What were the main drivers of Norfolk Southern's revenue growth in the second quarter of 2014?

The primary driver of revenue growth in the second quarter of 2014 was a significant increase in shipment volumes, which grew by 8%. This was complemented by an increase in average revenue per unit, which includes the impact of fuel surcharges.

How did operating expenses change compared to the previous year, and what impacted these changes?

Total railway operating expenses increased by 3% in the second quarter of 2014 compared to the same period in 2013. Key factors contributing to this increase included higher materials and other expenses (particularly casualties and other claims, and locomotive maintenance), increased fuel expense due to higher consumption, and increased depreciation. However, compensation and benefits expense decreased due to lower postretirement and pension benefit costs, partly offset by increases in incentive and stock-based compensation and pay rates.

What is the company's stance on its ongoing legal and environmental matters?

Norfolk Southern disclosed that it is involved in various lawsuits and claims, including rate reasonableness complaints, antitrust class actions, and casualty claims. The company believes it has adequate reserves for most of these matters and expects that the outcomes will not have a material adverse effect on its financial position, results of operations, or liquidity. For environmental matters, the company has recorded liabilities for probable and estimable costs and believes that known matters, individually or in aggregate, are unlikely to have a material adverse effect.

How does the company manage its liquidity and capital structure?

The company's primary source of liquidity is cash provided by operating activities, which was $1.4 billion in the first six months of 2014. The company maintained a healthy working capital and ended the period with $1.7 billion in cash and cash equivalents. Its total debt-to-total capitalization ratio stood at 43.4% as of June 30, 2014, indicating a solid capital structure. The company also has access to a $750 million credit facility and has the authority to issue additional debt or equity securities.

NSC 10-Q Quarterly Report Q2 FY2014 — Revenue, Net Income, EPS

Summary

Norfolk Southern Corporation (NSC) reported strong financial results for the second quarter and first six months of 2014, demonstrating robust operational performance. For the second quarter, the company achieved record-setting net income of $562 million, or $1.79 per diluted share, an increase of 21% and $0.33 per diluted share, respectively, year-over-year. This was driven by a 9% increase in railway operating revenues to $3.0 billion, primarily due to higher volumes. The company also achieved an all-time record low operating ratio of 66.5% in the quarter, indicating improved efficiency. For the first six months of 2014, net income rose slightly to $930 million from $915 million in the prior year. While the current year's results were impacted by the absence of a significant asset sale gain in the prior year, income from railway operations saw a healthy 10% increase. The company generated $1.4 billion in cash from operating activities, which supported investments in property, dividend payments, debt reduction, and share repurchases. Key operational drivers included strong performance in general merchandise and intermodal segments, though coal tonnage saw some declines, particularly in export and domestic metallurgical sectors.

Financial Highlights

46 data points

Beta

Revenue

$3.04B

Net Income

$562.00M

0.2% Net Margin

EPS (Diluted)

$1.79

Total Assets

$33.04B

Cash & Equivalents

$1.67B

Free Cash Flow

$421.00M

Financial Statements

Beta

Revenue	$3.04B
Operating Expenses	$2.02B
Operating Income	$1.02B
Interest Expense	$139.00M
Net Income	$562.00M
EPS (Basic)	$1.81
EPS (Diluted)	$1.79

Key Highlights

1Record-breaking second quarter net income of $562 million, a 21% increase year-over-year, with diluted EPS rising to $1.79.
2Railway operating revenues reached an all-time record of $3.0 billion in Q2 2014, up 9% from the prior year, driven by higher volumes.
3Achieved a record-low operating ratio of 66.5% in the second quarter, reflecting improved operational efficiency.
4Generated $1.4 billion in cash from operating activities in the first six months of 2014, demonstrating strong cash flow generation.
5General Merchandise and Intermodal segments showed significant revenue and volume growth, contributing positively to overall results.
6Share repurchases continued, with $100 million spent in the first six months of 2014, though at a lower pace than the prior year.
7The company successfully resolved two rate reasonableness complaints filed by customers DuPont and Sunbelt in its favor.

NORFOLK SOUTHERN CORP Quarterly Report for Q2 Ended Jun 30, 2014

Summary

Financial Highlights

Key Highlights

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