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Form 8-K NORFOLK SOUTHERN CORP For: Jul 27

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July 27, 2015 8:02 AM EDT


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
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)

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))

[ ]    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act
        (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
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)
 
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)

 
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)
 
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)
 
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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