NORFOLK SOUTHERN CORP - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - January 26, 2015

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Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Income
(Unaudited)

 
Fourth Quarter
 
Years ended December 31,
 
2014
 
2013
 
2014
 
2013
 
(in millions, except per share amounts)
 
 
 
 
 
 
 
 
 
 
 
 
Railway operating revenues
 
 
 
 
 
 
 
 
 
 
 
Coal
$
543
 
$
641
 
$
2,382
 
$
2,543
General merchandise
 
1,678
 
 
1,622
 
 
6,680
 
 
6,318
Intermodal
 
649
 
 
618
 
 
2,562
 
 
2,384
Total railway operating revenues
 
2,870
 
 
2,881
 
 
11,624
 
 
11,245
 
 
 
 
 
 
 
 
 
 
 
 
Railway operating expenses
 
 
 
 
 
 
 
 
 
 
 
Compensation and benefits
 
714
 
 
761
 
 
2,897
 
 
3,002
Purchased services and rents
 
452
 
 
406
 
 
1,687
 
 
1,629
Fuel
 
347
 
 
403
 
 
1,574
 
 
1,613
Depreciation
 
240
 
 
233
 
 
951
 
 
916
Materials and other
 
226
 
 
197
 
 
940
 
 
828
Total railway operating expenses
 
1,979
 
 
2,000
 
 
8,049
 
 
7,988
 
 
 
 
 
 
 
 
 
 
 
 
Income from railway operations
 
891
 
 
881
 
 
3,575
 
 
3,257
 
 
 
 
 
 
 
 
 
 
 
 
Other income – net (note 1)
 
28
 
 
39
 
 
104
 
 
233
Interest expense on debt
 
129
 
 
137
 
 
545
 
 
525
 
 
 
 
 
 
 
 
 
 
 
 
Income before income taxes
 
790
 
 
783
 
 
3,134
 
 
2,965
 
 
 
 
 
 
 
 
 
 
 
 
Provision for income taxes
 
 
 
 
 
 
 
 
 
 
 
Current
 
6
 
 
223
 
 
840
 
 
793
Deferred
 
273
 
 
47
 
 
294
 
 
262
Total income taxes
 
279
 
 
270
 
 
1,134
 
 
1,055
 
 
 
 
 
 
 
 
 
 
 
 
Net income
$
511
 
$
513
 
$
2,000
 
$
1,910
 
 
 
 
 
 
 
 
 
 
 
 
Earnings per share (note 1)
 
 
 
 
 
 
 
 
 
 
 
Basic
$
1.65
 
$
1.66
 
$
6.44
 
$
6.10
Diluted
 
1.64
 
 
1.64
 
 
6.39
 
 
6.04
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average shares outstanding (note 2)
 
 
 
 
 
 
 
 
 
 
 
Basic
 
309.0
 
 
308.7
 
 
309.4
 
 
311.9
Diluted
 
312.0
 
 
312.3
 
 
312.5
 
 
315.5

See accompanying notes to consolidated financial statements.










Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Comprehensive Income
(Unaudited)

 
Fourth Quarter
 
Years ended December 31,
 
2014
 
2013
 
2014
 
2013
 
($ in millions)
 
 
 
 
 
 
 
 
 
 
 
 
Net income
$
511
 
$
513
 
$
2,000
 
$
1,910
Other comprehensive income (loss), before tax:
 
 
 
 
 
 
 
 
 
 
 
Pension and other postretirement benefits
 
(329)
 
 
1,012
 
 
(15)
 
 
1,122
Other comprehensive income (loss) of equity investees
 
(18)
 
 
40
 
 
(8)
 
 
42
Other comprehensive income (loss), before tax
 
(347)
 
 
1,052
 
 
(23)
 
 
1,164
Income tax benefit (expense) related to items of other
 
 
 
 
 
 
 
 
 
 
 
comprehensive income (loss)
 
127
 
 
(393)
 
 
6
 
 
(436)
Other comprehensive income (loss), net of tax
 
(220)
 
 
659
 
 
(17)
 
 
728
 
 
 
 
 
 
 
 
 
 
 
 
Total comprehensive income
$
291
 
$
1,172
 
$
1,983
 
$
2,638

See accompanying notes to consolidated financial statements.































