-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, LNpdnaGy9yCGzUF+00vJahnFIF4TszeJM0Ua2SOURpjXG/utf5iSX0OMVhQqiVqU id6Nm6Su+CaJiw5oSR0wOw== 0000702165-95-000020.txt : 19950511 0000702165-95-000020.hdr.sgml : 19950511 ACCESSION NUMBER: 0000702165-95-000020 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950510 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORFOLK SOUTHERN CORP CENTRAL INDEX KEY: 0000702165 STANDARD INDUSTRIAL CLASSIFICATION: RAILROADS, LINE-HAUL OPERATING [4011] IRS NUMBER: 521188014 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08339 FILM NUMBER: 95536264 BUSINESS ADDRESS: STREET 1: THREE COMMERCIAL PL CITY: NORFOLK STATE: VA ZIP: 23510-2191 BUSINESS PHONE: 8046292680 10-Q 1 1ST QTR 95 NSC 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------------ FORM 10-Q (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended MARCH 31, 1995 ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to -------- -------- Commission file number 1-8339 NORFOLK SOUTHERN CORPORATION - --------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Virginia 52-1188014 - ---------------------------------------- ------------------------------- (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) Three Commercial Place Norfolk, Virginia 23510-2191 - ---------------------------------------- ------------------------------- (Address of principal executive offices) Zip Code Registrant's telephone number, including area code (804) 629-2680 ------------------ No Change - -------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. (X) Yes ( ) No The number of shares outstanding of each of the registrant's classes of Common Stock, as of the last practicable date: Class Outstanding as of April 30, 1995 ----- -------------------------------- Common Stock (par value $1.00) 131,978,551 shares (excluding 7,252,634 shares held by registrant's consolidated subsidiaries) PAGE 2 NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES (NS) INDEX Page ---- Part I. Financial Information: Item 1. Consolidated Statements of Income Three Months Ended March 31, 1995 and 1994 3 Consolidated Balance Sheets March 31, 1995 and December 31, 1994 4 Consolidated Statements of Cash Flows Three Months Ended March 31, 1995 and 1994 5 Notes to Consolidated Financial Statements 6-7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8-11 PartII. Other Information: Item 6. Exhibits and Reports on Form 8-K 12 Signatures 13 Index to Exhibits 14 PAGE 3 PART I. FINANCIAL INFORMATION ------------------------------ NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES Consolidated Statements of Income (In millions of dollars except per share amounts) (Unaudited)
Three Months Ended March 31, 1995 1994 --------- --------- TRANSPORTATION OPERATING REVENUES: Railway: Coal $ 300.3 $ 304.9 Merchandise 670.2 609.4 Other 28.7 28.0 --------- -------- Total railway 999.2 942.3 Motor carrier 139.5 134.5 --------- -------- Total transportation operating revenues 1,138.7 1,076.8 --------- -------- TRANSPORTATION OPERATING EXPENSES: Railway: Compensation and benefits 375.3 351.4 Materials, services and rents 163.1 161.0 Depreciation 94.4 93.3 Diesel fuel 48.7 45.7 Casualties and other claims 32.2 29.1 Other 35.5 37.5 --------- -------- Total railway 749.2 718.0 Motor carrier 140.4 136.5 --------- -------- Total transportation operating expenses 889.6 854.5 --------- -------- Income from operations 249.1 222.3 Other income (expense): Interest income 6.2 5.7 Interest expense on debt (28.3) (23.7) Other - net 49.5 21.0 --------- -------- Total other income 27.4 3.0 --------- -------- Income before income taxes 276.5 225.3 Provision for income taxes 105.8 80.4 --------- -------- NET INCOME $ 170.7 $ 144.9 ========= ======== Per share amounts (Note 5): Net income $ 1.29 $ 1.05 Dividends 0.52 0.48 See accompanying notes to consolidated financial statements.
