Norfolk Southern reports second-quarter 2020 results

Rhea-AI Summary

Norfolk Southern Corporation (NYSE: NSC) announced second-quarter results with a net income of $392 million and diluted earnings per share of $1.53. Operating revenues fell 29% to $2.1 billion, influenced by a 26% decline in total volume. Operating expenses decreased by 21% to $1.5 billion, primarily due to lower costs in fuel, compensation, and services. The operating ratio stood at 70.7%. CEO James A. Squires emphasized the company's adaptability and commitment to shareholder value during economic disruptions.

Positive

• Net income was $392 million.
• Diluted earnings per share reached $1.53.
• Operating expenses reduced by 21%, reflecting cost management.
• Operational efficiency improved with a 70.7% operating ratio.

Negative

• Operating revenues decreased 29% compared to Q2 2019.
• Total volume declined by 26%, impacting revenue.

NORFOLK, Va., July 29, 2020 /PRNewswire/ -- Norfolk Southern Corporation (NYSE: NSC) today reported second-quarter financial results.

Second-quarter net income was $392 million, diluted earnings per share were $1.53, and the operating ratio was 70.7 percent.

"In a period when working safely and delivering for our customers was abruptly redefined, our employees responded by protecting each other and innovating to serve rapidly evolving freight demand. Underscoring our commitment to shareholder value, we forged ahead with our ongoing transformation by further reducing our hump yard footprint, achieving fuel efficiency gains, and increasing train size. These are astounding achievements while managing the unprecedented economic disruption and public health crisis," said James A. Squires, Norfolk Southern chairman, president and CEO. "We are mobilized and driven to meet the challenges and opportunities that lie ahead, and we will continue to create collaborative change and relentlessly pursue increased productivity as a leading supply chain partner throughout the economic recovery and beyond."   

Second-quarter summary

• Railway operating revenues of $2.1 billion decreased 29 percent compared with second-quarter 2019, driven by a 26 percent decline in total volume.
• Railway operating expenses of $1.5 billion decreased 21 percent compared with second-quarter 2019, driven by lower fuel, compensation and benefits, and purchased services expenses.
• Income from railway operations was $610 million and the operating ratio was 70.7 percent.

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. Additional risks include the impact of the COVID-19 pandemic on us, our customers, our supply chain, and our operations. 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.

http://www.norfolksouthern.com  

 

Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Income
(Unaudited)
	Second Quarter								First Six Months
	2020				2019				2020				2019
	(in millions, except per share amounts)
Railway operating revenues
Merchandise	$	1,307			$	1,756			$	2,979			$	3,442
Intermodal	569				701				1,224				1,420
Coal	209				468				507				903
Total railway operating revenues	2,085				2,925				4,710				5,765
Railway operating expenses
Compensation and benefits	586				712				1,208				1,439
Purchased services and rents	372				418				775				842
Fuel	84				254				273				504
Depreciation	282				284				574				567
Materials and other	151				192				317				382
Loss on asset disposal	—				—				385				—
Total railway operating expenses	1,475				1,860				3,532				3,734
Income from railway operations	610				1,065				1,178				2,031
Other income – net	49				22				71				66
Interest expense on debt	156				153				310				302
Income before income taxes	503				934				939				1,795
Income taxes
Current	66				136				110				263
Deferred	45				76				56				133
Total income taxes	111				212				166				396
Net income	$	392			$	722			$	773			$	1,399
Earnings per share – diluted	$	1.53			$	2.70			$	3.00			$	5.21
Weighted average shares outstanding – diluted	256.7				267.1				257.7				268.3
See accompanying notes to consolidated financial statements

 

