01—Abstract
Summary
Summary of the 10-K filed February 6, 2020. Cited figures are marked; the original filing is the authoritative source.
Norfolk Southern Corporation (NSC) reported total railway operating revenues of $11.3 billiona 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%b 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.
02—Key points
Key Highlights
- Total 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.
- The railway operating ratio improved to 64.7% in 2019 from 65.4% in 2018, indicating increased operational efficiency.
- Merchandise and Intermodal segments were the largest revenue contributors, accounting for 60% and 25% of total railway operating revenues, respectively.
- Coal revenues declined by 8% in 2019 due to lower volumes, reflecting market headwinds in the energy sector.
- The company invested $2.02 billion in property additions in 2019, demonstrating a continued commitment to infrastructure and operational improvements.
- Diluted earnings per share increased to $10.25 in 2019 from $9.51 in 2018, partly due to share repurchases.
- Norfolk Southern operates approximately 19,500 route miles across 22 states and the District of Columbia.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2019filed February 6, 2020Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $11.30B$11.46B | −1.4% |
| Operating Expenses | $7.31B$7.50B | −2.6% |
| Operating Income | $3.99B$3.96B | +0.8% |
| Interest Expense | $604.00M$557.00M | +8.4% |
| Net Income | $2.72B$2.67B | +2.1% |
| EPS (Basic) | $10.32$9.58 | +7.7% |
| EPS (Diluted) | $10.25$9.51 | +7.8% |
| Shares Outstanding (Basic) | 263.30M277.70M | −5.2% |
| Shares Outstanding (Diluted) | 265.60M280.20M | −5.2% |
05—Questions
Frequently Asked Questions
What were Norfolk Southern's main sources of revenue in 2019?
In 2019, Norfolk Southern's railway operating revenues were primarily driven by its Merchandise segment (60%), followed by Intermodal (25%), and Coal (15%).
How did Norfolk Southern's operational efficiency change in 2019?
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.
What are the key risks facing Norfolk Southern according to the filing?
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.
What was the company's capital expenditure in 2019, and where was it directed?
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.
06—Continue