PAGE 4 NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets (In millions of dollars) (Unaudited)
March 31, December 31, 1995 1994 ------------ ------------ ASSETS Current assets: Cash and cash equivalents $ 117.9 $ 57.0 Short-term investments 224.0 249.7 Accounts receivable - net 708.7 726.6 Materials and supplies 67.0 61.9 Deferred income taxes 132.9 137.0 Other current assets 101.5 105.3 --------- --------- Total current assets 1,352.0 1,337.5 Investments 199.8 172.8 Properties less accumulated depreciation 9,158.7 8,987.1 Other assets 89.4 90.4 --------- --------- TOTAL ASSETS $10,799.9 $10,587.8 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short-term debt $ 42.1 $ 44.9 Accounts payable 674.1 704.1 Income and other taxes 250.7 168.5 Other current liabilities 145.7 142.3 Current maturities of long-term debt (Note 3) 70.2 72.0 --------- --------- Total current liabilities 1,182.8 1,131.8 Long-term debt (Note 3) 1,635.1 1,547.8 Other liabilities 977.7 961.9 Minority interests 52.9 53.5 Deferred income taxes 2,218.0 2,208.0 --------- --------- TOTAL LIABILITIES 6,066.5 5,903.0 --------- --------- Stockholders' equity: Common stock $1.00 per share par value 139.5 140.4 Other capital 419.0 410.4 Retained income 4,195.5 4,154.6 Less treasury stock at cost, 7,252,634 shares (20.6) (20.6) --------- --------- TOTAL STOCKHOLDERS' EQUITY 4,733.4 4,684.8 --------- --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $10,799.9 $10,587.8 ========= ========= See accompanying notes to consolidated financial statements.
PAGE 5 NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows (In millions of dollars) (Unaudited)
Three Months Ended March 31, 1995 1994 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 170.7 $ 144.9 Reconciliation of net income to net cash provided by operating activities: Special charge payments (2.8) (23.8) Depreciation 101.0 100.2 Deferred income taxes 12.7 3.3 Nonoperating gains and losses on properties and investments (40.8) (4.8) Changes in assets and liabilities affecting operations: Accounts receivable 22.9 (8.6) Materials and supplies (5.1) (2.1) Other current assets 3.8 (1.1) Current liabilities other than debt 68.3 22.6 Other - net 8.2 (7.1) ------- ------- Net cash provided by operating activities 338.9 223.5 CASH FLOWS FROM INVESTING ACTIVITIES: Property additions (Note 3) (183.2) (190.9) Property sales and other transactions 31.4 33.1 Investments and loans (24.3) (19.2) Investment sales and other transactions 23.8 34.9 Short-term investments - net 27.7 65.7 ------- ------- Net cash used for investing activities (124.6) (76.4) CASH FLOWS FROM FINANCING ACTIVITIES: Dividends (69.0) (66.3) Common stock issued - net 1.9 8.0 Purchase and retirement of common stock (71.9) (44.3) Proceeds from long-term borrowings 7.6 -- Debt repayments (22.0) (17.3) ------- ------- Net cash used for financing activities (153.4) (119.9) ------- ------- Net increase in cash and cash equivalents 60.9 27.2 CASH AND CASH EQUIVALENTS:* At beginning of year 57.0 80.5 ------- ------- At end of period $ 117.9 $ 107.7 ======= ======= - -------------------------------------------------------------------------- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the period for: Interest (net of amounts capitalized) $ 39.7 $ 37.7 Income taxes $ 3.7 $ 7.5 * Cash equivalents are highly liquid investments purchased three months or less from maturity. See accompanying notes to consolidated financial statements.
