10-KPeriod: FY2019

NORFOLK SOUTHERN CORP Annual Report, Year Ended Dec 31, 2019

Filed February 6, 2020For Securities:NSC

Summary

Norfolk Southern Corporation (NSC) reported total railway operating revenues of $11.3 billion for the year ended December 31, 2019. Despite a slight decrease in revenue compared to the prior year, the company demonstrated improved operational efficiency, with a notable reduction in its railway operating ratio to 64.7% from 65.4% in 2018. This efficiency gain, coupled with strategic initiatives, allowed for a slight increase in income from railway operations and a more significant increase in net income and diluted earnings per share. Merchandise and intermodal segments formed the bulk of revenues, accounting for 60% and 25% respectively, while coal contributed 15%. Capital expenditures for property additions remained robust, indicating continued investment in infrastructure. The company operates a vast network of approximately 19,500 route miles across 22 states, primarily serving the Eastern and Midwestern United States. NSC faces ongoing competition from other transportation modes, with CSX Corporation being its primary rail competitor. The report highlights the company's commitment to safety, security, and environmental compliance. While the company experienced a decrease in coal tonnage and intermodal volumes in 2019, the focus on pricing strategies and cost management helped mitigate the impact on overall financial performance. Looking ahead, NSC anticipates flat overall revenues for 2020, with expected growth in merchandise and intermodal offset by a decline in coal.

Financial Highlights

46 data points
Beta

Revenue

$11.30B

Net Income

$2.72B

24.1% Net Margin

EPS (Diluted)

$10.25

Total Assets

$37.92B

Cash & Equivalents

$580.00M

Free Cash Flow

$1.87B

Financial Statements
Beta
Revenue$11.30B
Operating Expenses$7.31B
Operating Income$3.99B
Interest Expense$604.00M
Net Income$2.72B
EPS (Basic)$10.32
EPS (Diluted)$10.25
Shares Outstanding (Basic)263.30M
Shares Outstanding (Diluted)265.60M

Key Highlights

  • 1Total railway operating revenues were $11.3 billion for 2019, a slight decrease from $11.46 billion in 2018, but income from railway operations saw a modest increase.
  • 2The railway operating ratio improved to 64.7% in 2019 from 65.4% in 2018, indicating increased operational efficiency.
  • 3Merchandise and Intermodal segments were the largest revenue contributors, accounting for 60% and 25% of total railway operating revenues, respectively.
  • 4Coal revenues declined by 8% in 2019 due to lower volumes, reflecting market headwinds in the energy sector.
  • 5The company invested $2.02 billion in property additions in 2019, demonstrating a continued commitment to infrastructure and operational improvements.
  • 6Diluted earnings per share increased to $10.25 in 2019 from $9.51 in 2018, partly due to share repurchases.
  • 7Norfolk Southern operates approximately 19,500 route miles across 22 states and the District of Columbia.

Frequently Asked Questions

In 2019, Norfolk Southern's railway operating revenues were primarily driven by its Merchandise segment (60%), followed by Intermodal (25%), and Coal (15%).

Operational efficiency improved in 2019 as indicated by a lower railway operating ratio of 64.7%, down from 65.4% in 2018. This was achieved through a 3% reduction in railway operating expenses which more than offset a 1% decline in revenues.

Key risks include significant governmental legislation and regulation impacting commercial, operating, and environmental matters; extensive federal and state environmental laws; climate change regulations affecting emissions; the transportation of hazardous materials; general economic conditions; potential disruptions in service due to demand fluctuations; volatility in energy prices; competition from other transportation providers; potential disruptions from interconnected carriers; reliance on technology and cybersecurity threats; labor agreements and potential work stoppages; various claims and lawsuits; and severe weather events.

In 2019, Norfolk Southern's property additions totaled $2.02 billion. This investment was allocated to 'Road and other property' ($1.37 billion) and 'Equipment' ($0.65 billion), reflecting ongoing investments in its infrastructure and rolling stock.