00007021652023FYFALSEseven dayshttp://fasb.org/us-gaap/2023#OtherAssetsNoncurrenthttp://fasb.org/us-gaap/2023#OtherAssetsNoncurrenthttp://fasb.org/us-gaap/2023#OtherLiabilitiesCurrenthttp://fasb.org/us-gaap/2023#OtherLiabilitiesCurrenthttp://fasb.org/us-gaap/2023#OtherLiabilitiesNoncurrenthttp://fasb.org/us-gaap/2023#OtherLiabilitiesNoncurrenthttp://fasb.org/us-gaap/2023#UnusualOrInfrequentItemLossGross00007021652023-01-012023-12-3100007021652023-06-30iso4217:USD00007021652024-01-31xbrli:shares00007021652022-01-012022-12-3100007021652021-01-012021-12-31iso4217:USDxbrli:shares00007021652023-12-3100007021652022-12-3100007021652021-12-3100007021652020-12-310000702165us-gaap:CommonStockMember2020-12-310000702165us-gaap:AdditionalPaidInCapitalMember2020-12-310000702165us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-310000702165us-gaap:RetainedEarningsMember2020-12-310000702165us-gaap:RetainedEarningsMember2021-01-012021-12-310000702165us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-01-012021-12-310000702165us-gaap:CommonStockMember2021-01-012021-12-310000702165us-gaap:AdditionalPaidInCapitalMember2021-01-012021-12-310000702165us-gaap:CommonStockMember2021-12-310000702165us-gaap:AdditionalPaidInCapitalMember2021-12-310000702165us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-12-310000702165us-gaap:RetainedEarningsMember2021-12-310000702165us-gaap:RetainedEarningsMember2022-01-012022-12-310000702165us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-01-012022-12-310000702165us-gaap:CommonStockMember2022-01-012022-12-310000702165us-gaap:AdditionalPaidInCapitalMember2022-01-012022-12-310000702165us-gaap:CommonStockMember2022-12-310000702165us-gaap:AdditionalPaidInCapitalMember2022-12-310000702165us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-12-310000702165us-gaap:RetainedEarningsMember2022-12-310000702165us-gaap:RetainedEarningsMember2023-01-012023-12-310000702165us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-01-012023-12-310000702165us-gaap:CommonStockMember2023-01-012023-12-310000702165us-gaap:AdditionalPaidInCapitalMember2023-01-012023-12-310000702165us-gaap:CommonStockMember2023-12-310000702165us-gaap:AdditionalPaidInCapitalMember2023-12-310000702165us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-12-310000702165us-gaap:RetainedEarningsMember2023-12-31utr:mi0000702165nsc:IntermodalMember2023-01-012023-12-31xbrli:pure0000702165nsc:AgricultureForestAndConsumerProductsMember2023-01-012023-12-310000702165nsc:ChemicalsMember2023-01-012023-12-310000702165nsc:CoalMember2023-01-012023-12-310000702165nsc:MetalsAndConstructionMember2023-01-012023-12-310000702165nsc:AutomotiveMember2023-01-012023-12-31nsc:depreciable_asset_class0000702165us-gaap:EquipmentMember2023-01-012023-12-310000702165nsc:RoadwayMember2023-01-012023-12-310000702165nsc:RailwayOperatingRevenuesMarketGroupMerchandiseMembernsc:AgriculturalForestAndConsumerMember2023-01-012023-12-310000702165nsc:RailwayOperatingRevenuesMarketGroupMerchandiseMembernsc:AgriculturalForestAndConsumerMember2022-01-012022-12-310000702165nsc:RailwayOperatingRevenuesMarketGroupMerchandiseMembernsc:AgriculturalForestAndConsumerMember2021-01-012021-12-310000702165nsc:RailwayOperatingRevenuesMarketGroupMerchandiseMembernsc:ChemicalsMember2023-01-012023-12-310000702165nsc:RailwayOperatingRevenuesMarketGroupMerchandiseMembernsc:ChemicalsMember2022-01-012022-12-310000702165nsc:RailwayOperatingRevenuesMarketGroupMerchandiseMembernsc:ChemicalsMember2021-01-012021-12-310000702165nsc:RailwayOperatingRevenuesMarketGroupMerchandiseMembernsc:MetalsAndConstructionMember2023-01-012023-12-310000702165nsc:RailwayOperatingRevenuesMarketGroupMerchandiseMembernsc:MetalsAndConstructionMember2022-01-012022-12-310000702165nsc:RailwayOperatingRevenuesMarketGroupMerchandiseMembernsc:MetalsAndConstructionMember2021-01-012021-12-310000702165nsc:RailwayOperatingRevenuesMarketGroupMerchandiseMembernsc:AutomotiveMember2023-01-012023-12-310000702165nsc:RailwayOperatingRevenuesMarketGroupMerchandiseMembernsc:AutomotiveMember2022-01-012022-12-310000702165nsc:RailwayOperatingRevenuesMarketGroupMerchandiseMembernsc:AutomotiveMember2021-01-012021-12-310000702165nsc:RailwayOperatingRevenuesMarketGroupMerchandiseMember2023-01-012023-12-310000702165nsc:RailwayOperatingRevenuesMarketGroupMerchandiseMember2022-01-012022-12-310000702165nsc:RailwayOperatingRevenuesMarketGroupMerchandiseMember2021-01-012021-12-310000702165nsc:RailwayOperatingRevenuesMarketGroupIntermodalMember2023-01-012023-12-310000702165nsc:RailwayOperatingRevenuesMarketGroupIntermodalMember2022-01-012022-12-310000702165nsc:RailwayOperatingRevenuesMarketGroupIntermodalMember2021-01-012021-12-310000702165nsc:RailwayOperatingRevenuesMarketGroupCoalMember2023-01-012023-12-310000702165nsc:RailwayOperatingRevenuesMarketGroupCoalMember2022-01-012022-12-310000702165nsc:RailwayOperatingRevenuesMarketGroupCoalMember2021-01-012021-12-310000702165nsc:AncillaryServicesMember2023-01-012023-12-310000702165nsc:AncillaryServicesMember2022-01-012022-12-310000702165nsc:AncillaryServicesMember2021-01-012021-12-310000702165us-gaap:TradeAccountsReceivableMember2023-12-310000702165us-gaap:TradeAccountsReceivableMember2022-12-310000702165nsc:OtherReceivablesMember2023-12-310000702165nsc:OtherReceivablesMember2022-12-310000702165us-gaap:CarryingReportedAmountFairValueDisclosureMemberus-gaap:FairValueMeasurementsRecurringMember2023-12-310000702165us-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:FairValueMeasurementsRecurringMember2023-12-310000702165us-gaap:CarryingReportedAmountFairValueDisclosureMemberus-gaap:FairValueMeasurementsRecurringMember2022-12-310000702165us-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:FairValueMeasurementsRecurringMember2022-12-310000702165nsc:ConrailIncMember2023-12-310000702165nsc:ConrailIncMember2022-12-310000702165nsc:TTXCompanyMember2023-12-310000702165nsc:TTXCompanyMember2022-12-310000702165us-gaap:OtherLongTermInvestmentsMember2023-12-310000702165us-gaap:OtherLongTermInvestmentsMember2022-12-310000702165nsc:ConrailEconomicMember2022-12-310000702165nsc:ConrailEconomicMember2023-12-310000702165nsc:ConrailVotingMember2022-12-310000702165nsc:ConrailVotingMember2023-12-310000702165nsc:ConrailIncMember2023-12-310000702165nsc:ConrailIncMember2023-01-012023-12-310000702165nsc:ConrailIncMember2022-01-012022-12-310000702165nsc:ConrailIncMember2021-01-012021-12-310000702165nsc:ConrailIncMember2022-12-31nsc:railroad0000702165nsc:TTXCompanyMember2023-12-310000702165nsc:TTXCompanyMember2023-01-012023-12-310000702165nsc:TTXCompanyMember2022-01-012022-12-310000702165nsc:TTXCompanyMember2021-01-012021-12-310000702165us-gaap:LandMember2023-12-310000702165us-gaap:LandMember2023-01-012023-12-310000702165us-gaap:RailroadTransportationEquipmentMember2023-12-310000702165us-gaap:RailroadTransportationEquipmentMember2023-01-012023-12-310000702165nsc:TiesMember2023-12-310000702165nsc:TiesMember2023-01-012023-12-310000702165nsc:BallastMember2023-12-310000702165nsc:BallastMember2023-01-012023-12-310000702165nsc:ConstructionInProcessRoadwayMember2023-12-310000702165nsc:ConstructionInProcessRoadwayMember2023-01-012023-12-310000702165nsc:OtherRoadwayMember2023-12-310000702165nsc:OtherRoadwayMember2023-01-012023-12-310000702165nsc:TotalRoadwayMember2023-12-310000702165nsc:LocomotivesMember2023-12-310000702165nsc:LocomotivesMember2023-01-012023-12-310000702165nsc:FreightCarsMember2023-12-310000702165nsc:FreightCarsMember2023-01-012023-12-310000702165us-gaap:TechnologyEquipmentMember2023-12-310000702165us-gaap:TechnologyEquipmentMember2023-01-012023-12-310000702165nsc:ConstructionInProcessEquipmentMember2023-12-310000702165nsc:ConstructionInProcessEquipmentMember2023-01-012023-12-310000702165us-gaap:OtherMachineryAndEquipmentMember2023-12-310000702165us-gaap:OtherMachineryAndEquipmentMember2023-01-012023-12-310000702165us-gaap:EquipmentMember2023-12-310000702165srt:OtherPropertyMember2023-12-310000702165srt:OtherPropertyMember2023-01-012023-12-310000702165us-gaap:LandMember2022-12-310000702165us-gaap:LandMember2022-01-012022-12-310000702165us-gaap:RailroadTransportationEquipmentMember2022-12-310000702165us-gaap:RailroadTransportationEquipmentMember2022-01-012022-12-310000702165nsc:TiesMember2022-12-310000702165nsc:TiesMember2022-01-012022-12-310000702165nsc:BallastMember2022-12-310000702165nsc:BallastMember2022-01-012022-12-310000702165nsc:ConstructionInProcessRoadwayMember2022-12-310000702165nsc:ConstructionInProcessRoadwayMember2022-01-012022-12-310000702165nsc:OtherRoadwayMember2022-12-310000702165nsc:OtherRoadwayMember2022-01-012022-12-310000702165nsc:TotalRoadwayMember2022-12-310000702165nsc:LocomotivesMember2022-12-310000702165nsc:LocomotivesMember2022-01-012022-12-310000702165nsc:FreightCarsMember2022-12-310000702165nsc:FreightCarsMember2022-01-012022-12-310000702165us-gaap:TechnologyEquipmentMember2022-12-310000702165us-gaap:TechnologyEquipmentMember2022-01-012022-12-310000702165nsc:ConstructionInProcessEquipmentMember2022-12-310000702165nsc:ConstructionInProcessEquipmentMember2022-01-012022-12-310000702165us-gaap:OtherMachineryAndEquipmentMember2022-12-310000702165us-gaap:OtherMachineryAndEquipmentMember2022-01-012022-12-310000702165us-gaap:EquipmentMember2022-12-310000702165srt:OtherPropertyMember2022-12-310000702165srt:OtherPropertyMember2022-01-012022-12-310000702165nsc:A420MaturingTo2028Member2023-12-310000702165nsc:A420MaturingTo2028Member2022-12-310000702165nsc:A430Maturing2029To2033Member2023-12-310000702165nsc:A430Maturing2029To2033Member2022-12-310000702165nsc:A432Maturing2034To2064Member2023-12-310000702165nsc:A432Maturing2034To2064Member2022-12-310000702165nsc:A522Maturing2097To2121Member2023-12-310000702165nsc:A522Maturing2097To2121Member2022-12-310000702165nsc:A555SeniorNotesDue2034Memberus-gaap:SeniorNotesMember2023-11-300000702165nsc:A595SeniorNotesDue2064Memberus-gaap:SeniorNotesMember2023-11-300000702165nsc:A505SeniorNotesDue2030Memberus-gaap:SeniorNotesMember2023-08-310000702165us-gaap:SeniorNotesMembernsc:A535SeniorNotesDue2054Member2023-08-310000702165us-gaap:SeniorNotesMembernsc:A445SeniorNotesDue2033Member2023-02-280000702165nsc:SecuritizationBorrowingsMember2023-05-310000702165nsc:SecuritizationBorrowingsMember2022-12-310000702165nsc:SecuritizationBorrowingsMember2023-12-310000702165nsc:A800MillionCreditAgreementExpiringInMarch2025Member2023-12-310000702165nsc:A800MillionCreditAgreementExpiringInMarch2025Member2022-12-310000702165us-gaap:SubsequentEventMembernsc:A800MillionCreditAgreementExpiringInJanuary2029Member2024-01-310000702165us-gaap:UnsecuredDebtMemberus-gaap:SubsequentEventMembernsc:DelayedDrawTermLoanFacilityMember2024-01-012024-01-310000702165us-gaap:UnsecuredDebtMemberus-gaap:SubsequentEventMembernsc:DelayedDrawTermLoanFacilityMember2024-01-310000702165srt:MinimumMemberus-gaap:EquipmentMember2023-12-310000702165srt:MaximumMemberus-gaap:EquipmentMember2023-12-310000702165srt:MinimumMembernsc:RoadwayAndPropertyMember2023-12-310000702165srt:MaximumMembernsc:RoadwayAndPropertyMember2023-12-310000702165us-gaap:BuildingMember2023-12-310000702165nsc:November2022RailwayPurchaseMember2022-11-012022-11-300000702165nsc:November2022RailwayPurchaseMember2023-06-012023-06-300000702165us-gaap:PensionPlansDefinedBenefitMember2023-12-310000702165us-gaap:PensionPlansDefinedBenefitMember2022-12-310000702165us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember2023-12-310000702165us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember2022-12-310000702165us-gaap:PensionPlansDefinedBenefitMember2021-12-310000702165us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember2021-12-310000702165us-gaap:PensionPlansDefinedBenefitMember2023-01-012023-12-310000702165us-gaap:PensionPlansDefinedBenefitMember2022-01-012022-12-310000702165us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember2023-01-012023-12-310000702165us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember2022-01-012022-12-310000702165us-gaap:PensionPlansDefinedBenefitMember2021-01-012021-12-310000702165us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember2021-01-012021-12-310000702165us-gaap:FundedPlanMemberus-gaap:PensionPlansDefinedBenefitMember2023-12-310000702165us-gaap:FundedPlanMemberus-gaap:PensionPlansDefinedBenefitMember2022-12-310000702165us-gaap:FundedPlanMemberus-gaap:PensionPlansDefinedBenefitMember2021-12-310000702165us-gaap:FundedPlanMemberus-gaap:PensionPlansDefinedBenefitMember2023-01-012023-12-310000702165us-gaap:FundedPlanMemberus-gaap:PensionPlansDefinedBenefitMember2022-01-012022-12-310000702165us-gaap:FundedPlanMemberus-gaap:PensionPlansDefinedBenefitMember2021-01-012021-12-310000702165us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMemberus-gaap:FundedPlanMember2023-12-310000702165us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMemberus-gaap:FundedPlanMember2022-12-310000702165us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMemberus-gaap:FundedPlanMember2021-12-310000702165us-gaap:PensionPlansDefinedBenefitMemberus-gaap:UnfundedPlanMember2023-12-310000702165us-gaap:PensionPlansDefinedBenefitMemberus-gaap:UnfundedPlanMember2022-12-310000702165us-gaap:PensionPlansDefinedBenefitMemberus-gaap:UnfundedPlanMember2021-12-310000702165us-gaap:PensionPlansDefinedBenefitMemberus-gaap:UnfundedPlanMember2023-01-012023-12-310000702165us-gaap:PensionPlansDefinedBenefitMemberus-gaap:UnfundedPlanMember2022-01-012022-12-310000702165us-gaap:PensionPlansDefinedBenefitMemberus-gaap:UnfundedPlanMember2021-01-012021-12-310000702165us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMemberus-gaap:UnfundedPlanMember2023-12-310000702165us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMemberus-gaap:UnfundedPlanMember2022-12-310000702165us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMemberus-gaap:UnfundedPlanMember2021-12-310000702165us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMemberus-gaap:UnfundedPlanMember2023-01-012023-12-310000702165us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMemberus-gaap:UnfundedPlanMember2022-01-012022-12-310000702165us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMemberus-gaap:UnfundedPlanMember2021-01-012021-12-31nsc:investment_firm0000702165us-gaap:PensionPlansDefinedBenefitMemberus-gaap:DefinedBenefitPlanEquitySecuritiesUsMember2023-12-310000702165us-gaap:PensionPlansDefinedBenefitMemberus-gaap:DefinedBenefitPlanEquitySecuritiesUsMember2022-12-310000702165us-gaap:DefinedBenefitPlanDebtSecurityMemberus-gaap:PensionPlansDefinedBenefitMember2023-12-310000702165us-gaap:DefinedBenefitPlanDebtSecurityMemberus-gaap:PensionPlansDefinedBenefitMember2022-12-310000702165us-gaap:DefinedBenefitPlanEquitySecuritiesNonUsMemberus-gaap:PensionPlansDefinedBenefitMember2023-12-310000702165us-gaap:DefinedBenefitPlanEquitySecuritiesNonUsMemberus-gaap:PensionPlansDefinedBenefitMember2022-12-310000702165us-gaap:PensionPlansDefinedBenefitMemberus-gaap:DefinedBenefitPlanCashAndCashEquivalentsMember2023-12-310000702165us-gaap:PensionPlansDefinedBenefitMemberus-gaap:DefinedBenefitPlanCashAndCashEquivalentsMember2022-12-310000702165us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMemberus-gaap:DefinedBenefitPlanEquitySecuritiesMember2023-12-310000702165us-gaap:DefinedBenefitPlanDebtSecurityMember2023-12-310000702165us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMemberus-gaap:DefinedBenefitPlanEquitySecuritiesMember2022-12-310000702165us-gaap:DefinedBenefitPlanDebtSecurityMember2022-12-310000702165srt:MinimumMember2023-12-310000702165srt:MaximumMember2023-12-310000702165us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:DefinedBenefitPlanEquitySecuritiesCommonStockMember2023-12-310000702165us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:DefinedBenefitPlanEquitySecuritiesCommonStockMember2023-12-310000702165us-gaap:FairValueMeasurementsRecurringMemberus-gaap:DefinedBenefitPlanEquitySecuritiesCommonStockMember2023-12-310000702165us-gaap:DefinedBenefitPlanEquitySecuritiesNonUsMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2023-12-310000702165us-gaap:DefinedBenefitPlanEquitySecuritiesNonUsMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2023-12-310000702165us-gaap:DefinedBenefitPlanEquitySecuritiesNonUsMemberus-gaap:FairValueMeasurementsRecurringMember2023-12-310000702165us-gaap:DefinedBenefitPlanDebtSecurityMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2023-12-310000702165us-gaap:DefinedBenefitPlanDebtSecurityMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2023-12-310000702165us-gaap:DefinedBenefitPlanDebtSecurityMemberus-gaap:FairValueMeasurementsRecurringMember2023-12-310000702165us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:DefinedBenefitPlanEquitySecuritiesUsMember2023-12-310000702165us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:DefinedBenefitPlanEquitySecuritiesUsMember2023-12-310000702165us-gaap:FairValueMeasurementsRecurringMemberus-gaap:DefinedBenefitPlanEquitySecuritiesUsMember2023-12-310000702165us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:USGovernmentAgenciesDebtSecuritiesMember2023-12-310000702165us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:USGovernmentAgenciesDebtSecuritiesMember2023-12-310000702165us-gaap:FairValueMeasurementsRecurringMemberus-gaap:USGovernmentAgenciesDebtSecuritiesMember2023-12-310000702165us-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2023-12-310000702165us-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2023-12-310000702165us-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2023-12-310000702165us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:AssetBackedSecuritiesMember2023-12-310000702165us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:AssetBackedSecuritiesMember2023-12-310000702165us-gaap:FairValueMeasurementsRecurringMemberus-gaap:AssetBackedSecuritiesMember2023-12-310000702165us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMembernsc:CommingledFundsMember2023-12-310000702165us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMembernsc:CommingledFundsMember2023-12-310000702165us-gaap:FairValueMeasurementsRecurringMembernsc:CommingledFundsMember2023-12-310000702165us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:DefinedBenefitPlanCashAndCashEquivalentsMember2023-12-310000702165us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:DefinedBenefitPlanCashAndCashEquivalentsMember2023-12-310000702165us-gaap:FairValueMeasurementsRecurringMemberus-gaap:DefinedBenefitPlanCashAndCashEquivalentsMember2023-12-310000702165us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2023-12-310000702165us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2023-12-310000702165us-gaap:FairValueMeasurementsRecurringMember2023-12-310000702165us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:DefinedBenefitPlanEquitySecuritiesCommonStockMember2022-12-310000702165us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:DefinedBenefitPlanEquitySecuritiesCommonStockMember2022-12-310000702165us-gaap:FairValueMeasurementsRecurringMemberus-gaap:DefinedBenefitPlanEquitySecuritiesCommonStockMember2022-12-310000702165us-gaap:DefinedBenefitPlanEquitySecuritiesNonUsMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2022-12-310000702165us-gaap:DefinedBenefitPlanEquitySecuritiesNonUsMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2022-12-310000702165us-gaap:DefinedBenefitPlanEquitySecuritiesNonUsMemberus-gaap:FairValueMeasurementsRecurringMember2022-12-310000702165us-gaap:DefinedBenefitPlanDebtSecurityMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2022-12-310000702165us-gaap:DefinedBenefitPlanDebtSecurityMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2022-12-310000702165us-gaap:DefinedBenefitPlanDebtSecurityMemberus-gaap:FairValueMeasurementsRecurringMember2022-12-310000702165us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:DefinedBenefitPlanEquitySecuritiesUsMember2022-12-310000702165us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:DefinedBenefitPlanEquitySecuritiesUsMember2022-12-310000702165us-gaap:FairValueMeasurementsRecurringMemberus-gaap:DefinedBenefitPlanEquitySecuritiesUsMember2022-12-310000702165us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:USGovernmentAgenciesDebtSecuritiesMember2022-12-310000702165us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:USGovernmentAgenciesDebtSecuritiesMember2022-12-310000702165us-gaap:FairValueMeasurementsRecurringMemberus-gaap:USGovernmentAgenciesDebtSecuritiesMember2022-12-310000702165us-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2022-12-310000702165us-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2022-12-310000702165us-gaap:CorporateDebtSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2022-12-310000702165us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:AssetBackedSecuritiesMember2022-12-310000702165us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:AssetBackedSecuritiesMember2022-12-310000702165us-gaap:FairValueMeasurementsRecurringMemberus-gaap:AssetBackedSecuritiesMember2022-12-310000702165us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMembernsc:CommingledFundsMember2022-12-310000702165us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMembernsc:CommingledFundsMember2022-12-310000702165us-gaap:FairValueMeasurementsRecurringMembernsc:CommingledFundsMember2022-12-310000702165us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:DefinedBenefitPlanCashAndCashEquivalentsMember2022-12-310000702165us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:DefinedBenefitPlanCashAndCashEquivalentsMember2022-12-310000702165us-gaap:FairValueMeasurementsRecurringMemberus-gaap:DefinedBenefitPlanCashAndCashEquivalentsMember2022-12-310000702165us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2022-12-310000702165us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2022-12-310000702165us-gaap:FairValueMeasurementsRecurringMember2022-12-310000702165us-gaap:FairValueInputsLevel2Member2023-12-310000702165us-gaap:FairValueInputsLevel2Member2022-12-310000702165nsc:ThoroughbredStockOptionPlanTSOPMember2023-12-310000702165us-gaap:EmployeeStockOptionMember2023-01-012023-12-310000702165us-gaap:EmployeeStockOptionMember2022-01-012022-12-310000702165us-gaap:EmployeeStockOptionMember2021-01-012021-12-310000702165us-gaap:RestrictedStockUnitsRSUMember2023-01-012023-12-310000702165us-gaap:RestrictedStockUnitsRSUMember2022-01-012022-12-310000702165us-gaap:RestrictedStockUnitsRSUMember2021-01-012021-12-310000702165us-gaap:PerformanceSharesMember2023-01-012023-12-310000702165us-gaap:PerformanceSharesMember2022-01-012022-12-310000702165us-gaap:PerformanceSharesMember2021-01-012021-12-310000702165us-gaap:EmployeeStockOptionMembersrt:MinimumMember2023-01-012023-12-310000702165us-gaap:EmployeeStockOptionMembersrt:MaximumMember2023-01-012023-12-310000702165us-gaap:EmployeeStockOptionMembernsc:LTIPMember2023-01-012023-12-310000702165us-gaap:EmployeeStockOptionMemberus-gaap:ShareBasedCompensationAwardTrancheOneMembernsc:LTIPMember2023-01-012023-12-310000702165us-gaap:EmployeeStockOptionMembernsc:LTIPMember2022-01-012022-12-310000702165us-gaap:EmployeeStockOptionMembernsc:LTIPMember2021-01-012021-12-310000702165us-gaap:EmployeeStockOptionMember2023-12-310000702165us-gaap:RestrictedStockUnitsRSUMember2022-12-310000702165us-gaap:RestrictedStockUnitsRSUMember2023-12-310000702165us-gaap:PerformanceSharesMember2022-12-310000702165us-gaap:PerformanceSharesMember2023-12-310000702165nsc:LTIPMember2023-12-310000702165nsc:LTIPMember2022-12-310000702165nsc:LTIPMember2021-12-310000702165nsc:ThoroughbredStockOptionPlanTSOPMember2022-12-310000702165nsc:ThoroughbredStockOptionPlanTSOPMember2021-12-310000702165nsc:LTIPMember2023-01-012023-12-310000702165nsc:LTIPMember2022-01-012022-12-310000702165nsc:LTIPMember2021-01-012021-12-310000702165nsc:ThoroughbredStockOptionPlanTSOPMember2023-01-012023-12-310000702165nsc:ThoroughbredStockOptionPlanTSOPMember2022-01-012022-12-310000702165nsc:ThoroughbredStockOptionPlanTSOPMember2021-01-012021-12-310000702165us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2022-12-310000702165us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2023-01-012023-12-310000702165us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2023-12-310000702165nsc:AccumulatedOtherComprehensiveIncomeEquityInvesteesMember2022-12-310000702165nsc:AccumulatedOtherComprehensiveIncomeEquityInvesteesMember2023-01-012023-12-310000702165nsc:AccumulatedOtherComprehensiveIncomeEquityInvesteesMember2023-12-310000702165us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2021-12-310000702165us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2022-01-012022-12-310000702165nsc:AccumulatedOtherComprehensiveIncomeEquityInvesteesMember2021-12-310000702165nsc:AccumulatedOtherComprehensiveIncomeEquityInvesteesMember2022-01-012022-12-310000702165us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetUnamortizedGainLossMember2023-01-012023-12-310000702165us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetUnamortizedGainLossMember2022-01-012022-12-310000702165us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetUnamortizedGainLossMember2021-01-012021-12-310000702165nsc:AccumulatedOtherComprehensiveIncomeEquityInvesteesMember2021-01-012021-12-3100007021652022-03-290000702165nsc:EasternOhioIncidentMember2023-02-03nsc:railcar0000702165nsc:EasternOhioIncidentMember2023-01-012023-12-310000702165nsc:EasternOhioIncidentMember2023-12-310000702165nsc:EasternOhioIncidentMember2023-01-012023-12-310000702165nsc:EasternOhioIncidentMember2023-08-22nsc:school_District0000702165nsc:EasternOhioIncidentMember2023-08-222023-08-220000702165nsc:OtherEnvironmentalClaimsMember2023-12-310000702165nsc:OtherEnvironmentalClaimsMember2022-12-31nsc:location0000702165nsc:OtherEnvironmentalClaimsMember2023-01-012023-12-3100007021652023-10-012023-12-310000702165nsc:AccountsPayableCasualtyAndOtherClaimsCurrentMember2022-12-310000702165nsc:AccountsPayableCasualtyAndOtherClaimsCurrentMember2023-01-012023-12-310000702165nsc:AccountsPayableCasualtyAndOtherClaimsCurrentMember2023-12-310000702165nsc:OtherLiabilitiesCasualtyAndOtherClaimsMember2022-12-310000702165nsc:OtherLiabilitiesCasualtyAndOtherClaimsMember2023-01-012023-12-310000702165nsc:OtherLiabilitiesCasualtyAndOtherClaimsMember2023-12-310000702165nsc:AccountsPayableCasualtyAndOtherClaimsCurrentMember2021-12-310000702165nsc:AccountsPayableCasualtyAndOtherClaimsCurrentMember2022-01-012022-12-310000702165nsc:OtherLiabilitiesCasualtyAndOtherClaimsMember2021-12-310000702165nsc:OtherLiabilitiesCasualtyAndOtherClaimsMember2022-01-012022-12-310000702165nsc:AccountsPayableCasualtyAndOtherClaimsCurrentMember2020-12-310000702165nsc:AccountsPayableCasualtyAndOtherClaimsCurrentMember2021-01-012021-12-310000702165nsc:OtherLiabilitiesCasualtyAndOtherClaimsMember2020-12-310000702165nsc:OtherLiabilitiesCasualtyAndOtherClaimsMember2021-01-012021-12-31