PAGE 6 NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. In the opinion of Management, the accompanying unaudited interim financial statements contain all adjustments (consisting of normal recurring accruals) necessary to present fairly the financial position as of March 31, 1995, and the results of operations and cash flows for the three months ended March 31, 1995 and 1994. While Management believes that the disclosures presented are adequate to make the information not misleading, these consolidated financial statements should be read in conjunction with the financial statements and notes included in the Corporation's latest Annual Report on Form 10-K. 2. Contingencies There have been no significant changes since year end 1994 in the matters as discussed in NOTE 17, CONTINGENCIES, appearing in the NS Annual Report on Form 10-K for 1994, Notes to Consolidated Financial Statements, beginning on page 72. 3. Capital Leases During the first quarter of 1995, an NS rail subsidiary entered into capital leases covering 114 new locomotives having a total cost of $134.9 million. The related capital lease obligations totaling $104.5 million were reflected in the Consolidated Balance Sheet as debt and, because they were non-cash transactions, were excluded from the Consolidated Statement of Cash Flows. The lease obligations carry stated interest rates between 8.23 percent and 8.60 percent but were converted to variable rate obligations using interest rate swap agreements. The interest rates on these obligations are based on the six-month London Interbank Offered Rate, plus 35 basis points, and will be reset every six months with realized gains or losses accounted for as an adjustment of interest expense over the terms of the leases. 4. Stock Purchase Programs Since 1987, the Board of Directors has authorized the purchase and retirement of up to 65 million shares of NS common stock. Purchases under the programs have been made with a combination of internally generated cash and through the issuance of debt. Since the first purchases in December 1987 through March 31, 1995, NS has purchased and retired 60,205,100 shares of its common stock under these programs at a cost of approximately $2.6 billion. Future purchases are dependent on market conditions, the economy, cash needs and alternative investment opportunities. PAGE 7 NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 5. Earnings Per Share "Earnings per share" is computed by dividing net income by the weighted average number of common shares outstanding as follows:
Three Months Ended March 31, 1995 1994 ------- ------- (In thousands) Average number of shares outstanding 132,494 138,159
Recent decreases in the average number of outstanding shares of NS common stock are the result of the stock purchase program described in Note 4. PAGE 8 NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS Net Income - ---------- "Net income" increased $25.8 million, or 18 percent, in the first quarter of 1995, compared with the same period last year. This represents NS' best first-quarter net income and reflects improved income from railway operations of $25.7 million and from nonoperating sources of $24.4 million. Railway Operating Revenues - -------------------------- First-quarter "Railway operating revenues" increased $56.9 million, or 6 percent, compared with the same period last year. This change in operating revenues was due to:
First Quarter 1995 vs. 1994 Increase (Decrease) ------------------ (In millions of dollars) Traffic volume (carloads) $ 87.8 Revenue per unit/mix (31.6) Other 0.7 ------- $ 56.9 =======
The principal revenue commodity groups and changes from the prior year were as follows:
First Quarter 1995 vs. 1994 Increase (Decrease) ------------------ (In millions of dollars) Coal $ (4.6) Merchandise: Intermodal 17.5 Metals/construction 12.0 Automotive 11.9 Chemicals 8.7 Paper/forest 7.4 Agriculture 3.3 Other, principally switching and demurrage 0.7 ------- $ 56.9 =======
PAGE 9 NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations Coal - ---- The decline in coal revenues compared with last year was attributable to a weather-related decrease in long-haul utility coal shipments and continued weakness in export coal. Severe winter weather in the first quarter of 1994 created high demand for utility coal, while this year's mild weather resulted in much lower burn rates at utilities served by NS. The decline in long-haul traffic was partially offset by an increase in short-haul utility business, including NS' new COLTainer rail-truck service. The overall comparative weakness in utility coal traffic was somewhat mitigated by increased movements of metallurgical coal. Higher metallurgical traffic is largely due to the return to service of certain facilities which were experiencing downtime last year. Looking ahead, the utility coal market in 1995 is expected to recover slowly with the return of more seasonal weather patterns and temperatures. However, most of the gain is not expected to occur until the second half of