Form 8-K NORFOLK SOUTHERN CORP For: Jul 27
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
July 27, 2015 (July 27, 2015)
________________________________
NORFOLK SOUTHERN CORPORATION
(Exact name of registrant as specified in its charter)
________________________________
Virginia | 1-8339 | 52-1188014 |
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification Number) |
Three Commercial Place | 757-629-2680 | |
Norfolk, Virginia 23510-9241 | (Registrant's telephone number, including area code) | |
(Address of principal executive offices) |
No Change
(Former name or former address, if changed since last report)
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act
(17 CFR 240.14d-2(b))
(17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act
(17 CFR 240.13e-4(c))
(17 CFR 240.13e-4(c))
Item 2.02. Results of Operations and Financial Condition
Item 7.01. Regulation FD Disclosure
On July 27, 2015, the Registrant issued a Press Release, attached hereto as Exhibit 99.1, reporting second quarter results for 2015 and posted its Quarterly Financial Review – Second Quarter 2015 on its website, www.nscorp.com, in the “Investor Relations” section, under “Financial Reports and Proxy Statements.” The accompanying unaudited financial information and summary of certain notes to the consolidated financial statements should be read in conjunction with: (a) the consolidated financial statements and notes included in the Registrant's latest Annual Report on Form 10-K and in subsequent Quarterly Reports on Form 10-Q; and (b) any Current Reports on Form 8-K.
Item 9.01. Financial Statements and Exhibits
(d) Exhibits
The following exhibit is furnished as part of this Current Report on Form 8-K:
Exhibit Number | Description |
99.1 | Press Release dated July 27, 2015. |
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
SIGNATURES
NORFOLK SOUTHERN CORPORATION
(Registrant)
/s/ Denise W. Hutson
Name: Denise W. Hutson
Title: Corporate Secretary
Title: Corporate Secretary
Date: July 27, 2015
EXHIBIT INDEX
Exhibit Number | Description |
99.1 | Press Release dated July 27, 2015. |
FOR IMMEDIATE RELEASE
Norfolk Southern reports second-quarter 2015 results
SECOND-QUARTER 2015 RESULTS
• | Railway operating revenues totaled $2.7 billion. |
• | Income from railway operations was $814 million. |
• | Net income totaled $433 million. |
• | Diluted earnings per share were $1.41. |
• | The railway operating ratio was 70.0 percent. |
NORFOLK, Va., July 27, 2015 – Norfolk Southern Corporation (NYSE: NSC) today reported financial results for second-quarter 2015. Net income for the quarter was $433 million, 23 percent lower compared with the $562 million record results from the same period of 2014. Diluted earnings per share were $1.41 compared with $1.79 per diluted share earned in the second quarter last year.
“While we face short-term pressure, particularly as we clear fuel surcharge revenue and coal headwinds, Norfolk Southern is well positioned to continue improving service, which will reduce costs and add value to our customers,” said CEO James A. Squires. “Growth within the intermodal franchise, consumer spending, housing-related momentum and improved manufacturing activity all support an optimistic longer-term outlook. We have a strong legacy of success, and we are taking the right steps to continue value creation for our customers, the communities we serve, our employees and our shareholders.”
SECOND-QUARTER SUMMARY
• | Railway operating revenues were $2.7 billion, 11 percent lower compared with second-quarter 2014, a result of lower fuel surcharges and coal volumes. Total volume decreased 2 percent, or about 46,000 units. Gains in intermodal and merchandise traffic were offset by losses in coal. |
• | General merchandise revenues were $1.6 billion, 5 percent lower than the same period last year, reflecting lower fuel surcharges. Volume grew by 1 percent, with strong growth in chemicals offsetting declines in steel. Automotive and paper volume increased with higher vehicle production and strength in pulpboard and lumber. The five general merchandise commodity groups reported mostly lower revenue results on a year-over-year basis: |
▪Chemicals: $454 million, about even with 2014
▪Agriculture: $ 379 million, down 2 percent
▪Metals/Construction: $344 million, down 16 percent
▪Automotive: $254 million, down 6 percent
▪Paper/Forest: $196 million, down 2 percent
• | Intermodal revenues were $633 million, 3 percent lower compared with second-quarter 2014, as lower fuel surcharges more than offset volume gains. Higher shipments in our international business drove overall volume growth of 2 percent in the quarter compared with the same period of 2014. |
• | Coal revenues were $453 million, 33 percent lower compared with the second quarter of 2014. Coal revenues were affected by continuing low natural gas prices and declining fuel surcharges. Volume was down 21 percent, driven by declines of 23 percent in domestic utility and 38 percent in export. |
• | Railway operating expenses declined 6 percent to $1.9 billion, primarily due to lower fuel costs, compared with the same period of 2014. |
• | Income from railway operations was $814 million, 20 percent lower compared with second-quarter 2014. |
• | The operating ratio, or operating expenses as a percentage of revenue, was 70.0 percent, compared with 66.5 percent in the same quarter of 2014. |
About Norfolk Southern
Norfolk Southern Corporation is one of the nation’s premier transportation companies. Its Norfolk Southern Railway subsidiary operates approximately 20,000 route miles in 22 states and the District of Columbia, serves every major container port in the eastern United States, and provides efficient connections to other rail carriers. Norfolk Southern operates the most extensive intermodal network in the East and is a major transporter of coal, automotive, and industrial products.
