NORFOLK SOUTHERN CORP - FORM 8-K - EX-99.2 - 4Q 2016 FINANCIALS

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8-K - 8-K - NORFOLK SOUTHERN CORP	ns8k-012716.htm
EX-99.1 - PRESS RELEASE - NORFOLK SOUTHERN CORP	nspr-012716.htm

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



	Fourth Quarter					Years ended December 31,
	2015			2014		2015		2014
	($ in millions, except per share amounts)

Railway operating revenues
Coal	$	433		$	543	$	1,823	$	2,382
General merchandise		1,522			1,678		6,279		6,680
Intermodal		563			649		2,409		2,562
Total railway operating revenues		2,518			2,870		10,511		11,624

Railway operating expenses
Compensation and benefits		702			714		2,911		2,897
Purchased services and rents		440			452		1,752		1,687
Fuel		194			347		934		1,574
Depreciation		287			240		1,054		951
Materials and other		253			226		976		940

Total railway operating expenses (note 1)		1,876			1,979		7,627		8,049

Income from railway operations		642			891		2,884		3,575

Other income – net		24			28		103		104
Interest expense on debt		142			129		545		545

Income before income taxes		524			790		2,442		3,134

Provision for income taxes
Current		(101	)		6		566		840
Deferred		264			273		320		294
Total income taxes		163			279		886		1,134

Net income	$	361		$	511	$	1,556	$	2,000

Earnings per share (note 1)
Basic	$	1.21		$	1.65	$	5.13	$	6.44
Diluted		1.20			1.64		5.10		6.39

Weighted average shares outstanding (note 2)
Basic		297.9			309.0		301.9		309.4
Diluted		300.4			312.0		304.4		312.5

See accompanying notes to consolidated financial statements.

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



	Fourth Quarter						Years ended December 31,
	2015			2014			2015			2014
	($ in millions)

Net income	$	361		$	511		$	1,556		$	2,000
Other comprehensive income (loss), before tax:
Pension and other postretirement benefits		(107	)		(329	)		(76	)		(15	)
Other comprehensive income (loss) of
equity investees		4			(18	)		—			(8	)

Other comprehensive income (loss), before tax		(103	)		(347	)		(76	)		(23	)
Income tax benefit (expense) related to items of
other comprehensive income (loss)		40			127			29			6

Other comprehensive income (loss), net of tax		(63	)		(220	)		(47	)		(17	)

Total comprehensive income	$	298		$	291		$	1,509		$	1,983

See accompanying notes to consolidated financial statements.

Norfolk Southern Corporation and Subsidiaries
Consolidated Balance Sheets
(Unaudited)



	At December 31,
	2015			2014
	($ in millions)
Assets
Current assets:
Cash and cash equivalents	$	1,101		$	973
Accounts receivable – net		946			1,055
Materials and supplies		271			236
Deferred income taxes		121			167
Other current assets		194			347
Total current assets		2,633			2,778

Investments		2,572			2,679
Properties less accumulated depreciation of $11,478 and
$10,814, respectively		28,992			27,694
Other assets (note 3)		63			49

Total assets	$	34,260		$	33,200

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	1,091		$	1,233
Short-term debt		200			100
Income and other taxes		203			217
Other current liabilities		237			228
Current maturities of long-term debt		500			2
Total current liabilities		2,231			1,780

Long-term debt (note 3)		9,393			8,883
Other liabilities		1,385			1,312
Deferred income taxes		9,063			8,817

Total liabilities		22,072			20,792

Stockholders’ equity:
Common stock $1.00 per share par value, 1,350,000,000 shares
authorized; outstanding 297,795,016 and 308,240,130 shares,
respectively, net of treasury shares		299			310
Additional paid-in capital		2,143			2,148
Accumulated other comprehensive loss		(445	)		(398	)
Retained income		10,191			10,348

Total stockholders’ equity		12,188			12,408

Total liabilities and stockholders’ equity	$	34,260		$	33,200

See accompanying notes to consolidated financial statements.

Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)



	Years ended December 31,
	2015			2014
	($ in millions)
Cash flows from operating activities:
Net income	$	1,556		$	2,000
Reconciliation of net income to net cash provided by operating activities:
Depreciation		1,059			956
Deferred income taxes		320			294
Gains and losses on properties and investments		(30	)		(13	)
Changes in assets and liabilities affecting operations:
Accounts receivable		109			(31	)
Materials and supplies		(35	)		(13	)
Other current assets		192			(260	)
Current liabilities other than debt		(183	)		53
Other – net		(111	)		(134	)

Net cash provided by operating activities		2,877			2,852

Cash flows from investing activities:
Property additions		(2,385	)		(2,118	)
Property sales and other transactions		63			114
Investments, including short-term		(5	)		(104	)
Investment sales and other transactions		240			106

Net cash used in investing activities		(2,087	)		(2,002	)

Cash flows from financing activities:
Dividends		(713	)		(687	)
Common stock issued		43			130
Purchase and retirement of common stock (note 2)		(1,075	)		(318	)
Proceeds from borrowings – net		1,185			200
Debt repayments		(102	)		(645	)

Net cash used in financing activities		(662	)		(1,320	)

Net increase (decrease) in cash and cash equivalents		128			(470	)

Cash and cash equivalents:
At beginning of year		973			1,443

At end of year	$	1,101		$	973

Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest (net of amounts capitalized)	$	518		$	522
Income taxes (net of refunds)		386			1,102

See accompanying notes to consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:

1. Restructuring Costs

Fourth quarter 2015 results include $49 million of costs associated with the restructuring of our Triple Crown Services subsidiary and the closure of our Roanoke, Virginia, office, which reduced net income by $31 million, or $0.10 per diluted share. For 2015, results include $93 million of such costs, which reduced net income by $58 million, or $0.19 per diluted share.

2. Stock Repurchase Program

We repurchased 11.3 million and 3.1 million shares of common stock in 2015 and 2014, respectively, at a cost of $1.1 billion and $318 million, respectively. We have remaining authorization from our Board of Directors to repurchase up to 23.9 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 151.1 million shares at a total cost of $9.5 billion.

3. New Accounting Pronouncement

In April 2015, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2015-03, "Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs." This update requires that debt issuance costs be presented in the balance sheet as a reduction from the related debt liability rather than as an asset, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this update. We early adopted the provisions of this ASU during the second quarter of 2015 and applied it retrospectively. The adoption of ASU 2015-03 resulted in the presentation of $47 million of debt issuance costs as a reduction of "Long-term debt" at December 31, 2015. We retrospectively adjusted the December 31, 2014 consolidated balance sheet and related disclosures to reflect the reclassification of $41 million of debt issuance costs from "Other assets" to "Long-term debt." There was no other impact on our consolidated financial statements from the adoption of ASU 2015-03.

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