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Norfolk Southern reports third-quarter 2019 results

October 23, 2019

NORFOLK, Va., Oct. 23, 2019 /PRNewswire/ -- Norfolk Southern Corporation (NYSE: NSC) today reported third-quarter financial results.

Third-quarter net income was $657 million and diluted earnings per share were $2.49. The operating ratio for the quarter was 64.9%, a third-quarter record for NS. These results include a $32 million write-off of a receivable resulting from a legal dispute, which unfavorably impacted the operating ratio by 110 basis points and earnings per share by $0.09.

“Our team achieved a record third-quarter operating ratio while successfully rolling out the first phase of our TOP21 operating plan, followed by the swift transition to the plan’s second phase. These efforts produced an 11% reduction in crew starts and recrews compared to the third-quarter last year, robustly outpacing the 6% volume decline while maintaining resilient service that supported an 11th consecutive quarter of year-over-year revenue per unit growth,” said James A. Squires, Norfolk Southern chairman, president and CEO. “Initiatives to reimagine mechanical operations while maintaining a more efficient fleet of locomotives and railcars also progressed, as these and other efforts delivered significant cost savings this quarter. Looking ahead, additional productivity will be generated as we advance to the third phase of TOP21 and execute initiatives surrounding fuel efficiency, distributed power, intermodal operations, and our mechanical network, just to name a few. Norfolk Southern remains fully dedicated to our strategic plan for the creation of shareholder value through sweeping productivity improvements while maintaining a superior service product for our customers.”

Third-quarter summary and highlights

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 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)



Third Quarter


First Nine Months


2019


2018


2019


2018


(in millions, except per share amounts)









Railway operating revenues








Merchandise

$

1,731



$

1,737



$

5,173



$

5,060


Intermodal

707



746



2,127



2,138


Coal

403



464



1,306



1,364


Total railway operating revenues

2,841



2,947



8,606



8,562










Railway operating expenses








Compensation and benefits

682



725



2,121



2,168


Purchased services and rents

423



450



1,265



1,281


Fuel

226



274



730



812


Depreciation

286



276



853



821


Materials and other

228



202



610



599


Total railway operating expenses

1,845



1,927



5,579



5,681










Income from railway operations

996



1,020



3,027



2,881










Other income – net

22



30



88



67


Interest expense on debt

150



142



452



409










Income before income taxes

868



908



2,663



2,539










Income taxes








Current

119



157



382



437


Deferred

92



49



225



138


Total income taxes

211



206



607



575










Net income

$

657



$

702



$

2,056



$

1,964










Earnings per share - diluted

$

2.49



$

2.52



$

7.70



$

6.95










Weighted average shares outstanding - diluted

264.3



278.2



266.9



282.6



See accompanying notes to consolidated financial statements.

Norfolk Southern Corporation and Subsidiaries

Consolidated Balance Sheets

(Unaudited)



September 30,


December 31,


2019


2018


($ in millions)

Assets




Current assets:




Cash and cash equivalents

$

452



$

358


Accounts receivable – net

973



1,009


Materials and supplies

266



207


Other current assets

325



288


Total current assets

2,016



1,862






Investments

3,376



3,109


Properties less accumulated depreciation of $12,381




and $12,374, respectively

31,394



31,091


Other assets

714



177






Total assets

$

37,500



$

36,239






Liabilities and stockholders' equity




Current liabilities:




Accounts payable

$

1,407



$

1,505


Short-term debt

350




Income and other taxes

202



255


Other current liabilities

401



246


Current maturities of long-term debt

401



585


Total current liabilities

2,761



2,591






Long-term debt

11,085



10,560


Other liabilities

1,727



1,266


Deferred income taxes

6,689



6,460






Total liabilities

22,262



20,877






Stockholders' equity:




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




authorized; outstanding 260,746,663 and 268,098,472 shares,




respectively, net of treasury shares

262



269


Additional paid-in capital

2,219



2,216


Accumulated other comprehensive loss

(553)



(563)


Retained income

13,310



13,440






Total stockholders' equity

15,238



15,362






Total liabilities and stockholders' equity

$

37,500



$

36,239



See accompanying notes to consolidated financial statements.

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



First Nine Months


2019


2018


($ in millions)

Cash flows from operating activities




Net income

$

2,056



$

1,964


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




Depreciation

854



822


Deferred income taxes

225



138


Gains and losses on properties

(4)



(26)


Changes in assets and liabilities affecting operations:




Accounts receivable

34



(102)


Materials and supplies

(59)



(45)


Other current assets

40



45


Current liabilities other than debt

(72)



173


Other – net

(77)



(85)






Net cash provided by operating activities

2,997



2,884






Cash flows from investing activities




Property additions

(1,494)



(1,326)


Property sales and other transactions

282



93


Investment purchases

(12)



(4)


Investment sales and other transactions

(99)



96






Net cash used in investing activities

(1,323)



(1,141)






Cash flows from financing activities




Dividends

(705)



(627)


Common stock transactions

21



38


Purchase and retirement of common stock

(1,550)



(2,300)


Proceeds from borrowings – net of issuance costs

1,404



2,023


Debt repayments

(750)



(750)






Net cash used in financing activities

(1,580)



(1,616)






Net increase in cash, cash equivalents, and restricted cash

94



127






Cash, cash equivalents, and restricted cash




At beginning of year

446



690






At end of period

$

540



$

817






Supplemental disclosures of cash flow information




Cash paid during the period for:




Interest (net of amounts capitalized)

$

392



$

327


Income taxes (net of refunds)

404



314



See accompanying notes to consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:

1. Stock Repurchase Program
We repurchased and retired 8.4 million shares of common stock under our stock repurchase program during the first nine months of 2019, at a cost of $1.6 billion. During the first nine months of 2018, we repurchased and retired 12.8 million shares (5.7 million under an accelerated share repurchase program and 7.1 million shares under our ongoing program) at a cost of $2.1 billion. Since the beginning of 2006, we have repurchased and retired 194.0 million shares at a total cost of $15.7 billion.

2. Leases
On January 1, 2019, we adopted Financial Accounting Standards Board Accounting Standards Update 2016-02, “Leases (Topic 842)” which requires lessees to recognize right-of-use (ROU) assets and lease liabilities on the balance sheet for leases greater than twelve months. As a result of the adoption, the Consolidated Balance Sheet at September 30, 2019 includes the recognition of ROU assets of $561 million included in “Other assets,” current lease liabilities of $97 million included in “Other current liabilities,” and non-current lease liabilities of $464 million included in “Other liabilities.”

3. Restricted Cash
The “Cash, cash equivalents, and restricted cash” line item on the Consolidated Statements of Cash Flows includes restricted cash of $88 million at both September 30, 2019 and December 31, 2018, reflecting deposits held by a third-party bond agent as collateral for certain debt obligations maturing in October 2019. The restricted cash balance is included as part of “Other current assets” on the Consolidated Balance Sheets in both periods.

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SOURCE Norfolk Southern Corporation