NSC 8-K
Norfolk Southern Corp (NSC)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________________________
FORM
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
January 27,
2021 (
________________________________
(Exact name of registrant as specified in its charter)
______________________________________
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No Change
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition
On January 27, 2021, the Registrant issued a Press Release, attached hereto as Exhibit 99.1, reporting fourth-quarter and full-year results for 2020.
Item 7.01. Regulation FD Disclosure
| A. | Quarterly Financial Data. Attached hereto, as Exhibit 99.2, is the Quarterly Financial Data for the fourth quarter of 2020. This document is available on the Registrant’s website, www.norfolksouthern.com, in the “Invest in NS” section, under “Financial Reports.” This unaudited financial information and summary of certain notes to the consolidated financial statements should be read in conjunction with: (a) the consolidated financial statements and notes included in the Registrant's latest Annual Report on Form 10-K and in subsequent Quarterly Reports on Form 10-Q; and (b) any Current Reports on Form 8-K. |
| B. | Dividend Declaration. On January 27, 2021, the Registrant issued a Press Release, attached hereto as Exhibit 99.3, announcing the declaration of a quarterly dividend of $0.99 per share of common stock, payable on March 10, 2021, to shareholders of record as of February 5, 2021 and an increased targeted dividend payout ratio range of 35% to 40%. |
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
The following exhibits are filed as part of this Current Report on Form 8-K:
| Exhibit Number | Description |
| 99.1 | Press Release dated January 27, 2021 |
| 99.2 | 2020 Q4 Financial Data |
| 99.3 | Press Release dated January 27, 2021 |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| SIGNATURES | |
| NORFOLK SOUTHERN CORPORATION | |
| (Registrant) | |
| /s/ Denise W. Hutson | |
| Name: Denise W. Hutson | |
| Title: Corporate Secretary |
Date: January 27, 2021
 |
 Norfolk Southern Corporation, Three Commercial Place, Norfolk, Va. 23510-2191 |
FOR IMMEDIATE RELEASE
Norfolk Southern reports fourth-quarter and full-year 2020 results
Achieves record low operating ratio in the fourth quarter
NORFOLK, Va., January 27, 2021 – Norfolk Southern Corporation (NYSE: NSC) today reported fourth-quarter and full-year 2020 financial results.
Fourth-quarter net income was $671 million, diluted earnings per share were $2.64, and the operating ratio improved to an all-time quarterly record of 61.8%. Full-year net income was $2.0 billion, diluted earnings per share were $7.84 and the operating ratio was 69.3%. During the first quarter of 2020, Norfolk Southern reported a $385 million non-cash locomotive rationalization charge, and in the third quarter of 2020 reported a $99 million non-cash investment impairment charge. Excluding these non-cash charges, adjusted full-year net income was $2.4 billion, adjusted diluted earnings per share were $9.25, and the adjusted operating ratio improved to 64.4% versus the record of 64.7% set in 2019.
“During a year of unprecedented market disruption and uncertainty, the Norfolk Southern team delivered record productivity levels while providing safe and reliable freight solutions for our customers,” said James A. Squires, Norfolk Southern chairman, president and CEO. “As we take stock of what we achieved in 2020 while managing both the pandemic and energy market challenges, including the successful idling of four additional hump operations while driving productivity to record levels, we see much more opportunity ahead. We have set the stage to drive further efficiency and profitable growth in 2021 through our precision scheduled railroading operating plan, which will deliver long-term value for both our shareholders and customers.”
