Norfolk Southern (NSC) 8-K Norfolk Southern reports first-quarter 2020 results, non-cash asset rationalization charge related to PSR implementation

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Income

(Unaudited)

	First Quarter
	2020		2019
	(in millions, except per share amounts)
Railway operating revenues
Merchandise	$	1,672	$	1,686
Intermodal		655		719
Coal		298		435
Total railway operating revenues		2,625		2,840
Railway operating expenses
Compensation and benefits		622		727
Purchased services and rents		403		424
Fuel		189		250
Depreciation		292		283
Materials and other		166		190
Loss on asset disposal		385		—
Total railway operating expenses		2,057		1,874
Income from railway operations		568		966
Other income – net		22		44
Interest expense on debt		154		149
Income before income taxes		436		861
Income taxes
Current		44		127
Deferred		11		57
Total income taxes		55		184
Net income	$	381	$	677
Earnings per share – diluted	$	1.47	$	2.51
Weighted average shares outstanding – diluted		258.7		269.4

See accompanying notes to consolidated financial statements

Norfolk Southern Corporation and Subsidiaries

Consolidated Balance Sheets

(Unaudited)

	March 31,			December 31,
	2020			2019
	($ in millions)
Assets
Current assets:
Cash and cash equivalents	$	608		$	580
Accounts receivable – net		889			920
Materials and supplies		265			244
Other current assets		240			337
Total current assets		2,002			2,081
Investments		3,470			3,428
Properties less accumulated depreciation of $11,794
and $11,982, respectively		31,179			31,614
Other assets		787			800
Total assets	$	37,438		$	37,923
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	1,284		$	1,428
Income and other taxes		200			229
Other current liabilities		352			327
Current maturities of long-term debt		400			316
Total current liabilities		2,236			2,300
Long-term debt		11,807			11,880
Other liabilities		1,683			1,744
Deferred income taxes		6,828			6,815
Total liabilities		22,554			22,739
Stockholders’ equity:
Common stock $1.00 per share par value, 1,350,000,000 shares
authorized; outstanding 256,179,130 and 257,904,956 shares,
respectively, net of treasury shares		258			259
Additional paid-in capital		2,205			2,209
Accumulated other comprehensive loss		(481	)		(491	)
Retained income		12,902			13,207
Total stockholders’ equity		14,884			15,184
Total liabilities and stockholders’ equity	$	37,438		$	37,923

See accompanying notes to consolidated financial statements

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

	First Three Months
	2020			2019
	($ in millions)
Cash flows from operating activities
Net income	$	381		$	677
Reconciliation of net income to net cash provided by operating activities:
Depreciation		292			283
Deferred income taxes		11			57
Gains and losses on properties		(8	)		(18	)
Loss on asset disposal		385			—
Changes in assets and liabilities affecting operations:
Accounts receivable		32			(39	)
Materials and supplies		(21	)		(21	)
Other current assets		(33	)		12
Current liabilities other than debt		(40	)		(27	)
Other – net		(44	)		(43	)
Net cash provided by operating activities		955			881
Cash flows from investing activities
Property additions		(366	)		(467	)
Property sales and other transactions		158			152
Investment purchases		—			(2	)
Investment sales and other transactions		(25	)		(33	)
Net cash used in investing activities		(233	)		(350	)
Cash flows from financing activities
Dividends		(242	)		(230	)
Common stock transactions		14			2
Purchase and retirement of common stock		(466	)		(500	)
Proceeds from borrowings		—			250
Net cash used in financing activities		(694	)		(478	)
Net increase in cash, cash equivalents, and restricted cash		28			53
Cash, cash equivalents, and restricted cash
At beginning of year		580			446
At end of period	$	608		$	499
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest (net of amounts capitalized)	$	121		$	112
Income taxes (net of refunds)		16			9

See accompanying notes to consolidated financial statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:

1. 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 quarter of 2020, the Company recorded a charge related to the loss on the sale of approximately 300 locomotives disposed of in the first quarter, and a write-down of approximately 400 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" by $1.11.

2. Stock Repurchase Program

We repurchased and retired 2.6 million and 2.9 million shares of common stock under our stock repurchase program during the first three months of 2020 and 2019, respectively, at a cost of $466 million and $500 million, respectively.

3. Restricted Cash

The "Cash, cash equivalents, and restricted cash" line item on the Consolidated Statement 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.