Washington, D.C. 20549

 

☒     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

for the fiscal year ended December 31, 2023

 

☐      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 

(Exact name of registrant as specified in its charter)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class			Trading Symbol(s)			Name of each exchange on which registered
Norfolk Southern Corporation Common Stock (Par Value $1.00)			NSC			New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: NONE

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes ☒  No ☐

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.  Yes ☐  No ☒

 

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.  Yes ☒   No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes ☒   No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer", "accelerated filer", "smaller reporting company", and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒    Accelerated filer ☐   Non-accelerated filer ☐   Smaller reporting company ☐ Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes ☐   No ☒

 

The aggregate market value of the voting common equity held by non-affiliates at June 30, 2023 was $51,455,298,277 (based on the closing price as quoted on the New York Stock Exchange on June 30, 2023).

 

The number of shares outstanding of each of the registrant’s classes of common stock, at January 31, 2024: 225,881,508 (excluding 20,320,777 shares held by the registrant’s consolidated subsidiaries).

 

DOCUMENTS INCORPORATED BY REFERENCE: Portions of the Registrant’s definitive proxy statement to be filed electronically pursuant to Regulation 14A not later than 120 days after the end of the fiscal year, are incorporated herein by reference in Part III.

 

 

 

GENERAL – Norfolk Southern Corporation (Norfolk Southern) is an Atlanta, Georgia-based company that owns a major freight railroad, Norfolk Southern Railway Company (NSR).  We were incorporated on July 23, 1980, under the laws of the Commonwealth of Virginia.  Our common stock (Common Stock) is listed on the New York Stock Exchange (NYSE) under the symbol “NSC.”

 

Unless indicated otherwise, Norfolk Southern Corporation and its subsidiaries, including NSR, are referred to collectively as NS, we, us, and our. 

 

We are primarily engaged in the rail transportation of raw materials, intermediate products, and finished goods primarily in the Southeast, East, and Midwest and, via interchange with rail carriers, to and from the rest of the United States (U.S.).  We also transport overseas freight through several Atlantic and Gulf Coast ports.  We offer the most extensive intermodal network in the eastern half of the U.S.

 

We make available free of charge through our website, www.norfolksouthern.com, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports as soon as reasonably practicable after such material is electronically filed with or furnished to the U.S. Securities and Exchange Commission (SEC).  In addition, the following documents are available on our website and in print to any shareholder who requests them:

•Norfolk Southern Corporation Bylaws

•Charters of the Committees of the Board of Directors

•Corporate Governance Guidelines

•Categorical Independence Standards

•The Thoroughbred Code of Ethics

•Code of Ethical Conduct for Senior Financial Officers

RAILROAD OPERATIONS – At December 31, 2023, we operated approximately 19,100 route miles in 22 states and the District of Columbia.

 

Our system reaches many manufacturing plants, electric generating facilities, mines, distribution centers, transload facilities, and other businesses located in our service area.

Corridors with heaviest freight volume:

•New York City area to Chicago (via Allentown and Pittsburgh)

•Chicago to Macon (via Cincinnati, Chattanooga, and Atlanta)

•Central Ohio to Norfolk (via Columbus and Roanoke)

•Cleveland to Kansas City

•Birmingham to Meridian

•Memphis to Chattanooga

The miles operated, which include major leased lines between Cincinnati and Chattanooga, and an exclusive operating agreement for trackage rights over property owned by North Carolina Railroad Company, were as follows:

 

			Mileage Operated at December 31, 2023
			Route Miles						Second and Other Main Track						Passing Track, Crossovers and Turnouts						Way and Yard Switching						Total
Owned			14,312						2,676						1,953						8,142						27,083
Operated under lease, contract or trackage
rights			4,825						1,889						406						841						7,961
Total			19,137						4,565						2,359						8,983						35,044

 

In 2022, we entered into an asset purchase and sale agreement with the Board of Trustees of the Cincinnati Southern Railway (CSR) to purchase 337 miles of railway line that extends from Cincinnati, Ohio to Chattanooga, Tennessee that we currently operate under a lease. The transaction is scheduled to close on March 15, 2024. See further discussion in Item 7 “Management's Discussion and Analysis of Financial Condition and Results of Operations” and Item 8 “Notes to Consolidated Financial Statements.”

We operate freight service over lines with significant ongoing Amtrak and commuter passenger operations and conduct freight operations over trackage owned or leased by Amtrak, New Jersey Transit, Southeastern Pennsylvania Transportation Authority, Metro-North Commuter Railroad Company, and Michigan Department of Transportation.

The following table sets forth certain statistics relating to our operations for the past five years:

 

			Years ended December 31,
			2023						2022						2021						2020						2019
Revenue ton miles (billions)			176						179						178						164						194
Revenue per thousand revenue ton miles			$	69.05					$	71.35					$	62.56					$	59.67					$	58.21
Revenue ton miles (thousands) per railroad employee			8,719						9,513						9,694						8,191						7,939
Ratio of railway operating expenses to railway
operating revenues (railway operating ratio)			76.5%						62.3%						60.1%						69.3%						64.7%

RAILWAY OPERATING REVENUES – Total railway operating revenues were $12.2 billion in 2023.  Following is an overview of our three commodity groups. See the discussion of merchandise revenues by major commodity group, intermodal revenues, and coal revenues and tonnage in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

 

MERCHANDISE – Our merchandise commodity group is composed of four groupings: 

•Agriculture, forest and consumer products includes soybeans, wheat, corn, fertilizer, livestock and poultry feed, food products, food oils, flour, sweeteners, ethanol, lumber and wood products, pulp board and paper products, wood fibers, wood pulp, beverages, and canned goods.

•Chemicals includes sulfur and related chemicals, petroleum products (including crude oil), chlorine and bleaching compounds, plastics, rubber, industrial chemicals, chemical wastes, sand, and natural gas liquids.

•Metals and construction includes steel, aluminum products, machinery, scrap metals, cement, aggregates, minerals, clay, transportation equipment, and items for the U.S. military.

•Automotive includes finished motor vehicles and automotive parts.

In 2023, we handled 2.2 million merchandise carloads, which accounted for 61% of our total railway operating revenues.

INTERMODAL – Our intermodal commodity group consists of shipments moving in domestic and international containers and trailers.  These shipments are handled on behalf of intermodal marketing companies, international steamship lines, premium customers and asset-owning companies. In 2023, we handled 3.8 million intermodal units, which accounted for 25% of our total railway operating revenues.

 

COAL – Coal revenues accounted for 14% of our total railway operating revenues in 2023.  We handled 76 million tons, or 0.7 million carloads, most of which originated on our lines from major eastern coal basins, with the balance from major western coal basins received via the Memphis and Chicago gateways. Our coal franchise supports the electric generation market, directly serving approximately 30 coal-fired power plants, as well as the export, domestic metallurgical and industrial markets, primarily through direct rail and river, lake, and coastal facilities, including various terminals on the Ohio River, at Lamberts Point in Norfolk, Virginia, at the Port of Baltimore, and on Lake Erie.

FREIGHT RATES – Our predominant pricing mechanisms, private contracts and exempt price quotes, are not subject to regulation. In general, market forces are the primary determinant of rail service prices.

 

 

Our railroad infrastructure makes us capital intensive with net properties of approximately $33 billion on a historical cost basis.

Property Additions – Property additions for the past five years were as follows:

Our capital spending and replacement programs are and have been designed to support our ability to provide safe, efficient, and reliable rail transportation services.

Equipment – Our equipment includes owned and leased locomotives and railcars; maintenance of way equipment and machinery; other equipment and tools used in our shops, offices and facilities; and vehicles and other equipment used for maintenance, transportation, and other activities. Our equipment includes both owned equipment acquired by us, and equipment held under lease arrangements. At December 31, 2023, we owned or leased the following revenue generating equipment:

 

			Owned						Leased						Total						Capacity of Equipment
Locomotives:																					(Horsepower)
Multiple purpose			3,162						30						3,192						12,471,795
Auxiliary units			140						—						140						—
Switching			4						—						4						4,400
Total locomotives			3,306						30						3,336						12,476,195
Freight cars:																					(Tons)
Gondola			18,011						3,741						21,752						2,443,624
Hopper			7,672						—						7,672						876,433
Covered hopper			5,384						—						5,384						598,451
Box			2,189						610						2,799						257,694
Flat			1,213						676						1,889						135,106
Other			1,086						—						1,086						46,815
Total freight cars			35,555						5,027						40,582						4,358,123
Intermodal equipment:
Chassis			38,397						1,063						39,460
Containers			17,662						—						17,662
Roadrailers			1,110						—						1,110
Total intermodal equipment			57,169						1,063						58,232

 

The following table indicates the number and year built for locomotives and freight cars owned at December 31, 2023:

 

			2023						2022						2021						2020						2019						2014- 2018						2009- 2013						2008 & Before						Total
Locomotives:
No. of units			—						—						1						10						36						225						242						2,792						3,306
% of fleet			—		%				—		%				—		%				—		%				1		%				7		%				7		%				85		%				100		%
Freight cars:
No. of units			1,043						236						—						—						198						4,195						6,401						23,482						35,555
% of fleet			3		%				1		%				—		%				—		%				—		%				12		%				18		%				66		%				100		%

The following table shows the average age of our owned locomotive and freight car fleets at December 31, 2023 and information regarding 2023 retirements:

 

Locomotives

Freight Cars

Average age – in service

28.5

years

25.4

years

Retirements

2

units

1,744

units

Average age – retired

23.0

years

40.8

years

Track Maintenance – Of the 35,000 total miles of track on which we operate, we are responsible for maintaining 28,400 miles, with the remainder being operated under trackage rights from other parties responsible for maintenance.