Fourth-quarter summary
| · | Railway operating revenues of $2.6 billion decreased 4% compared with fourth-quarter 2019, driven by a 1% decline in volume, lower fuel surcharges, and differing business mix. |
| · | Railway operating expenses were $1.6 billion, a decrease of 8%, or $139 million, compared with the same period last year. Lower fuel costs, compensation and benefits, and purchased services were partially offset by lower gains on property sales. |
| · | Income from railway operations was $1.0 billion, an increase of 2%, or $22 million, year-over-year. The railway operating ratio was 61.8%, an all-time record. |
2020 summary
| · | Railway operating revenues of $9.8 billion declined 13% as volume was down 12% year-over-year, reflecting declines in all major commodity categories driven by the global pandemic. |
| · | Railway operating expenses of $6.8 billion decreased $520 million, or 7%, compared with last year. Lower fuel costs, compensation and benefits, purchased services, and materials costs were partially offset by a $385 million non-cash locomotive rationalization charge as well as a $99 million non-cash impairment charge related to an equity-method investment. |
| o | Excluding the non-cash locomotive rationalization and investment impairment charges, adjusted operating expenses declined by $1.0 billion, or 14%, compared to last year. |
| · | Income from railway operations was $3.0 billion and the operating ratio was 69.3%. |
| o | Excluding the non-cash locomotive rationalization and investment impairment charges, adjusted income from railway operations was $3.5 billion, while the adjusted operating ratio improved to 64.4% versus the record of 64.7% set in 2019. |
About Norfolk Southern
Norfolk Southern Corporation (NYSE: NSC) is one of the nation’s premier transportation companies. Its Norfolk Southern Railway Company subsidiary operates approximately 19,300 route miles in 22 states and the District of Columbia, serves every major container port in the eastern United States, and provides efficient connections to other rail carriers. Norfolk Southern is a major transporter of industrial products, including agriculture, forest and consumer products, chemicals, and metals and construction materials. In addition, the railroad operates the most extensive intermodal network in the East and is a principal carrier of coal, automobiles, and automotive parts.
Non-GAAP Financial Measures
This news release includes certain non-GAAP financial measures. Reconciliation of these non-GAAP financial measures is provided
in the table below, entitled “Reconciliation of Non-GAAP Financial Measures.”
Forward-looking statements
This news release contains forward-looking statements that may be identified by the use of words like “believe,” “expect,” “anticipate,” “estimate,” “plan,” “consider,” “project,” and similar references to the future. Forward-looking statements reflect our good-faith evaluation of information currently available. These forward-looking statements are subject to a number of risks and uncertainties, and our actual results may differ materially from those projected. Please refer to our annual and quarterly reports filed with the SEC for a full discussion of those risks and uncertainties we view as most important. Forward-looking statements are not, and should not be relied upon as, a guarantee of future performance or results, nor will they necessarily prove to be accurate indications of the times at or by which any such performance or results will be achieved. As a result, actual outcomes and results may differ materially from those expressed in forward-looking statements. We undertake no obligation to update or revise forward-looking statements.
Media Inquiries:
Media Relations, 404-420-4444 ([email protected])
Investor Inquiries:
Pete Sharbel, 470-867-4807 ([email protected])
http://www.norfolksouthern.com
Reconciliation of Non-GAAP Financial Measures
Information included within this filing includes non-GAAP financial measures, as defined by SEC Regulation G. Non-GAAP financial measures should be considered in addition to, not as a substitute for, the financial measures reported in accordance with U.S. generally accepted accounting principles (GAAP).
GAAP financial results are adjusted to exclude the effects of a non-cash charge in the first quarter of 2020 related to the sale of 703 locomotives. The introduction of precision scheduled railroading in 2019 continues to provide significant benefits to the network operations and resulted in excess capacity resulting in the sale of these locomotives. GAAP financial results are also adjusted to exclude the effects of an impairment charge in the third quarter of 2020 related to an equity method investment. The income tax effects on the non-GAAP adjustments were calculated based on the applicable tax rates to which the non-GAAP adjustments relate.
