10-KPeriod: FY2014

NORFOLK SOUTHERN CORP Annual Report, Year Ended Dec 31, 2014

Filed February 11, 2015For Securities:NSC

Summary

Norfolk Southern Corporation (NSC) reported strong operational and financial performance for the fiscal year ended December 30, 2014. The company achieved a record-low operating ratio of 69.2%, driven by a 3% increase in railway operating revenues to $11.6 billion, largely due to significant volume growth in its intermodal and merchandise segments. These gains successfully offset a decline in the coal business. Despite facing challenges such as resource shortages and network delays attributed to unexpected volume growth and severe winter weather, NSC demonstrated a commitment to improving service by adding resources. Looking ahead to 2015, the company anticipates that increased volumes and higher rates will mitigate the impact of lower oil prices on its fuel surcharge revenue. Management's focus remains on safety, service, cost control, productivity, and a market-based pricing strategy.

Financial Highlights

49 data points
Beta

Revenue

$11.62B

Net Income

$2.00B

17.2% Net Margin

EPS (Diluted)

$6.39

Total Assets

$33.20B

Cash & Equivalents

$973.00M

Free Cash Flow

$797.00M

Financial Statements
Beta
Revenue$11.62B
Operating Expenses$8.05B
Operating Income$3.58B
Interest Expense$545.00M
Net Income$2.00B
EPS (Basic)$6.44
EPS (Diluted)$6.39
Shares Outstanding (Basic)309.40M
Shares Outstanding (Diluted)312.50M

Key Highlights

  • 1Achieved a record-low operating ratio of 69.2% in 2014, indicating improved efficiency.
  • 2Railway operating revenues increased by 3% to $11.6 billion, driven by strong performance in intermodal and merchandise segments.
  • 3Coal revenue saw a decline of 6% compared to 2013, reflecting lower volumes and pricing.
  • 4Invested $2.1 billion in property additions, including significant capital for infrastructure and equipment, with a planned $2.4 billion for 2015.
  • 5Implemented a share repurchase program, with $318 million spent in 2014.
  • 6Net income increased by 5% to $2.0 billion ($6.39 per diluted share) in 2014, compared to $1.9 billion ($6.04 per diluted share) in 2013.

Frequently Asked Questions

Revenue growth in 2014 was primarily driven by strong volume increases in the intermodal and merchandise market segments. These segments include chemicals, metals/construction, agriculture/consumer products/government, automotive, and paper/clay/forest products. The intermodal segment, in particular, saw an 8% volume growth.

Norfolk Southern experienced resource shortages and network delays in 2014 due to unexpected volume growth and severe winter weather. The company is committed to improving service and has taken steps to add resources to its network to meet demand. They reported seeing improvements in operational metrics in the latter part of the year as a result of these efforts.

For 2015, Norfolk Southern expects increased volumes and higher rates to offset the impact of lower oil prices on its fuel surcharge revenue. However, coal revenues are anticipated to decrease further due to lower average revenue per unit (largely from reduced fuel surcharges) and declining volumes, especially in utility and export markets.

Norfolk Southern has budgeted $2.4 billion for property additions in 2015. This includes substantial investments in track structure, equipment, facilities and terminals (including the Crescent Corridor), and Positive Train Control (PTC) implementation. They also plan to acquire 282 miles of the Delaware & Hudson Railway Co. rail line, subject to regulatory approval.