Over 85% of the main line trackage (including first, second, third, and branch main tracks, all excluding rail operated pursuant to trackage rights) has rail ranging from 131 to 155 pounds per yard with the standard installation currently at 136 pounds per yard. Approximately 39% of our lines, excluding rail operated pursuant to trackage rights, carried 20 million or more gross tons per track mile during 2023.

The following table summarizes several measurements regarding our track roadway additions and replacements during the past five years:

			2023						2022						2021						2020						2019
Track miles of rail installed			584						541						458						418						449
Miles of track surfaced			4,013						4,155						4,225						4,785						5,012
Crossties installed (millions)			2.1						2.2						2.0						1.8						2.4

Traffic Control – Of the 16,200 route miles we dispatch, 11,300 miles incorporate signalization. This includes 8,500 miles governed by centralized traffic control (CTC) and 2,800 miles utilizing automatic block signals.  Within the 8,500 miles of CTC, 7,600 miles are controlled by data radio systems originating from 355 base station radio sites.

 

ENVIRONMENTAL MATTERS – Compliance with federal, state, and local laws and regulations relating to the protection of the environment is one of our principal goals.  With the exception of our response to the Eastern Ohio Incident (the “Incident” as defined in Note 17) such compliance has not had a material effect on our financial position, results of operations, liquidity, or competitive position. For further information on the Incident and environmental matters, see Note 17 in Item 8 “Notes to Consolidated Financial Statements.”

 

Workforce – We employed an average of 20,300 employees during 2023, and 20,700 employees at the end of 2023. Approximately 80% of our railroad employees are covered by collective bargaining agreements with various labor unions, and referred to as “craft” employees. See the discussion of “Labor Agreements” in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”  The remainder of our workforce is composed of management employees.

 

Craft Workforce Levels and Productivity – Maintaining appropriate headcount levels for our craft-employee workforce is critical to our on-time and consistent delivery of customers’ goods and operational efficiency goals. We manage this human capital metric through forecasting tools designed to ensure the optimal level of staffing to meet business demands. We measure and monitor employee productivity based on various factors, including gross ton miles per train and engine employee.

Safety – We are dedicated to providing employees with a safe workplace and the knowledge and tools they need to work safely and return home safely every day. Our commitment to an injury-free workplace is outlined in our Foundation of Safety policy which focuses on rules compliance, responsibility, relationships, and responsiveness.

Our safety programs, practices, and messaging further reinforce the importance of working safely. We measure employee safety performance through internal metrics such as accidents, injuries, and serious injuries per 200,000 employee-hours. We also use metrics established by the Federal Railroad Administration (FRA) to measure FRA-reportable accidents per million train miles and injuries per 200,000 employee-hours. Given that safety continues to be a top priority, and the importance of safety among our workforce and to our business, our Board of Directors (Board) has a standing Safety Committee that, among other duties, reviews, monitors, and evaluates our compliance with our safety programs and practices.

Attracting and Retaining Management Employees – Our talent strategy for management employees is essential to attracting strong candidates in a competitive talent environment. We evaluate the effectiveness of that strategy by studying market trends, benchmarking the attractiveness of our employee value proposition, maintaining a competitive compensation package, and analyzing retention data.

We also focus on driving employee engagement, which is key to increasing employee productivity, retention, and safety. We take a data-centric approach, including the use of periodic surveys among employees, to identify new initiatives that will help boost engagement and drive business results.

Employee Development and Training – We provide a range of developmental programs, opportunities, skills, and resources for our employees to be successful in their careers. We provide classroom instruction, hands-on training and simulation-based training designed to improve on-the-job effectiveness and safety outcomes.

We also use modern learning and performance technologies to offer robust professional growth opportunities. Through on-demand digital course offerings, custom-built learning paths, and in-person facilitated content, our programs provide a holistic and inclusive approach to professional development throughout an employee's career.

Diversity, Equity, and Inclusion – As a leading transportation service company, we recognize that success in the global marketplace relies on the recruitment and retention of top-tier talent, as well as leveraging the expertise and experiences of individuals from all backgrounds.

In pursuit of this goal, we are dedicated to establishing a workplace that is diverse, equitable, and inclusive, where a broad spectrum of identities, perspectives, and experiences is not only represented but also valued and empowered to thrive.

Our Inclusion Leadership Council, comprised of senior leaders from all departments, our seven employee resource groups, and the Diversity, Equity, and Inclusion strategy team, collaborate closely to implement the plan, articulate measurable goals, and hold ourselves accountable.

GOVERNMENT REGULATION – In addition to environmental, safety, securities, and other regulations generally applicable to all business, our railroads are subject to regulation by the U.S. Surface Transportation Board (STB).  The STB has jurisdiction to varying extents over rates, routes, customer access provisions, fuel surcharges, conditions of service, and the extension or abandonment of rail lines.  The STB has jurisdiction to determine whether we are “revenue adequate” on an annual basis based on the results of the prior year. A railroad is “revenue adequate” on an annual basis under the applicable law when its return on net investment exceeds the rail industry’s composite cost of capital.  This determination is made pursuant to a statutory requirement. The STB also has jurisdiction over the consolidation, merger, or acquisition of control of and by rail common carriers. 

 

The relaxation of economic regulation of railroads, following the Staggers Rail Act of 1980, included exemption from STB regulation of the rates and most service terms for intermodal business (trailer-on-flat-car, container-on-flat-car), rail boxcar shipments, lumber, manufactured steel, automobiles, and certain bulk commodities such as sand, gravel, pulpwood, and wood chips for paper manufacturing.  Further, all shipments that we have under contract are effectively removed from commercial regulation for the duration of the contract.  Approximately 90% of our revenues comes from either exempt shipments or shipments moving under transportation contracts; the remainder comes from shipments moving under public tariff rates.

 

Efforts have been made over the past several years to increase federal economic regulation of the rail industry, and such efforts are expected to continue in 2024.  The Staggers Rail Act of 1980 substantially balanced the interests of shippers and rail carriers, and encouraged and enabled rail carriers to innovate, invest in their infrastructure, and compete for business, thereby contributing to the economic health of the nation and to the revitalization of the industry.  Accordingly, we will continue to oppose efforts to reimpose increased economic regulation. 

Railroads are also subject to the enactment of laws by Congress and regulation by the U.S. Department of Transportation (DOT) (including the FRA) and the U.S. Department of Homeland Security (DHS) (including the Transportation Security Administration (TSA)), which regulate most aspects of our operations related to safety, security and cybersecurity.

Government regulations are further discussed within Item 1A “Risk Factors” and the safety and security of our railroads are discussed within the “Security of Operations” section contained herein.

 

COMPETITION – There is continuing strong competition among rail, water, and highway carriers.  Price is usually only one factor of importance as shippers and receivers choose a transport mode and specific hauling company. Inventory carrying costs, service reliability, ease of handling, and the desire to avoid loss and damage during transit are also important considerations, especially for higher-valued finished goods, machinery, and consumer products.  Even for raw materials, semi-finished goods, and work-in-progress, users are increasingly sensitive to transport arrangements that minimize problems at successive production stages.

Our primary rail competitor is CSX Corporation (CSX); both we and CSX operate throughout much of the same territory. Other railroads also operate in parts of the territory.  We also compete with motor carriers, water carriers, and with shippers who have the additional options of handling their own goods in private carriage, sourcing products from different geographic areas, and using substitute products.

 

Certain marketing strategies to expand reach and shipping options among railroads and between railroads and motor carriers enable railroads to compete more effectively in specific markets. 

SECURITY OF OPERATIONS – We continue to enhance the security of our rail system. Our comprehensive security plan is modeled on and was developed in conjunction with the security plan prepared by the Association of American Railroads (AAR) post September 11, 2001. The AAR Security Plan defines four Alert Levels and details the actions and countermeasures that are being applied across the railroad industry as the risk of terrorist, extremist or seriously disruptive cyber-attack increases or decreases. The Alert Level actions include countermeasures that will be applied in three general areas: (1) operations (including transportation, engineering, and mechanical); (2) information technology and communications; and, (3) railroad police. All of our Operations Division employees are advised by their supervisors or train dispatchers, as appropriate, of any change in Alert Level and any additional responsibilities they may incur due to such change.

Our security plan also complies with DOT security regulations pertaining to training and security plans with respect to the transportation of hazardous materials. As part of the plan, security awareness training is given to all railroad employees who directly affect hazardous material transportation safety, and is integrated into hazardous material training programs. Additionally, location-specific security plans are in place for rail corridors in certain metropolitan areas referred to as High Threat Urban Areas (HTUA). Particular attention is aimed at reducing risk in a HTUA by: (1) the establishment of secure storage areas for rail cars carrying toxic-by-inhalation (TIH) materials; (2) the expedited movement of trains transporting rail cars carrying TIH materials; (3) reducing the number of unattended loaded tank cars carrying TIH materials; and (4) cooperation with federal, state, local, and tribal governments to identify those locations where security risks are the highest.