Norfolk Southern believes that these non-GAAP financial measures provide valuable information regarding its earnings and business trends by excluding specific items that it believes are not indicative of the ongoing operating results of its business, providing a useful way for investors to make a comparison of our performance over time and against other companies in our industry by excluding the effects of the locomotive and impairment charges. These non-GAAP financial measures are being provided as supplemental information to Norfolk Southern’s GAAP financial measures, and Norfolk Southern believes these measures provide investors with additional meaningful financial information regarding our operational performance. Norfolk Southern also uses these non-GAAP measures as supplemental measures to evaluate its business and performance.
| ($ in millions except per share amounts) | ||||
| 2020 | ||||
| Railway operating expenses | $ | 6,787 | ||
| Effect of locomotive & investment impairment charges | (484 | ) | ||
| Adjusted railway operating expenses | $ | 6,303 | ||
| Income from railway operations | $ | 3,002 | ||
| Effect of locomotive & investment impairment charges | 484 | |||
| Adjusted income from railway operations | $ | 3,486 | ||
| Operating ratio (%) | 69.3 | |||
| Effect of locomotive & investment impairment charges (%) | (4.9 | ) | ||
| Adjusted operating ratio (%) | 64.4 | |||
| Income before income taxes | $ | 2,530 | ||
| Effect of locomotive & investment impairment charges | 484 | |||
| Adjusted income before income taxes | $ | 3,014 | ||
| Income taxes | $ | 517 | ||
| Effect of locomotive & investment impairment charges | 122 | |||
| Adjusted income taxes | $ | 639 | ||
| Net income | $ | 2,013 | ||
| Effect of locomotive & investment impairment charges | 362 | |||
| Adjusted net income | $ | 2,375 | ||
| Diluted earnings per share | $ | 7.84 | ||
| Effect of locomotive & investment impairment charges | 1.41 | |||
| Adjusted diluted earnings per share | $ | 9.25 | ||
###
Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Income
(Unaudited)
| Fourth Quarter | Years Ended December 31, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| (in millions, except per share amounts) | ||||||||||||||||
| Railway operating revenues | ||||||||||||||||
| Merchandise | $ | 1,553 | $ | 1,630 | $ | 6,088 | $ | 6,803 | ||||||||
| Intermodal | 730 | 697 | 2,654 | 2,824 | ||||||||||||
| Coal | 290 | 363 | 1,047 | 1,669 | ||||||||||||
| Total railway operating revenues | 2,573 | 2,690 | 9,789 | 11,296 | ||||||||||||
| Railway operating expenses | ||||||||||||||||
| Compensation and benefits | 587 | 630 | 2,373 | 2,751 | ||||||||||||
| Purchased services and rents | 426 | 460 | 1,687 | 1,725 | ||||||||||||
| Fuel | 136 | 223 | 535 | 953 | ||||||||||||
| Depreciation | 287 | 285 | 1,154 | 1,138 | ||||||||||||
| Materials and other | 153 | 130 | 653 | 740 | ||||||||||||
| Loss on asset disposal | — | — | 385 | — | ||||||||||||
| Total railway operating expenses | 1,589 | 1,728 | 6,787 | 7,307 | ||||||||||||
| Income from railway operations | 984 | 962 | 3,002 | 3,989 | ||||||||||||
| Other income – net | 43 | 18 | 153 | 106 | ||||||||||||
| Interest expense on debt | 160 | 152 | 625 | 604 | ||||||||||||
| Income before income taxes | 867 | 828 | 2,530 | 3,491 | ||||||||||||
| Income taxes | ||||||||||||||||
| Current | 132 | 57 | 375 | 439 | ||||||||||||
| Deferred | 64 | 105 | 142 | 330 | ||||||||||||
| Total income taxes | 196 | 162 | 517 | 769 | ||||||||||||
| Net income | $ | 671 | $ | 666 | $ | 2,013 | $ | 2,722 | ||||||||
| Earnings per share – diluted | $ | 2.64 | $ | 2.55 | $ | 7.84 | $ | 10.25 | ||||||||
| Weighted average shares outstanding – diluted | 254.7 | 261.6 | 256.6 | 265.6 | ||||||||||||
See accompanying notes to consolidated financial statements
Norfolk Southern Corporation and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
| At December 31, | ||||||||
| 2020 | 2019 | |||||||
| ($ in millions) | ||||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 1,115 | $ | 580 | ||||
| Accounts receivable – net | 848 | 920 | ||||||
| Materials and supplies | 221 | 244 | ||||||
| Other current assets | 134 | 337 | ||||||
| Total current assets | 2,318 | 2,081 | ||||||
| Investments | 3,590 | 3,428 | ||||||
| Properties less accumulated depreciation of $11,985 and $11,982, respectively | 31,345 | 31,614 | ||||||
| Other assets | 709 | 800 | ||||||
| Total assets | $ | 37,962 | $ | 37,923 | ||||
| Liabilities and stockholders’ equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 1,016 | $ | 1,428 | ||||
| Income and other taxes | 263 | 229 | ||||||
| Other current liabilities | 302 | 327 | ||||||
| Current maturities of long-term debt | 579 | 316 | ||||||
| Total current liabilities | 2,160 | 2,300 | ||||||
| Long-term debt | 12,102 | 11,880 | ||||||
| Other liabilities | 1,987 | 1,744 | ||||||
| Deferred income taxes | 6,922 | 6,815 | ||||||
| Total liabilities | 23,171 | 22,739 | ||||||
| Stockholders’ equity: | ||||||||
| Common stock $1.00 per share par value, 1,350,000,000 shares authorized; outstanding 252,095,082 and 257,904,956 shares, respectively, net of treasury shares | 254 | 259 | ||||||
| Additional paid-in capital | 2,248 | 2,209 | ||||||
| Accumulated other comprehensive loss | (594 | ) | (491 | ) | ||||
| Retained income | 12,883 | 13,207 | ||||||
| Total stockholders’ equity | 14,791 | 15,184 | ||||||
| Total liabilities and stockholders’ equity | $ | 37,962 | $ | 37,923 | ||||
See accompanying notes to consolidated financial statements
Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
| Years Ended December 31, | ||||||||
| 2020 | 2019 | |||||||
| ($ in millions) | ||||||||
| Cash flows from operating activities | ||||||||
| Net income | $ | 2,013 | $ | 2,722 | ||||
| Reconciliation of net income to net cash provided by operating activities: | ||||||||
| Depreciation | 1,154 | 1,139 | ||||||
| Deferred income taxes | 142 | 330 | ||||||
| Gains and losses on properties | (39 | ) | (42 | ) | ||||
| Loss on asset disposal | 385 | — | ||||||
| Impairment of investment | 99 | — | ||||||
| Changes in assets and liabilities affecting operations: | ||||||||
| Accounts receivable | 71 | 87 | ||||||
| Materials and supplies | 23 | (37 | ) | |||||
| Other current assets | 3 | (4 | ) | |||||
| Current liabilities other than debt | 34 | (185 | ) | |||||
| Other – net | (248 | ) | (118 | ) | ||||
| Net cash provided by operating activities | 3,637 | 3,892 | ||||||
| Cash flows from investing activities | ||||||||
| Property additions | (1,494 | ) | (2,019 | ) | ||||
| Property sales and other transactions | 333 | 377 | ||||||
| Investment purchases | (13 | ) | (18 | ) | ||||
| Investment sales and other transactions | (1 | ) | (104 | ) | ||||
| Net cash used in investing activities | (1,175 | ) | (1,764 | ) | ||||
| Cash flows from financing activities | ||||||||
| Dividends | (960 | ) | (949 | ) | ||||
| Common stock transactions | 69 | 27 | ||||||
| Purchase and retirement of common stock | (1,439 | ) | (2,099 | ) | ||||
| Proceeds from borrowings – net of issuance costs | 784 | 2,192 | ||||||
| Debt repayments | (381 | ) | (1,188 | ) | ||||
| Other | — | 23 | ||||||
| Net cash used in financing activities | (1,927 | ) | (1,994 | ) | ||||
| Net increase in cash, cash equivalents, and restricted cash | 535 | 134 | ||||||
| Cash, cash equivalents, and restricted cash | ||||||||
| At beginning of year | 580 | 446 | ||||||
| At end of year | $ | 1,115 | $ | 580 | ||||
| Supplemental disclosures of cash flow information | ||||||||
| Cash paid during the year for: | ||||||||
| Interest (net of amounts capitalized) | $ | 577 | $ | 555 | ||||
| Income taxes (net of refunds) | 311 | 543 | ||||||
See accompanying notes to consolidated financial statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:
1. Impairment of Investment
In 2020, we recorded an other-than-temporary impairment of $99 million related to the carrying value of an equity method investment. This non-cash impairment charge is recorded in “Purchased services and rents” on the Consolidated Statement of Income and had a $74 million impact on net income.