the year due to high utility stockpiles. The export coal market is expected to be mixed, with lower rates offsetting increased demand, although some improvement over 1994's depressed results is expected. Merchandise - ----------- All merchandise commodity groups showed improvement over last year's first quarter, as overall merchandise traffic volume was up 12 percent. The largest increase was in intermodal, with revenues up 18 percent on a 23 percent increase in traffic. Intermodal, which has been NS' fastest growing line of business in 1995, is expected to continue to expand as additional business is shifted from trucks, and capacity improvements generate growth from existing sources. The metals/construction and automotive groups also posted strong first-quarter gains, compared with last year, with revenues up 17 percent and 11 percent, respectively. Both groups benefited from an overall improvement in the economy, with metals/construction also gaining from new production facilities coming on-line. Revenues from metals/construction traffic are expected to continue ahead of last year, as growth is projected in construction and steel output. Automotive volume and revenues are expected to decline somewhat due to lower production and planned retooling downtime. Railway Operating Expenses - -------------------------- First-quarter "Railway operating expenses" increased $31.2 million, or 4 percent, compared with the same period last year. The largest increase was in "Compensation and benefits" which was up $23.9 million, or 7 percent. The higher labor costs were partly due to the 10 percent increase in total rail traffic. Other factors were: (1) a 4 percent wage increase, effective July 1, 1994, for agreement employees; (2) higher health care costs for agreement employees due to the absorption last year of the cash surplus in a multi-railroad insurance fund; and (3) increased accruals for stock-based compensation, a result of the rise in the NS stock price during the first quarter of 1995. "Casualties and other claims" increased $3.1 million, or 11 percent, over expenses in the PAGE 10 NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations first quarter of 1994, which were unusually low due to favorable development experience related to claims filed in past years. "Diesel fuel" expenses were up $3.0 million, or 7 percent, largely due to higher consumption related to increased traffic. "Other expenses" declined $2.0 million, or 5 percent, due to lower employee moving expenses which had been unusually high in the first quarter of 1994 due to the early retirement program in the fall of 1993. Motor Carrier Operating Revenues - -------------------------------- First-quarter "Motor carrier operating revenues" increased $5.0 million, or 4 percent, compared with the same period last year, with all of the increase attributable to the High Value Products (HVP) Division. Motor Carrier Operating Expenses - -------------------------------- "Motor carrier operating expenses" rose $3.9 million, or 3 percent, compared with the same period last year, principally due to volume- related expense increases in the HVP Division. Other Income (Expense) - ---------------------- "Other income (expense)" was up $24.4 million over first quarter 1994, due to a $30.5 million ($18.8 million after-tax) gain (mostly non-cash) resulting from the partial redemption of a real estate partnership interest. "Interest income" was up $0.5 million, or 9 percent, due to higher invested cash balances. "Interest expense on debt" increased $4.6 million, or 19 percent, mainly due to higher rates on commercial paper debt. Income Taxes - ------------ The "Provision for income taxes" in first quarter 1995 totaled $105.8 million, for an effective rate of 38.3 percent, compared with an effective rate of 35.7 percent last year. The lower effective rate in first quarter 1994 was due to an adjustment in federal income tax reserves related to prior years. FINANCIAL CONDITION AND LIQUIDITY
March 31, 1995 December 31, 1994 -------------- ----------------- (Dollars in millions) Cash and short-term investments $341.9 $306.7 Working capital $169.2 $205.7 Current ratio 1.1 1.2 Debt to total capitalization 27.0% 26.2%
PAGE 11 NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations CASH FLOWS FROM OPERATING ACTIVITIES are NS' principal source of liquidity and were sufficient to cover cash outflows for dividends, debt repayments and capital spending (see Consolidated Statements of Cash Flows on page 5). The increase in cash provided by operating activities compared with first quarter 1994 was primarily due to higher income from operations and to lower special charge payments. CASH FLOWS FROM INVESTING ACTIVITIES were affected principally by capital spending for property additions, which in first quarter 1995 included approximately $30 million related to locomotives under capital leases (see Note 3). "Property sales and other transactions" primarily reflects proceeds from dispositions of nonoperating property. "Investments and loans" consists primarily of premium payments related to corporate-owned life insurance (COLI), while "Investment sales and other transactions" principally reflects borrowing on COLI. CASH FLOWS FROM FINANCING ACTIVITIES in the first quarter of 1995 primarily reflects uses of cash with the largest amount having been spent on the stock purchase program (see Note 4). "Proceeds from long- term borrowings" represents amounts received in connection with capital lease transactions entered into during the first quarter (see Note 3). PAGE 12 PART II - OTHER INFORMATION ---------------------------- NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES Item 6. Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibits Computation of Per Share Earnings Financial Data Schedule (b) Reports on Form 8-K No reports on Form 8-K were filed for the three months ended March 31, 1995. PAGE 13 SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. NORFOLK SOUTHERN CORPORATION ----------------------------------------- (Registrant) Date: May 10, 1995 /s/ Dezora M. Martin ------------------- ----------------------------------------- Dezora M. Martin Corporate Secretary (Signature) Date: May 10, 1995 /s/ John P. Rathbone ------------------- ----------------------------------------- John P. Rathbone Vice President and Controller (Principal Accounting Officer) (Signature) PAGE 14 NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES INDEX TO EXHIBITS ----------------- Electronic Submission Exhibit Number Description Page Number - ----------- ----------------------------------------- ----------- 11 Statement re Computation of Per Share Earnings 15-16 27 Financial Data Schedule (This exhibit is required to be submitted electronically pursuant to the rules and regulations of the Securities and Exchange Commission and shall not be deemed filed for purposes of Section 11 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934). 17 PAGE 15 EX-11 2 1ST QTR 95 EX-11 NS COMPUTATION OF PER SHARE EARNINGS EXHIBIT 11, Page 1 of 2 NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES COMPUTATION OF PER SHARE EARNINGS (In millions except per share amounts)
Three Months Ended March 31, ------------------- 1995 1994 -------- -------- COMPUTATION FOR STATEMENTS OF INCOME Income before cumulative effects of changes in accounting principles $ 170.7 $ 144.9 ------- ------- Weighted average number of shares outstanding 132.5 138.2 ------- ------- Primary earnings per share $ 1.29 $ 1.05 ======= ======= ADDITIONAL PRIMARY COMPUTATION Net income per statements of income $ 170.7 $ 144.9 ------- ------- Adjustment to weighted average number of shares outstanding: Weighted average number of shares outstanding per primary computation above 132.5 138.2 Dilutive effect of outstanding options, stock appreciation rights (SARs) and performance share units (PSUs) (as determined by the application of the treasury stock method)(1) 1.2 1.3 ------- ------- Weighted average number of shares outstanding, as adjusted 133.7 139.5 ======= ======= Primary earnings per share, as adjusted(2): $ 1.28 $ 1.04 ======= ======= (1) See Note 12 of Notes to Consolidated Financial Statements in Norfolk Southern's 1994 Annual Report on Form 10-K for a description of the Long-Term Incentive Plan. (2) These calculations are submitted in accordance with Regulation S-K item 601(b)(11) although not required by footnote 2 to paragraph 14 of APB Opinion No. 15 because they result in dilution of less than 3 percent.
PAGE 16 EXHIBIT 11, Page 2 of 2 NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES COMPUTATION OF PER SHARE EARNINGS (In millions except per share amounts)
Three Months Ended March 31, ------------------- 1995 1994 -------- -------- FULLY DILUTED COMPUTATION Net income per statements of income $ 170.7 $ 144.9 Adjustment to increase earnings to requisite level to earn maximum PSUs, net of tax effect 12.4 21.7 ------- ------- Net income, as adjusted $ 183.1 $ 166.6 ======= ======= Adjustment to weighted average number of shares outstanding, as adjusted for additional primary calculation: Weighted average number of shares outstanding, as adjusted per additional primary computation on page 1 133.7 139.5 Additional dilutive effect of outstanding options and SARs (as determined by the application of the treasury stock method using period end market price) 0.1 -- Additional shares issuable at maximum level for PSUs 0.1 0.1 ------- ------- Weighted average number of shares, as adjusted 133.9 139.6 ======= ======= Fully diluted earnings per share(3): $ 1.37 $ 1.19 ======= ======= (3) These calculations are submitted in accordance with Regulation S-K item 601(b)(11) although they are contrary to paragraph 40 of APB Opinion No. 15 because they produce an anti-dilutive result.
PAGE 17 EX-27 3 1ST QTR 95 EX-27 NSC FINANCIAL DATA SCHEDULE
5 1,000,000 3-MOS DEC-31-1995 MAR-31-1995 $ 118 224 729 20 67 1,352 13,409 4,250 10,800 1,183 1,635 140 0 0 419 10,800 0 1,139 0 890 (56) 0 28 277 106 171 0 0 0 171 1.29 0
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