We also operate four facilities that are under U.S. Coast Guard (USCG) Maritime Security Regulations. With respect to these facilities, each facility’s security plan has been approved by the applicable Captain of the Port and remains subject to inspection by the USCG.

Additionally, we continue to engage in close and regular coordination with numerous federal and state agencies, including the DHS, the TSA, the Federal Bureau of Investigation, the FRA, the USCG, U.S. Customs and Border Protection, the Department of Defense, and various state Homeland Security offices.

In 2023, through the Norfolk Southern Operation Awareness and Response Program as well as participation in the Transportation Community Awareness and Emergency Response Program, we provided rail accident response training to more than 5,000 emergency responders, such as local police and fire personnel, utilizing a combination of online training and face-to-face training sessions as well as the Norfolk Southern Safety Train. We also have ongoing programs to sponsor local emergency responders at the Security and Emergency Response Training Center.

We also continually evaluate ourselves for appropriate business continuity and disaster recovery planning, with test scenarios that include cybersecurity attacks. Our risk-based information security program helps ensure our defenses and resources are aligned to address the most likely and most damaging potential attacks, to provide support for our organizational mission and operational objectives, and to keep us in the best position to detect, mitigate, and recover from a wide variety of potential attacks in a timely fashion.

The risks set forth in the following risk factors could have a material adverse effect on our financial position, results of operations, or liquidity in a particular year or quarter, and could cause those results to differ materially from those expressed or implied in our forward-looking statements. The information set forth in this Item 1A “Risk Factors” should be read in conjunction with the rest of the information included in this annual report, including

Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Item 8 “Financial Statements and Supplementary Data.” We have experienced a number of the risks described below over the past year in connection with the Incident and the Incident Proceedings (defined below). The risks described below should be read in conjunction with the information regarding the Incident and Incident Proceedings provided in Note 17 in Item 8 “Notes to Consolidated Financial Statements.”

As defined and as further described in Note 17 in Item 8 “Notes to Consolidated Financial Statements”, there was an Incident that occurred in the first quarter that consisted of a February 3, 2023 train derailment in East Palestine, Ohio that included 11 non-Company-owned tank cars containing hazardous materials, fires associated with the derailment that threatened certain of the tank cars, and a controlled vent and burn procedure conducted on February 6, 2023 on five of the derailed tank cars, all of which contained vinyl chloride. As a result of the Incident, we have become subject to numerous legal, regulatory, legislative and other proceedings related thereto, including but not limited to, the National Transportation Safety Board (NTSB) Investigation, the FRA Incident Investigation, the FRA Safety Assessment, the U.S. Department of Justice (DOJ) Complaint, the Ohio Complaint, the Incident Lawsuits, the Shareholder Matters, and the Incident Inquiries and Investigations, (each as defined in Note 17 in Item 8 “Notes to Consolidated Financial Statements”), in addition to other proceedings, actions, or potential changes in response to the Incident, including but not limited to those related to, among other items, train size, train length, train composition, or crew size (collectively, the “Incident Proceedings”). Set forth below are additional risks pertaining to an investment in the Company that are related to the Incident and the Incident Proceedings.

The costs, liabilities, fines, penalties, and/or financial impact resulting from or related to the Incident or the Incident Proceedings have been significant to date, may exceed expected or accrued amounts, and have and can be expected to continue to negatively affect our financial results. We have incurred and will continue to remain subject to incurring significant costs, liabilities, fines, and penalties related to the Incident and the Incident Proceedings, including amounts that may have a material adverse effect on our financial position, results of operations, or liquidity.

In addition, while we have accrued estimates of probable and reasonably estimable liabilities with respect to the Incident and the Incident Proceedings (several of which are in early stages), we cannot predict the final outcome or estimate the reasonably possible range of loss with certainty and such estimates may change over time due to a variety of factors, including but not limited to those set forth in Note 17 in Item 8 “Notes to Consolidated Financial Statements” or other unfavorable or unexpected developments or outcomes which could result in our current estimates being insufficient. These estimated amounts also do not include any estimate of loss for specific items for which we believe a loss is either not probable or not reasonably estimable for the reasons set forth in Note 17 in Item 8 “Notes to Consolidated Financial Statements.” As a result, our currently accrued amounts of estimated liabilities may be insufficient, and any additional, new or updated accruals could have a material adverse effect on our results of operations or financial position.

New or additional governmental regulation and/or operational changes resulting from or related to the Incident or the Incident Proceedings may negatively impact us, our customers, the rail industry, or the markets we serve. The legislative, regulatory, operational or other actions taken, protocols adopted (including by us), or changes resulting from the Incident or any of the Incident Proceedings may, either individually or in the aggregate, have a material adverse effect on us, our customers, the rail industry, or the markets we serve. We also face risks from requirements that may be imposed by the government in resolution of government actions, including, for example, restrictions on our methods of operations. Our inability to comply with the requirements of any new or additional laws, regulations or operating protocols resulting from or related to the Incident or the Incident Proceedings may have a material adverse effect on our financial position, results of operations, liquidity, or operations.

Governmental legislation, regulation, and Executive Orders over commercial, operational, tax, safety, security, or cybersecurity matters could negatively affect us, our customers, the rail industry or the markets we serve. Congress can enact laws, agencies can promulgate regulations, and Executive Orders can be issued that increase or alter regulation in a way that negatively affects us, our customers, the rail industry or the markets we serve. Railroads presently are subject to commercial and operational regulation by the STB, which has jurisdiction to varying extents over rates, routes, customer access provisions, fuel surcharges, conditions of service, and the extension or abandonment of rail lines.

The STB also has jurisdiction over the consolidation, merger, or acquisition of control of and by rail common carriers. Additional or updated regulation of the rail industry by Congress or the STB, whether under new, existing or amended laws or regulations, could have a significant negative impact on our ability to negotiate prices for rail services, on our railway operating revenues, and on the efficiency, conduct, or complexity of our operations. Such additional or updated industry regulation, as well as enactment of any new or updated tax laws, could also negatively impact cash flows from our operating activities and, therefore, result in reduced capital spending on our rail network or abandonment of lines.

Railroads are also subject to the enactment of laws by Congress and regulation by the DOT (including the FRA) and the DHS (including the TSA), which regulate many aspects of our operations related to safety, security and cybersecurity. Additional or updated safety, security, or cybersecurity regulation by Congress, the DOT or DHS could have a negative impact on our business and the efficiency, conduct, or complexity of our operations including (but not limited to) increased operating costs, capital expenditures, claims and litigation.

Our inability to comply with the requirements of existing or updated laws, regulations, or Executive Orders that govern our operations or the rail industry, including but not limited to those pertaining to commercial, operational, tax, safety, security, or cybersecurity matters, could have a material adverse effect on our financial position, results of operations or liquidity.

We are addressing multiple governmental actions as a result of the Incident, as noted in “Incident Risks” above.

Federal and state environmental laws and regulations could negatively impact us and our operations. Our operations are subject to extensive federal and state environmental laws and regulations concerning, among other things: emissions to the air; discharges to waterways or groundwater supplies; handling, storage, transportation, and disposal of waste and other materials; and, the cleanup of hazardous material or petroleum releases. The risk of incurring environmental liability, for acts and omissions, past, present, and future, is inherent in the railroad business. This risk includes property owned by us, whether currently or in the past, that is or has been subject to a variety of uses, including our railroad operations and other industrial activity by past owners or our past and present tenants.

Environmental problems that are latent or undisclosed may exist on these properties, and we could incur environmental liabilities or costs, the amount and materiality of which cannot be estimated reliably at this time, with respect to one or more of these properties. Moreover, lawsuits and claims involving other unidentified environmental sites and matters are likely to arise from time to time.

Our inability to comply with the extensive federal and state environmental laws and regulations to which we are subject could result in significant liabilities or otherwise adversely impact our operations.

As noted in “Incident Risks” above, in connection with the Incident, we are experiencing negative impacts related to environmental matters, including extensive cleanup costs and litigation related to alleged environmental impacts of the Incident.

A significant cybersecurity incident or other disruption to our technology infrastructure could disrupt our business operations. To conduct business, we extensively rely on information and operational technology systems, and improvements in those technologies, in all aspects of our business. The threat landscape is vast and includes hobbyists, cybercriminals, nation-states and state-sponsored activities. Attacks from these entities include, but is not limited to, denial of service, unauthorized access, theft of money, and data and extortion. System upgrades, redundancy and other continuity measures may be ineffective or inadequate, and our business continuity and disaster recovery planning may not be sufficient for all eventualities. Regardless of the cause, significant disruption or failure of one or more of information or operational technology systems operated by us or under control of third parties, including computer hardware, software, cloud services and communications equipment, can result in us experiencing a service interruption, data breach, or other operational difficulties. Such failures or disruptions can adversely impact our business by, among other things, preventing intercompany communications and disrupting operations that may result in direct or indirect monetary losses, damage to equipment or property, or loss of confidence in corporate competency. These events could have a materially adverse effect on our business, reputation, results of operations and financial condition. Although we maintain comprehensive security programs designed to protect our information technology systems, including our risk-based approach to cybersecurity, our reliance on the Framework for Improving Critical Infrastructure Cybersecurity drafted by the U.S Department of Commerce's National Institute of Standards and Technology (NIST CSF) and our layered defense system, we are continually targeted by threat actors attempting to access our networks and we may be unable to detect or prevent a breach of our systems or disruption to our service in the future. While we have previously experienced technology outages and cybersecurity events that have impacted our systems and service, future events may result in more significant impacts to our operations, reputation or financial results. These potentially impactful future events could include service disruptions, unauthorized access to our systems, viruses, ransomware, and/or compromise, acquisition, or destruction of our data. We also could be impacted by cybersecurity events targeting third parties that we rely on for business operations, including third party vendors that have access to our systems or data and third parties who provide services and are in our supply chain. Such a direct or indirect cybersecurity incident could interrupt our service, cause safety failures or operational difficulties, decrease revenues, increase operating costs, impact our efficiency, damage our corporate reputation, and/or expose us to litigation or government action or increased regulation, which could result in penalties, fines or judgments. In addition, our failure to comply with or adhere to privacy-related or data protection laws and regulations could result in government investigations and proceedings against us, or litigation, resulting in adverse reputational impacts, penalties, and legal liability.

