Norfolk Southern (NSC) 8-K Norfolk Southern reports third-quarter 2019 results

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.