Norfolk Southern Corporation and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
	June 30,				December 31,
	2020				2019
	($ in millions)
Assets
Current assets:
Cash and cash equivalents	$	1,143			$	580
Accounts receivable – net	822				920
Materials and supplies	257				244
Other current assets	128				337
Total current assets	2,350				2,081
Investments	3,590				3,428
Properties less accumulated depreciation of $11,823
and $11,982, respectively	31,217				31,614
Other assets	805				800
Total assets	$	37,962			$	37,923
Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	1,268			$	1,428
Income and other taxes	239				229
Other current liabilities	343				327
Current maturities of long-term debt	85				316
Total current liabilities	1,935				2,300
Long-term debt	12,612				11,880
Other liabilities	1,680				1,744
Deferred income taxes	6,874				6,815
Total liabilities	23,101				22,739
Stockholders' equity:
Common stock $1.00 per share par value, 1,350,000,000 shares
authorized; outstanding 255,109,247 and 257,904,956 shares,
respectively, net of treasury shares	256				259
Additional paid-in capital	2,217				2,209
Accumulated other comprehensive loss	(475)				(491)
Retained income	12,863				13,207
Total stockholders' equity	14,861				15,184
Total liabilities and stockholders' equity	$	37,962			$	37,923
See accompanying notes to consolidated financial statements

 

Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
	First Six Months
	2020				2019
	($ in millions)
Cash flows from operating activities
Net income	$	773			$	1,399
Reconciliation of net income to net cash provided by operating activities:
Depreciation	574				567
Deferred income taxes	56				133
Gains and losses on properties	(11)				(7)
Loss on asset disposal	385				—
Changes in assets and liabilities affecting operations:
Accounts receivable	98				(30)
Materials and supplies	(13)				(49)
Other current assets	30				55
Current liabilities other than debt	—				(30)
Other – net	(134)				(86)
Net cash provided by operating activities	1,758				1,952
Cash flows from investing activities
Property additions	(735)				(979)
Property sales and other transactions	258				214
Investment purchases	(5)				(12)
Investment sales and other transactions	(58)				(75)
Net cash used in investing activities	(540)				(852)
Cash flows from financing activities
Dividends	(482)				(458)
Common stock transactions	26				18
Purchase and retirement of common stock	(669)				(1,050)
Proceeds from borrowings	784				1,054
Debt repayments	(314)				(750)
Net cash used in financing activities	(655)				(1,186)
Net increase (decrease) in cash, cash equivalents, and restricted cash	563				(86)
Cash, cash equivalents, and restricted cash
At beginning of year	580				446
At end of period	$	1,143			$	360
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest (net of amounts capitalized)	$	287			$	271
Income taxes (net of refunds)	1				215
See accompanying notes to consolidated financial statements

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:

1.  Stock Repurchase Program
We repurchased and retired 3.9 million and 5.7 million shares of common stock under our stock repurchase program during the first six months of 2020 and 2019, respectively, at a cost of $669 million and $1.1 billion, respectively. 

2.  Loss on Asset Disposal
In the first quarter of 2020, we committed to a plan to dispose of certain locomotives deemed excess and no longer needed for railroad operations.  Specifically, during the first six months of 2020, the Company recorded a charge related to the loss on the sale of approximately 450 locomotives disposed of in the first six months, and a write-down of approximately 250 additional locomotives that we are actively marketing to sell.   Accordingly, a $385 million loss was recorded to adjust their carrying amount to their estimated fair value. The loss on asset disposal reduced "Earnings per share – diluted" for the first six months by $1.11.

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 in 2019, reflecting deposits held by a third-party bond agent as collateral for certain debt obligations which matured on October 1, 2019. 

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SOURCE Norfolk Southern Corporation

FAQ

What were Norfolk Southern's Q2 2020 net income and earnings per share?

Norfolk Southern reported a net income of $392 million and diluted earnings per share of $1.53 for Q2 2020.

What was the operating ratio for Norfolk Southern in Q2 2020?

The operating ratio for Norfolk Southern in Q2 2020 was 70.7%.

How much did Norfolk Southern's revenue decrease in Q2 2020 compared to the previous year?

Norfolk Southern's operating revenues decreased by 29% compared to Q2 2019.

What factors contributed to the decline in Norfolk Southern's revenues?

The decline in revenues was primarily driven by a 26% decrease in total volume.

What actions did Norfolk Southern take to manage expenses in Q2 2020?

Norfolk Southern reduced operating expenses by 21% due to lower fuel, compensation, and purchased services costs.