Media Inquiries:
Frank Brown, 757-629-2710 ([email protected])
Investor Inquiries:
Katie Cook, 757-629-2861 ([email protected])
http://www.norfolksouthern.com
###
Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Income
(Unaudited)
Consolidated Statements of Income
(Unaudited)
Second Quarter | First Six Months | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
($ in millions, except per share amounts) | |||||||||||||||
Railway operating revenues | |||||||||||||||
Coal | $ | 453 | $ | 672 | $ | 908 | $ | 1,213 | |||||||
General merchandise | 1,627 | 1,720 | 3,147 | 3,272 | |||||||||||
Intermodal | 633 | 650 | 1,225 | 1,246 | |||||||||||
Total railway operating revenues | 2,713 | 3,042 | 5,280 | 5,731 | |||||||||||
Railway operating expenses | |||||||||||||||
Compensation and benefits | 724 | 715 | 1,507 | 1,455 | |||||||||||
Purchased services and rents | 438 | 414 | 861 | 806 | |||||||||||
Fuel | 255 | 408 | 519 | 840 | |||||||||||
Depreciation | 247 | 238 | 492 | 475 | |||||||||||
Materials and other | 235 | 248 | 481 | 469 | |||||||||||
Total railway operating expenses | 1,899 | 2,023 | 3,860 | 4,045 | |||||||||||
Income from railway operations | 814 | 1,019 | 1,420 | 1,686 | |||||||||||
Other income – net | 19 | 18 | 40 | 44 | |||||||||||
Interest expense on debt | 134 | 139 | 266 | 278 | |||||||||||
Income before income taxes | 699 | 898 | 1,194 | 1,452 | |||||||||||
Provision for income taxes | |||||||||||||||
Current | 243 | 311 | 416 | 505 | |||||||||||
Deferred | 23 | 25 | 35 | 17 | |||||||||||
Total income taxes | 266 | 336 | 451 | 522 | |||||||||||
Net income | $ | 433 | $ | 562 | $ | 743 | $ | 930 | |||||||
Earnings per share | |||||||||||||||
Basic | $ | 1.43 | $ | 1.81 | $ | 2.43 | $ | 2.99 | |||||||
Diluted | 1.41 | 1.79 | 2.41 | 2.97 | |||||||||||
Weighted average shares outstanding (note 1) | |||||||||||||||
Basic | 302.9 | 309.5 | 304.8 | 309.5 | |||||||||||
Diluted | 305.5 | 312.8 | 307.5 | 312.7 |
See accompanying notes to consolidated financial statements.
Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Comprehensive Income
(Unaudited)
Consolidated Statements of Comprehensive Income
(Unaudited)
Second Quarter | First Six Months | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
($ in millions) | |||||||||||||||
Net income | $ | 433 | $ | 562 | $ | 743 | $ | 930 | |||||||
Other comprehensive income, before tax: | |||||||||||||||
Pension and other postretirement benefits | 11 | 7 | 21 | 306 | |||||||||||
Other comprehensive income (loss) of | |||||||||||||||
equity investees | — | 7 | (4 | ) | 10 | ||||||||||
Other comprehensive income, before tax | 11 | 14 | 17 | 316 | |||||||||||
Income tax expense related to items of other | |||||||||||||||
comprehensive income | (5 | ) | (4 | ) | (8 | ) | (118 | ) | |||||||
Other comprehensive income, net of tax | 6 | 10 | 9 | 198 | |||||||||||
Total comprehensive income | $ | 439 | $ | 572 | $ | 752 | $ | 1,128 |
See accompanying notes to consolidated financial statements.
