10-QPeriod: Q3 FY2014

NORFOLK SOUTHERN CORP Quarterly Report for Q3 Ended Sep 30, 2014

Filed October 22, 2014For Securities:NSC

Summary

Norfolk Southern Corporation reported strong third-quarter and year-to-date results for 2014, with net income increasing by 16% to $559 million for the quarter and by 7% to $1.5 billion for the first nine months. This performance was driven by a 7% increase in railway operating revenues for the quarter, largely due to higher volumes across key segments like intermodal and chemicals, as well as a 3% increase in operating expenses. The company achieved a record-low operating ratio of 67.0% for the third quarter. For the first nine months, while revenue grew 5%, the year-over-year net income comparison was impacted by a significant land sale gain in the prior year. Despite this, the company maintained a solid cash flow from operations of $2.3 billion, which supported investments in property additions, debt repayment, dividends, and share repurchases. The company's financial position remains robust, with a decreasing debt-to-capitalization ratio and ample liquidity to meet its obligations.

Financial Highlights

46 data points
Beta

Revenue

$3.02B

Net Income

$559.00M

18.5% Net Margin

EPS (Diluted)

$1.79

Total Assets

$33.21B

Cash & Equivalents

$1.43B

Free Cash Flow

$339.00M

Financial Statements
Beta
Revenue$3.02B
Operating Expenses$2.02B
Operating Income$998.00M
Interest Expense$138.00M
Net Income$559.00M
EPS (Basic)$1.80
EPS (Diluted)$1.79

Key Highlights

  • 1Net income for Q3 2014 was $559 million, a 16% increase year-over-year, with diluted EPS of $1.79.
  • 2Railway operating revenues for Q3 2014 increased by 7% to $3.0 billion, driven by an 8% rise in volumes, particularly in intermodal and chemicals.
  • 3The operating ratio improved to a record 67.0% for Q3 2014, down from 69.9% in Q3 2013, indicating improved operational efficiency.
  • 4For the first nine months of 2014, net income was $1.5 billion, up 7% year-over-year, though the prior year's results benefited from a $60 million land sale gain.
  • 5Cash provided by operating activities for the first nine months of 2014 was $2.3 billion, supporting capital expenditures, debt repayments, dividends, and share repurchases.
  • 6The company repurchased $166 million of its common stock in the first nine months of 2014, a decrease from $564 million in the same period of 2013.
  • 7Total assets grew to $33.2 billion, while total liabilities decreased to $20.8 billion, strengthening the company's balance sheet.

Frequently Asked Questions

The primary driver of Norfolk Southern's revenue growth in the third quarter of 2014 was a significant increase in volumes, up 8% year-over-year. Key segments contributing to this volume growth included intermodal and chemicals.

Operating expenses increased by 3% to $2.0 billion in the third quarter of 2014, which was a slower pace than the 7% increase in revenue. This controlled expense growth contributed to the improvement in the operating ratio.

Norfolk Southern expects coal revenues for the remainder of 2014 to be lower compared to the previous year, primarily due to anticipated lower average revenue per unit and reduced volumes, particularly in export and utility coal markets.

The company's total debt-to-total capitalization ratio improved to 41.8% at September 30, 2014, down from 45.6% at December 31, 2013, indicating a deleveraging trend. They also have access to a $750 million credit facility and a renewed $350 million accounts receivable securitization program.