash and cash equivalents		79		19

Cash and cash equivalents
At beginning of period		1,443		653

At end of period	$	1,522	$	672

Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest (net of amounts capitalized)	$	75	$	62
Income taxes (net of refunds)		60		23

See accompanying notes to consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:

Other Income – Net
In first quarter 2013, we recognized a $97 million gain on a land sale, which increased net income by $60 million or $0.19 per share.
Stock Repurchase Program
In each of the first quarters of 2014 and 2013, we repurchased 0.5 million shares of common stock, totaling $50 million and $33 million, respectively. We have remaining authorization from our Board of Directors to repurchase up to 37.7 million shares through December 31, 2017. 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 137.3 million shares at a total cost of $8.2 billion.