2. Loss on Asset Disposal
In 2020, we sold 703 locomotives deemed excess and no longer needed for railroad operations. Accordingly, we recorded a $385 million loss to adjust their carrying amount to their estimated fair value.
3. Stock Repurchase Program
We repurchased and retired 7.4 million and 11.3 million shares of common stock under our stock repurchase programs in 2020 and 2019, respectively, at a cost of $1.4 billion and $2.1 billion, respectively.
4. Restricted Cash
The “Cash, cash equivalents, and restricted cash” line item on the Consolidated Statement of Cash Flows at January 1, 2019 includes restricted cash of $88 million, which reflects deposits held by a third-party bond agent as collateral for certain debt obligations which matured on October 1, 2019.
| |
Norfolk Southern Corporation, Three Commercial Place, Norfolk, Va. 23510 |
FOR IMMEDIATE RELEASE
Norfolk Southern increases quarterly dividend by 5 cents and increases target dividend payout ratio
NORFOLK, Va., Jan. 27, 2021 – Norfolk Southern Corporation (NYSE: NSC) today announced that its board of directors approved a 5% increase in its quarterly dividend on the company’s common stock, from 94 to 99 cents per share. The company also announced an increase to its long-term target dividend payout ratio from 33% to a range of 35-40% of net income.
“Strong operational results achieved through our precision scheduled railroading transformation have underpinned robust cash flow generation,” said James A. Squires, Norfolk Southern chairman, president and CEO. “Today’s announcements highlight our confidence in long-term value creation and commitment to superior shareholder returns.”
The dividend is payable March 10 to shareholders of record on Feb. 5. Norfolk Southern has paid a dividend on its common stock for 154 consecutive quarters since its formation in 1982.
About Norfolk Southern
Norfolk Southern Corporation (NYSE: NSC) is one of the nation’s premier transportation companies. Its Norfolk Southern Railway Company subsidiary operates approximately 19,300 route miles in 22 states and the District of Columbia, serves every major container port in the eastern United States, and provides efficient connections to other rail carriers. Norfolk Southern is a major transporter of industrial products, including agriculture, forest and consumer products, chemicals, and metals and construction materials. In addition, the railroad operates the most extensive intermodal network in the East and is a principal carrier of coal, automobiles, and automotive parts.
Forward-looking statements
This news release contains forward-looking statements that may be identified by the use of words like “believe,” “expect,” “anticipate,” “estimate,” “plan,” “consider,” “project,” and similar references to the future. Forward-looking statements reflect our good-faith evaluation of information currently available. These forward-looking statements are subject to a number of risks and uncertainties, and our actual results may differ materially from those projected. Please refer to our annual and quarterly reports filed with the SEC for a full discussion of those risks and uncertainties we view as most important. Forward-looking statements are not, and should not be relied upon as, a guarantee of future performance or results, nor will they necessarily prove to be accurate indications of the times at or by which any such performance or results will be achieved. As a result, actual outcomes and results may differ materially from those expressed in forward-looking statements. We undertake no obligation to update or revise forward-looking statements.
Media Inquiries:
Media Relations, 404-420-4444 ([email protected])
Investor Inquiries:
Pete Sharbel, 470-867-4807 ([email protected])
http://www.norfolksouthern.com
###