Norfolk Southern Corporation and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
 
December 31,
 
December 31,
 
2014
 
2013
 
($ in millions)
Assets
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
973
 
 
$
1,443
Short-term investments
 
 
-
 
 
 
118
Accounts receivable - net
 
 
1,055
 
 
 
1,024
Materials and supplies
 
 
236
 
 
 
223
Deferred income taxes
 
 
167
 
 
 
180
Other current assets
 
 
347
 
 
 
87
Total current assets
 
 
2,778
 
 
 
3,075
 
 
 
 
 
 
 
 
Investments
 
 
2,679
 
 
 
2,439
Properties less accumulated depreciation of $10,814 and
 
 
 
 
 
 
 
$10,387, respectively
 
 
27,694
 
 
 
26,645
Other assets
 
 
90
 
 
 
324
 
 
 
 
 
 
 
 
Total assets
 
$
33,241
 
 
$
32,483
 
 
 
 
 
 
 
 
Liabilities and stockholders’ equity
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
Accounts payable
 
$
1,233
 
 
$
1,265
Short-term debt
 
 
100
 
 
 
100
Income and other taxes
 
 
217
 
 
 
225
Other current liabilities
 
 
228
 
 
 
270
Current maturities of long-term debt
 
 
2
 
 
 
445
Total current liabilities
 
 
1,780
 
 
 
2,305
 
 
 
 
 
 
 
 
Long-term debt
 
 
8,924
 
 
 
8,903
Other liabilities
 
 
1,312
 
 
 
1,444
Deferred income taxes
 
 
8,817
 
 
 
8,542
Total liabilities
 
 
20,833
 
 
 
21,194
 
 
 
 
 
 
 
 
Stockholders’ equity:
 
 
 
 
 
 
 
Common stock $1.00 per share par value, 1,350,000,000 shares
 
 
 
 
 
 
 
authorized; outstanding 308,240,130 and 308,878,402 shares,
 
 
 
 
 
 
 
respectively, net of treasury shares
 
 
310
 
 
 
310
Additional paid-in capital
 
 
2,148
 
 
 
2,021
Accumulated other comprehensive loss
 
 
(398)
 
 
 
(381)
Retained income
 
 
10,348
 
 
 
9,339
 
 
 
 
 
 
 
 
Total stockholders’ equity
 
 
12,408
 
 
 
11,289
 
 
 
 
 
 
 
 
Total liabilities and stockholders’ equity
 
$
33,241
 
 
$
32,483
See accompanying notes to consolidated financial statements.






Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
 
Years ended December 31,
 
2014
 
2013
 
($ in millions)
Cash flows from operating activities
 
 
 
 
 
Net income
$
2,000
 
$
1,910
Reconciliation of net income to net cash provided by operating activities:
 
 
 
 
 
Depreciation
 
956
 
 
922
Deferred income taxes
 
294
 
 
262
Gains and losses on properties and investments (note 1)
 
(13)
 
 
(104)
Changes in assets and liabilities affecting operations:
 
 
 
 
 
Accounts receivable
 
(31)
 
 
85
Materials and supplies
 
(13)
 
 
(7)
Other current assets
 
(260)
 
 
(5)
Current liabilities other than debt
 
53
 
 
5
Other – net
 
(134)
 
 
10
Net cash provided by operating activities
 
2,852
 
 
3,078
 
 
 
 
 
 
Cash flows from investing activities
 
 
 
 
 
Property additions
 
(2,118)
 
 
(1,971)
Property sales and other transactions
 
114
 
 
144
Investments, including short-term
 
(104)
 
 
(130)
Investment sales and other transactions
 
106
 
 
63
Net cash used in investing activities
 
(2,002)
 
 
(1,894)
 
 
 
 
 
 
Cash flows from financing activities
 
 
 
 
 
Dividends
 
(687)
 
 
(637)
Common stock issued – net
 
130
 
 
131
Purchase and retirement of common stock (note 2)
 
(318)
 
 
(627)
Proceeds from borrowings – net
 
200
 
 
989
Debt repayments
 
(645)
 
 
(250)
Net cash used in financing activities
 
(1,320)
 
 
(394)
 
 
 
 
 
 
Net increase (decrease) in cash and cash equivalents
 
(470)
 
 
790
 
 
 
 
 
 
Cash and cash equivalents
 
 
 
 
 
At beginning of year
 
1,443
 
 
653
 
 
 
 
 
 
At end of year
$
973
 
$
1,443
 
 
 
 
 
 
Supplemental disclosures of cash flow information
 
 
 
 
 
Cash paid during the year for:
 
 
 
 
 
Interest (net of amounts capitalized)
$
522
 
$
492
Income taxes (net of refunds)
 
1,102
 
 
735
See accompanying notes to consolidated financial statements.






NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:

1.
Other Income – Net
In first quarter 2013, we recognized a $97 million gain on a land sale, which increased net income by $60 million or $0.19 per share.

2.
Stock Repurchase Program
We repurchased 3.1 million shares of common stock in 2014, totaling $318 million, and 8.3 million shares at a cost of $627 million for 2013. We have remaining authorization from our Board of Directors to repurchase up to 35.2 million shares through December 31, 2017. The timing and volume of purchases is guided by our assessment of market conditions and other pertinent factors. Any near-term share repurchases are expected to be made with internally generated cash, cash on hand, or proceeds from borrowings. Since the beginning of 2006, we have repurchased and retired 139.8 million shares at a total cost of $8.4 billion.


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