Our business may be seriously harmed if we fail to develop, implement, maintain, upgrade, enhance, protect and integrate our information technology systems. If we fail to develop, acquire or implement new technology, or otherwise fail to maintain, protect or integrate our information technology systems, we may suffer a competitive disadvantage within the rail industry and with companies providing alternative modes of transportation service.

As a common carrier by rail, we must offer to transport hazardous materials, which exposes us to significant costs and claims. Transportation of certain hazardous materials or third party-owned equipment (typically used to transport such materials) creates risks of significant losses in terms of personal injury and property (including environmental) damage and compromise critical parts of our rail network. The costs of a catastrophic rail accident involving hazardous materials or third party-owned equipment could exceed our insurance coverage. We have obtained insurance for potential losses for third-party liability and first-party property damages (see Note 17 in Item 8 “Notes to Consolidated Financial Statements”); however, insurance is available from a limited number of insurers and may not continue to be available or, if available, may not be obtainable on terms acceptable to us. Any future legislation preventing the transportation of hazardous materials through specific cities could have negative impacts including increased network congestion and operating costs, reduced operating efficiency, and increased risk of an accident involving hazardous materials.

With regard to the risks arising from the transportation of hazardous materials, the Incident and the Incident Proceedings have given rise to significant costs to us and impacts on our rail network, as noted in “Incident Risks” above. With respect to third party-owned equipment, the primary risk arises from the potential for a latent defect we are unable to identify despite robust safety inspection protocols.

We face competition from other transportation providers. We are subject to competition from motor carriers, railroads and, to a lesser extent, ships, barges, and pipelines, on the basis of transit time, pricing, and quality and reliability of service. While we have primarily used internal resources to build or acquire and maintain our rail system, trucks and barges have been able to use public rights-of-way maintained by public entities. Any future improvements, expenditures, legislation, or regulation changing or materially increasing the efficiency or reducing the cost of one or more alternative modes of transportation in the regions in which we operate (such as granting materially greater latitude for motor carriers with respect to size or weight limitations or adoption and utilization of autonomous commercial vehicles) could have a material adverse effect on our ability to compete with other modes of transportation.

Capacity constraints could negatively impact our service and operating efficiency. We have experienced and may again experience capacity constraints on our rail network related to employee or equipment shortages, increased demand for rail services, severe weather, congestion on other railroads, including passenger activities, or impacts from changes to our network structure or composition. Such constraints could result in operational inefficiencies or adversely affect our operations.

Significant increases in demand for rail services could result in the unavailability of qualified personnel and resources like locomotives. Changes in workforce demographics, training requirements, and availability of qualified personnel, particularly for engineers and conductors, have negatively impacted and may again negatively impact our ability to meet short-term demand for rail service. Unpredicted increases in demand for rail services may exacerbate such risks and could negatively impact our operational efficiency.

Constraints on the supply chain or the operations of carriers with which we interchange may adversely affect our operations. Our ability to provide rail service to our customers depends in large part upon a functioning global supply chain and our ability to maintain collaborative relationships with connecting carriers (including shortlines and regional railroads) with respect to, among other matters, freight rates, revenue division, car supply and locomotive availability, data exchange and communications, reciprocal switching, interchange, and trackage rights. Deterioration in the supply chain or service provided by connecting carriers, or in our relationship with those connecting carriers, could result in our inability to meet our customers’ demands or require us to use alternate train routes, which could result in significant additional costs and network inefficiencies.

Additionally, any significant consolidations, mergers or operational changes among other railroads may alter our market access and reach.

We may be negatively affected by terrorism or war. Any terrorist attack, or other similar event, any government response thereto, and war or risk of war could cause significant business interruption. Because we play a critical role in the nation’s transportation system, we could become the target of such an attack or have a significant role in the government’s preemptive approach or response to an attack or war.

Although we currently maintain insurance coverage for third-party liability arising out of war and acts of terrorism, we maintain only limited insurance coverage for first-party property damage and damage to property in our care, custody, or control caused by certain acts of terrorism. In addition, premiums for some or all of our current insurance programs covering these losses could increase dramatically, or insurance coverage for certain losses could be unavailable to us in the future.

We may be negatively affected by supply constraints resulting from disruptions in the fuel markets or the nature of some of our supplier markets. We consumed approximately 377 million gallons of diesel fuel in 2023. Fuel availability could be affected by limitation in the fuel supply or by imposition of mandatory allocation or rationing regulations. A severe fuel supply shortage arising from production curtailments, increased demand in existing or emerging foreign markets, disruption of oil imports, disruption of domestic refinery production, damage to refinery or pipeline infrastructure, political unrest, war or other factors could impact us as well as our customers and other transportation companies.

Due to the capital-intensive nature, as well as the industry-specific requirements of the rail industry, high barriers of entry exist for potential new suppliers of core railroad items, such as locomotives and rolling stock equipment. Additionally, we compete with other industries for available capacity and raw materials used in the production of locomotives and certain track and rolling stock materials. Changes in the competitive landscapes of these limited supplier markets could result in increased prices or significant shortages of materials.

Pandemics, epidemics or endemic diseases could further negatively impact us, our customers, our supply chain and our operations. The magnitude and duration of a pandemic, epidemic or endemic disease, and its impact on our customers and general economic conditions can influence the demand for our services and affect our revenues. In addition, such outbreaks could affect our operations and business continuity if a significant number of our essential employees, overall or in a key location, are unable to work from contraction of or exposure to the disease or if governmental orders prevent our employees or critical suppliers from working. To the extent such diseases adversely affect our business and financial results, they may also have the effect of heightening many of the other risks described in the risk factors included herein, or may affect our operating and financial results in a manner that is not presently known to us.

We may be subject to various claims and lawsuits that could result in significant expenditures. The nature of our business exposes us to the potential for various claims and litigation related to labor and employment, personal injury, commercial disputes, freight loss and other property damage, and other matters. Job-related personal injury and occupational claims are subject to the Federal Employer’s Liability Act (FELA), which is applicable only to railroads. FELA’s fault-based tort system produces results that are unpredictable and inconsistent as compared with a no-fault worker’s compensation system. The variability inherent in this system could result in actual costs being different from the liability recorded.

A catastrophic rail accident, whether on our lines or another carrier’s, involving any or all of release of hazardous materials, freight loss, property damage, personal injury, and environmental liability could compromise critical parts of our rail network. Losses associated with such an accident involving us could exceed our insurance coverage, resulting in a material adverse effect on our liquidity. Any material changes to current litigation trends could also have a material adverse effect on our liquidity to the extent not covered by insurance.

We have obtained insurance for potential losses for third-party liability and first-party property damages; however, insurance is available from a limited number of insurers and may not continue to be available or, if available, may not be obtainable on terms acceptable to us.

We are incurring significant expenditures as a result of claims and lawsuits arising from the Incident and the related Incident Proceedings, as described in “Incident Risks” above.

Failure to attract and retain key executive officers, or skilled professional or technical employees could adversely impact our business and operations. Our success depends on our ability to attract and retain skilled employees, including a sufficient number of craft employees to enable us to efficiently conduct our operations. Difficulties in recruiting and retaining skilled employees, including train and engine workers, key executives, and other skilled professional and technical employees; the unexpected loss of such individuals; and/or our inability to successfully transition key roles could each have a material adverse effect on our business and operations.

The vast majority of our employees belong to labor unions, and the renegotiation of labor agreements or any provisions thereof, or any strikes or work stoppages (including any entered into in connection with any such negotiations), could adversely affect our operations. Approximately 80% of our railroad employees are covered by collective bargaining agreements with various labor unions. We entered into updated labor agreements with these labor unions in December 2022 and future national labor agreements, or renegotiation of labor agreements or provisions of labor agreements, could significantly increase our costs for health care, wages, and other benefits. Additionally, if our craft employees were to engage in a strike, work stoppage, or other slowdown, including in connection with the renegotiation of any such agreements or any provisions thereof, we could experience a significant disruption in our operations, thereby adversely impacting our results of operations.

Severe weather and disasters have caused, and could again cause, significant business interruptions and expenditures. Severe weather conditions and other natural phenomena resulting from changing weather patterns and rising sea levels or other causes, including hurricanes, floods, fires, landslides, extreme temperatures, significant precipitation, and earthquakes, have caused, and may again cause damage to our network, our workforce to be unavailable and us to be unable to use our equipment. Additionally, shifts in weather patterns caused by climate change are expected to increase the frequency, severity or duration of certain adverse weather conditions, which could cause more significant business interruptions that result in increased costs, increased liabilities, and decreased revenues.

Concern over climate change has led to significant federal, state, and international legislative and regulatory efforts to limit greenhouse gas (GHG) emissions. Restrictions, caps, taxes, or other legislative or regulatory controls on GHG emissions, including diesel exhaust, could significantly increase our operating costs and decrease the amount of traffic we handle.

