Norfolk Southern(US:NSC)2022-07-27 16:07Financial Performance - Norfolk Southern Corporation reported a 16% increase in total railway operating revenues, reaching $3,250 million in the second quarter of 2022 compared to $2,799 million in the same period of 2021[73]. - Income from railway operations rose by 9% to $1,271 million in the second quarter of 2022, up from $1,167 million in the second quarter of 2021[69]. - The diluted earnings per share increased by 5% to $3.45 in the second quarter of 2022, compared to $3.28 in the same quarter of 2021[69]. - The railway operating ratio worsened to 60.9% in the second quarter of 2022 from 58.3% in the same quarter of 2021, indicating higher operating expenses relative to revenues[69]. Revenue Breakdown - Coal revenues increased by 34% in the second quarter of 2022, driven by higher average revenue per unit despite a 4% decline in coal tonnage[73][85]. - Intermodal revenues grew by 21% in the second quarter of 2022, reaching $972 million, supported by higher average revenue per unit[73]. - Merchandise revenues increased by 10% in the second quarter of 2022, totaling $1,853 million, primarily due to higher fuel surcharge revenues and pricing gains[73]. - Approximately 95% of Norfolk Southern's revenue base is covered by contracts that include negotiated fuel surcharges, which totaled $421 million in the second quarter of 2022[75]. - The company expects continued revenue growth for the remainder of the year, driven by higher average revenue per unit and volume growth in merchandise and intermodal segments[80][83]. Operating Expenses - Total railway operating expenses increased by 21% to $1,979 million in Q2 2022 compared to $1,632 million in Q2 2021, and by 17% to $3,809 million for the first six months of 2022 compared to $3,256 million in the same period of 2021[87]. - Fuel expenses surged by 117% to $408 million in Q2 2022 and by 94% to $709 million for the first six months of 2022, driven by a 124% increase in locomotive fuel prices[89]. - Materials and other expenses rose by 77% to $172 million in Q2 2022 and by 38% to $343 million for the first six months of 2022, attributed to higher track and freight car materials costs[90]. Cash Flow and Financing - Cash provided by operating activities was $2.0 billion for the first six months of 2022, a slight decrease from $2.1 billion in the same period of 2021[94]. - Cash used in investing activities increased to $714 million for the first six months of 2022 from $529 million in the same period last year, primarily due to higher property additions[95]. - Cash used in financing activities was $877 million for the first six months of 2022, down from $1.0 billion in the same period last year, reflecting increased proceeds from borrowing[96]. - The debt-to-total capitalization ratio increased to 53.4% at June 30, 2022, compared to 50.4% at December 31, 2021[98]. Tax and Shareholder Returns - The effective tax rates for Q2 2022 and the first six months of 2022 were 24.7% and 23.9%, respectively, compared to 21.3% and 21.8% for the same periods in 2021[92]. - The company repurchased $1.5 billion of common stock in the first six months of both 2022 and 2021, with a new program authorized for an additional $10.0 billion beginning April 1, 2022[97]. Operational Management - Norfolk Southern is actively working on service restoration by recruiting and training transportation crews to improve network fluidity[67]. - The company expects cash on hand combined with cash provided by operating activities to be sufficient to meet ongoing obligations, while monitoring the impacts of the COVID-19 pandemic[101]. - As of June 30, 2022, the company's disclosure controls and procedures were effective in alerting management to material information required for periodic filings under the Exchange Act[109]. - No changes in internal control over financial reporting were identified during the second quarter of 2022 that materially affected the company's internal control[110].