10-QPeriod: Q3 FY2013

NORFOLK SOUTHERN CORP Quarterly Report for Q3 Ended Sep 30, 2013

Filed October 23, 2013For Securities:NSC

Summary

Norfolk Southern Corporation (NSC) reported a solid third quarter and first nine months of 2013, demonstrating revenue growth driven by energy-related shipments, industrial products, intermodal, and automotive sectors. Net income for the third quarter increased by 20% year-over-year to $482 million, with diluted earnings per share rising to $1.53 from $1.24. For the first nine months, net income grew 5% to $1.4 billion, supported by a $60 million gain from asset sales. Despite a decline in coal revenues due to lower volumes and pricing, overall railway operating revenues saw a 5% increase in Q3. Operating expenses saw a modest increase, leading to an improved operating ratio of 69.9% in Q3 2013 compared to 72.9% in Q3 2012, indicating enhanced operational efficiency. The company maintained a strong liquidity position with $1.0 billion in cash, cash equivalents, and short-term investments as of September 30, 2013. Investment activities included significant property additions, while financing activities saw substantial share repurchases totaling $564 million in the first nine months, alongside dividend payments. The company also issued $500 million in senior notes during the quarter to manage its debt structure. Management expects continued revenue growth for the remainder of the year.

Financial Highlights

46 data points
Beta

Revenue

$2.82B

Net Income

$482.00M

17.1% Net Margin

EPS (Diluted)

$1.53

Total Assets

$31.36B

Cash & Equivalents

$984.00M

Free Cash Flow

$312.00M

Financial Statements
Beta
Revenue$2.82B
Operating Expenses$1.98B
Operating Income$849.00M
Interest Expense$131.00M
Net Income$482.00M
EPS (Basic)$1.55
EPS (Diluted)$1.53

Key Highlights

  • 1Net income for Q3 2013 increased by 20% to $482 million, with diluted EPS rising to $1.53.
  • 2First nine months net income reached $1.4 billion, a 5% increase year-over-year, aided by a $60 million asset sale gain.
  • 3Railway operating revenues grew 5% in Q3 2013 to $2.8 billion, driven by energy, industrial, intermodal, and automotive segments, offsetting a decline in coal.
  • 4Operating ratio improved to 69.9% in Q3 2013 from 72.9% in Q3 2012, indicating better operational efficiency.
  • 5Company maintained strong liquidity with $1.0 billion in cash, cash equivalents, and short-term investments as of September 30, 2013.
  • 6Share repurchases continued, with $564 million spent in the first nine months of 2013.
  • 7Issued $500 million in 4.80% senior notes due 2043 during the third quarter.

Frequently Asked Questions

Revenue growth in Q3 2013 was primarily driven by energy-related shipments (crude oil and materials for natural gas drilling), increased revenue from other industrial products, intermodal, and automotive segments. These gains helped offset the softness experienced in the coal markets.

While total railway operating expenses saw a slight increase, the company improved its operating ratio to 69.9% in Q3 2013 from 72.9% in Q3 2012. This improvement was due to revenue growth outpacing expense increases and effective cost management, particularly in materials and other expenses, which decreased year-over-year.

Norfolk Southern maintained a strong liquidity position with $1.0 billion in cash, cash equivalents, and short-term investments as of September 30, 2013. Cash provided by operating activities for the first nine months was $2.4 billion, sufficient to fund capital expenditures, share repurchases, dividends, and debt repayments.

During the third quarter, Norfolk Southern issued $500 million of 4.80% senior notes due 2043. The company also continued its share repurchase program, spending $564 million in the first nine months of 2013, and paid dividends totaling $476 million for the same period.