Norfolk Southern Corporation and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
Consolidated Balance Sheets
(Unaudited)
June 30, | December 31, | ||||||||
2015 | 2014 | ||||||||
($ in millions) | |||||||||
Assets | |||||||||
Current assets: | |||||||||
Cash and cash equivalents | $ | 889 | $ | 973 | |||||
Accounts receivable – net | 1,055 | 1,055 | |||||||
Materials and supplies | 277 | 236 | |||||||
Deferred income taxes | 125 | 167 | |||||||
Other current assets | 67 | 347 | |||||||
Total current assets | 2,413 | 2,778 | |||||||
Investments | 2,724 | 2,679 | |||||||
Properties less accumulated depreciation of $11,188 and | |||||||||
$10,814, respectively | 28,075 | 27,694 | |||||||
Other assets (note 2) | 98 | 49 | |||||||
Total assets | $ | 33,310 | $ | 33,200 | |||||
Liabilities and stockholders’ equity | |||||||||
Current liabilities: | |||||||||
Accounts payable | $ | 1,144 | $ | 1,233 | |||||
Short-term debt | — | 100 | |||||||
Income and other taxes | 295 | 217 | |||||||
Other current liabilities | 264 | 228 | |||||||
Current maturities of long-term debt | 500 | 2 | |||||||
Total current liabilities | 2,203 | 1,780 | |||||||
Long-term debt (note 2) | 8,890 | 8,883 | |||||||
Other liabilities | 1,322 | 1,312 | |||||||
Deferred income taxes | 8,818 | 8,817 | |||||||
Total liabilities | 21,233 | 20,792 | |||||||
Stockholders’ equity: | |||||||||
Common stock $1.00 per share par value, 1,350,000,000 shares | |||||||||
authorized; outstanding 301,386,849 and 308,240,130 shares, | |||||||||
respectively, net of treasury shares | 303 | 310 | |||||||
Additional paid-in capital | 2,146 | 2,148 | |||||||
Accumulated other comprehensive loss | (389 | ) | (398 | ) | |||||
Retained income | 10,017 | 10,348 | |||||||
Total stockholders’ equity | 12,077 | 12,408 | |||||||
Total liabilities and stockholders’ equity | $ | 33,310 | $ | 33,200 |
See accompanying notes to consolidated financial statements.
Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
Consolidated Statements of Cash Flows
(Unaudited)
First Six Months | |||||||
2015 | 2014 | ||||||
($ in millions) | |||||||
Cash flows from operating activities | |||||||
Net income | $ | 743 | $ | 930 | |||
Reconciliation of net income to net cash provided by operating activities: | |||||||
Depreciation | 494 | 478 | |||||
Deferred income taxes | 35 | 17 | |||||
Gains and losses on properties and investments | (18 | ) | (3 | ) | |||
Changes in assets and liabilities affecting operations: | |||||||
Accounts receivable | — | (98 | ) | ||||
Materials and supplies | (41 | ) | (28 | ) | |||
Other current assets | 282 | 30 | |||||
Current liabilities other than debt | (1 | ) | 144 | ||||
Other – net | (21 | ) | (33 | ) | |||
Net cash provided by operating activities | 1,473 | 1,437 | |||||
Cash flows from investing activities | |||||||
Property additions | (886 | ) | (809 | ) | |||
Property sales and other transactions | 32 | 44 | |||||
Investments, including short-term | (3 | ) | (3 | ) | |||
Investment sales and other transactions | 5 | 121 | |||||
Net cash used in investing activities | (852 | ) | (647 | ) | |||
Cash flows from financing activities | |||||||
Dividends | (360 | ) | (335 | ) | |||
Common stock issued | 28 | 82 | |||||
Purchase and retirement of common stock (note 1) | (765 | ) | (100 | ) | |||
Proceeds from borrowings – net | 494 | — | |||||
Debt repayments | (102 | ) | (213 | ) | |||
Net cash used in financing activities | (705 | ) | (566 | ) | |||
Net increase (decrease) in cash and cash equivalents | (84 | ) | 224 | ||||
Cash and cash equivalents | |||||||
At beginning of year | 973 | 1,443 | |||||
At end of period | $ | 889 | $ | 1,667 | |||
Supplemental disclosures of cash flow information | |||||||
Cash paid during the period for: | |||||||
Interest (net of amounts capitalized) | $ | 249 | $ | 255 | |||
Income taxes (net of refunds) | 55 | 313 |
See accompanying notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:
1. Stock Repurchase Program
We repurchased 7.4 million and 1.0 million shares of common stock in the first six months of 2015 and 2014, respectively, at a cost of $765 million and $100 million, respectively. We have remaining authorization from our Board of Directors to repurchase up to 27.8 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 147.2 million shares at a total cost of $9.2 billion.
2. New Accounting Pronouncement
In April 2015, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2015-03, "Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs." This update requires that debt issuance costs be presented in the balance sheet as a reduction from the related debt liability rather than as an asset, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this update. We early adopted the provisions of this ASU during the second quarter of 2015 and applied it retrospectively. The adoption of ASU 2015-03 resulted in the presentation of $43 million of debt issuance costs as a reduction of "Long-term debt" at June 30, 2015. We retrospectively adjusted the December 31, 2014 consolidated balance sheet and related disclosures to reflect the reclassification of $41 million of debt issuance costs from "Other assets" to "Long-term debt." There was no other impact on our consolidated financial statements from the adoption of ASU 2015-03.
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