Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Income
(Unaudited)
Third Quarter | First Nine Months | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
(in millions, except per share amounts) | ||||||||||||||||
Railway operating revenues | ||||||||||||||||
Merchandise | $ | 1,556 | $ | 1,731 | $ | 4,535 | $ | 5,173 | ||||||||
Intermodal | 700 | 707 | 1,924 | 2,127 | ||||||||||||
Coal | 250 | 403 | 757 | 1,306 | ||||||||||||
Total railway operating revenues | 2,506 | 2,841 | 7,216 | 8,606 | ||||||||||||
Railway operating expenses | ||||||||||||||||
Compensation and benefits | 578 | 682 | 1,786 | 2,121 | ||||||||||||
Purchased services and rents | 486 | 423 | 1,261 | 1,265 | ||||||||||||
Fuel | 126 | 226 | 399 | 730 | ||||||||||||
Depreciation | 293 | 286 | 867 | 853 | ||||||||||||
Materials and other | 183 | 228 | 500 | 610 | ||||||||||||
Loss on asset disposal | — | — | 385 | — | ||||||||||||
Total railway operating expenses | 1,666 | 1,845 | 5,198 | 5,579 | ||||||||||||
Income from railway operations | 840 | 996 | 2,018 | 3,027 | ||||||||||||
Other income – net | 39 | 22 | 110 | 88 | ||||||||||||
Interest expense on debt | 155 | 150 | 465 | 452 | ||||||||||||
Income before income taxes | 724 | 868 | 1,663 | 2,663 | ||||||||||||
Income taxes | ||||||||||||||||
Current | 133 | 119 | 243 | 382 | ||||||||||||
Deferred | 22 | 92 | 78 | 225 | ||||||||||||
Total income taxes | 155 | 211 | 321 | 607 | ||||||||||||
Net income | $ | 569 | $ | 657 | $ | 1,342 | $ | 2,056 | ||||||||
Earnings per share – diluted | $ | 2.22 | $ | 2.49 | $ | 5.21 | $ | 7.70 | ||||||||
Weighted average shares outstanding – diluted | 256.1 | 264.3 | 257.2 | 266.9 |
See accompanying notes to consolidated financial statements
Norfolk Southern Corporation and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
September 30, | December 31, | |||||||
2020 | 2019 | |||||||
($ in millions) | ||||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 1,359 | $ | 580 | ||||
Accounts receivable – net | 883 | 920 | ||||||
Materials and supplies | 247 | 244 | ||||||
Other current assets | 90 | 337 | ||||||
Total current assets | 2,579 | 2,081 | ||||||
Investments | 3,566 | 3,428 | ||||||
Properties less accumulated depreciation of $11,873 and $11,982, respectively | 31,239 | 31,614 | ||||||
Other assets | 795 | 800 | ||||||
Total assets | $ | 38,179 | $ | 37,923 | ||||
Liabilities and stockholders’ equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 1,273 | $ | 1,428 | ||||
Income and other taxes | 257 | 229 | ||||||
Other current liabilities | 386 | 327 | ||||||
Current maturities of long-term debt | 89 | 316 | ||||||
Total current liabilities | 2,005 | 2,300 | ||||||
Long-term debt | 12,634 | 11,880 | ||||||
Other liabilities | 1,701 | 1,744 | ||||||
Deferred income taxes | 6,898 | 6,815 | ||||||
Total liabilities | 23,238 | 22,739 | ||||||
Stockholders’ equity: | ||||||||
Common stock $1.00 per share par value, 1,350,000,000 shares authorized; outstanding 253,985,338 and 257,904,956 shares, respectively, net of treasury shares | 255 | 259 | ||||||
Additional paid-in capital | 2,246 | 2,209 | ||||||
Accumulated other comprehensive loss | (471 | ) | (491 | ) | ||||
Retained income | 12,911 | 13,207 | ||||||
Total stockholders’ equity | 14,941 | 15,184 | ||||||
Total liabilities and stockholders’ equity | $ | 38,179 | $ | 37,923 |
See accompanying notes to consolidated financial statements
Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
First Nine Months | ||||||||
2020 | 2019 | |||||||
($ in millions) | ||||||||
Cash flows from operating activities | ||||||||
Net income | $ | 1,342 | $ | 2,056 | ||||
Reconciliation of net income to net cash provided by operating activities: | ||||||||
Depreciation | 867 | 854 | ||||||
Deferred income taxes | 78 | 225 | ||||||
Gains and losses on properties | (14 | ) | (4 | ) | ||||
Loss on asset disposal | 385 | — | ||||||
Impairment of investment | 99 | — | ||||||
Changes in assets and liabilities affecting operations: | ||||||||
Accounts receivable | 36 | 34 | ||||||
Materials and supplies | (3 | ) | (59 | ) | ||||
Other current assets | 55 | 40 | ||||||
Current liabilities other than debt | 104 | (72 | ) | |||||
Other – net | (182 | ) | (77 | ) | ||||
Net cash provided by operating activities | 2,767 | 2,997 | ||||||
Cash flows from investing activities | ||||||||
Property additions | (1,053 | ) | (1,494 | ) | ||||
Property sales and other transactions | 291 | 282 | ||||||
Investment purchases | (6 | ) | (12 | ) | ||||
Investment sales and other transactions | (50 | ) | (99 | ) | ||||
Net cash used in investing activities | (818 | ) | (1,323 | ) | ||||
Cash flows from financing activities | ||||||||
Dividends | (722 | ) | (705 | ) | ||||
Common stock transactions | 53 | 21 | ||||||
Purchase and retirement of common stock | (960 | ) | (1,550 | ) | ||||
Proceeds from borrowings – net of issuance costs | 784 | 1,404 | ||||||
Debt repayments | (325 | ) | (750 | ) | ||||
Net cash used in financing activities | (1,170 | ) | (1,580 | ) | ||||
Net increase in cash, cash equivalents, and restricted cash | 779 | 94 | ||||||
Cash, cash equivalents, and restricted cash | ||||||||
At beginning of year | 580 | 446 | ||||||
At end of period | $ | 1,359 | $ | 540 | ||||
Supplemental disclosures of cash flow information | ||||||||
Cash paid during the period for: | ||||||||
Interest (net of amounts capitalized) | $ | 395 | $ | 392 | ||||
Income taxes (net of refunds) | 118 | 404 |
See accompanying notes to consolidated financial statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:
1. Impairment of Investment
During the third quarter of 2020, we recorded an other-than-temporary impairment of $99 million related to the carrying value of an equity method investment. This non-cash impairment charge is recorded in "Purchased services and rents" on the Consolidated Statements of Income and had a $74 million impact on net income for the third quarter and the first nine months of 2020.
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 nine months of 2020, the Company recorded a charge related to the loss on the sale of 574 locomotives disposed of in the first nine months, and a write-down of 129 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.
3. Stock Repurchase Program
We repurchased and retired 5.3 million and 8.4 million shares of common stock under our stock repurchase program during the first nine months of 2020 and 2019, respectively, at a cost of $960 million and $1.6 billion, respectively.
4. 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.