In addition, legislation and regulation related to climate change or GHG emissions could negatively affect the markets we serve and our customers. Even without legislation or regulation, government incentives and adverse publicity relating to climate change or GHG emissions could negatively affect the markets for certain of the commodities we carry, or our customers that use commodities we carry to produce energy (including coal), use significant amounts of energy in producing or delivering the commodities we carry, or manufacture or produce goods that consume significant amounts of energy associated with GHG emissions.

We may be negatively impacted by changes in general economic conditions. Negative changes in domestic and global economic conditions, including reduced import and export volumes, could affect the producers and consumers of the freight we carry. Economic conditions could also result in bankruptcies of one or more large customers.

We may be negatively affected by energy prices. Volatility in energy prices could have a significant effect on a variety of items including, but not limited to: the economy; demand for transportation services; business related to the energy sector, including crude oil, natural gas, and coal; fuel prices; and, fuel surcharges.

The state of capital markets could adversely affect our liquidity. We rely on the capital markets to provide some of our capital requirements, including the issuance of debt instruments and the sale of certain receivables. Significant instability or disruptions of the capital markets, including the credit markets, or deterioration of our financial position due to internal or external factors could restrict or eliminate our access to, and/or significantly increase the cost of, various financing sources, including bank credit facilities and issuance of corporate bonds. Instability or disruptions of the capital markets and deterioration of our financial position, alone or in combination, could also result in a reduction of our credit rating to below investment grade, which could prohibit or restrict us from accessing external sources of short- and long-term debt financing and/or significantly increase the associated costs.

 

None.

We use a multi-layered defensive cybersecurity strategy based on the cyber security framework drafted by the NIST. The NIST CSF is a voluntary framework of best practices to identify, protect, detect, respond to, and recover from cybersecurity matters. Based on the NIST CSF, our processes to identify, assess, and manage material risks from cybersecurity threats includes the following:

We identify risks from cybersecurity threats by first developing and maintaining an understanding of those assets essential to our operation and reputation, as well as assets that could provide value to threat actors. Any cyber act is considered a potential risk if a threat actor can use it to reduce the value of an asset, reduce our ability to utilize or otherwise access the value of an asset, or surreptitiously gain or increase their access to an asset or its value.

We assess risks from cybersecurity threats by evaluating exposure of our assets to identified cyber risks, as well as potential impacts to our operations or reputation from our inability to access or utilize an asset or realize its value, or a threat actor’s ability to gain access to an asset or its value. We further evaluate the potential materiality of these risks based on the potential impact to our operations or reputation.

We mitigate risks from cybersecurity threats by applying multiple layers of defense to ensure we have the continued ability to access or utilize an asset or its value, and deny threat actors the ability to gain or increase their access to an asset or its value. We prioritize defensive mechanisms, including administrative, procedural, and technical controls, according to their relative cost and reduction in risk based on the NIST CSF.

We further monitor, test, assess, and update these processes, including working with government agencies and peers to implement practices to guard against an evolving threat environment and to ensure we remain compliant with relevant regulatory requirements.

Our processes to assess, identify, and manage cybersecurity risks are expressly incorporated into our enterprise risk management (ERM) framework, which includes technology as one of the five primary risk categories addressed by the ERM framework, with cybersecurity risks being one of the three subcategories within the technology risk category. As a result, our ERM leadership team works with the Chief Information Officer (CIO) and Chief Information Security Officer (CISO) to define the top areas of risk in both the technology and cybersecurity areas, with such risks incorporated into our ERM framework and mapped to the NIST CSF. Our internal ERM leadership also meets on a quarterly basis with our technology risk working group, comprised of leaders across the information technology, information security and law departments, to monitor developments in the threat landscape so that key cybersecurity threats impacting the Company continue to be identified and prioritized.

We employ multiple service providers from time to time to perform periodic reviews and evaluations of our cybersecurity framework, the results of which are provided to and reviewed with management, with appropriate reporting to the Finance and Risk Management Committee (F&RM Committee) of the Board. These reviews encompass a broad range of areas, including information technology system resilience, cybersecurity risk assessments, information security program assessments, external threat environment reviews, internal cybersecurity policy compliance, and near-term incident response to identify or disconfirm potential involvement of a threat actor.

Within our purchasing and third-party vendor management programs, we require all vendors who handle our data as well as vendors who provide technology and data services – including hardware, software, staffing, and support – to maintain certain security protections including, but not limited to, compliance with applicable data protection laws, and implementation of administrative, physical and technical safeguards to protect our data, including how our data is stored, accessed and transmitted. In addition, all providers within these service categories must sign our data security attachment that articulates the specific security standards, cybersecurity insurance, and mandatory incident reporting protocols applicable to the underlying provision of services.

Please see Item 1A. Risk Factors – Operational Risks – “A significant cybersecurity incident or other disruption to our technology infrastructure could disrupt our business operations” for our disclosures regarding the most pertinent risks we may experience from cybersecurity threats.

As noted therein, regardless of the cause, a significant disruption or failure of one or more information or operational technology systems operated by us or under control of third parties can result in service disruptions, unauthorized access to our systems, viruses, ransomware, and/or compromise, acquisition, or destruction of our data.

Such a direct or indirect cybersecurity incident could interrupt our service, cause safety failures or operational difficulties, decrease revenues, increase operating costs, impact our efficiency, damage our corporate reputation, and/or expose us to litigation, government action, increased regulation, penalties, fines or judgments, any or all which may ultimately have a materially adverse effect on our results of operations, financial condition, reputation, and business (including our strategy of operating a resilient freight railroad).

While we have previously experienced technology outages and cybersecurity events that have impacted our systems and service, future events may result in more significant impacts to our operations, reputation or financial results. As a result of these prior events, and given the potential risks that a technology outage or cybersecurity event would result in a materially adverse effect on our results of operations, financial condition, reputation, or business, we have conducted and will continue conducting, internal and third-party assessments of information technology and cybersecurity vulnerabilities, information technology resiliency, and our related processes and procedures, so that we can continue to identify and address key cybersecurity risks.

The Norfolk Southern Board, through the F&RM Committee, has direct oversight of cybersecurity risks. The F&RM Committee receives periodic reports from the CIO and CISO regarding the primary technology risks impacting the company, including risks impacting our information and operational systems, service resiliency, cybersecurity risks, and the related threat environment. Agendas for these periodic updates may be further adjusted to address any emerging risks or key topics in greater detail, including emerging regulations, best practices, cyber readiness, and third-party assessment results. Regular updates are also provided to the F&RM Committee regarding all material or potentially material cybersecurity incidents, including root causes, and identification of and progress towards, remediation activities through completion.

The Board receives a periodic update from the Chair of the F&RM Committee regarding the matters addressed by the F&RM Committee, as well as an annual report from the CISO highlighting the emerging threat landscape, our progress executing on our defensive cybersecurity strategy, and a review of our cybersecurity incident investigation and response processes.

The CISO, reporting to the CIO, is directly responsible for the assessment, oversight, and management of our enterprise-wide cybersecurity strategy and governance. Our CISO has significant relevant experience in the area, including graduate and postgraduate engineering technology degrees, along with 20 years of information security experience in critical infrastructure, as well as seven years with Norfolk Southern where he guided the Company through the implementation of our multi-layered defensive cybersecurity strategy that aligns with the NIST CSF. As noted above, our technology risk working group, comprised of leaders across the information technology, information security and law departments, including our CIO, CISO and Data Privacy Officer (DPO), among others, further monitor developments in the threat landscape so that key cybersecurity threats impacting the Company continue to be identified and prioritized.

Cybersecurity incidents are reported directly to the CISO in accordance with the applicable incident response plan. The CISO, together with the DPO, determine incident severity and response, and in turn report material or potentially material incidents to our internal 8-K subcommittee (comprised of senior leaders from the law, accounting, finance, investor relations, and communications departments), our CEO, and our Executive Vice President Corporate Affairs and Chief Legal Officer, who in turn notify the Chairs of the Board and the F&RM Committee. The Board is promptly notified prior to filing any 8-K disclosing any material or potentially material cybersecurity incidents, with the F&RM Committee provided further updates regarding root causes and remediation efforts.

We also have a cybersecurity incident response plan including specific responsive protocols administered by a predesignated incident response team, led by our CISO and DPO and comprised of other members of management. This incident response team also conducts periodic table-top exercises with management to ensure adherence to our cybersecurity incident response plan.

In an effort to deter and detect cyber threats, we also periodically provide all employees with a data protection and cybersecurity awareness training program, which covers timely and relevant topics, including phishing, password protection, confidential data protection, asset use and mobile security, and further educates employees on the importance of and process for reporting all potential incidents immediately. We also use technology-based tools to mitigate cybersecurity risks and to bolster employee-based cybersecurity programs.

 

For information on our legal proceedings, see Note 17 “Commitments and Contingencies” in Item 8 “Notes to Consolidated Financial Statements.”

 

 

Our executive officers generally are elected and designated annually by the Board at its first meeting held after the annual meeting of stockholders, and they hold office until their successors are elected. Executive officers also may be elected and designated throughout the year as the Board considers appropriate. There are no family relationships among our officers, nor any arrangement or understanding between any officer and any other person pursuant to which the officer was selected. The following table sets forth certain information, at February 1, 2024, relating to our officers.

 

Name, Age, Present Position			Business Experience During Past Five Years
Alan H. Shaw, 56, President and Chief Executive Officer			Present position since May 1, 2022. Served as President from December 1, 2021 to May 1, 2022. Served as Executive Vice President and Chief Marketing Officer from May 16, 2015 to December 1, 2021.
Ann A. Adams, 53,   Executive Vice President and   Chief Transformation Officer			Present position since April 1, 2019. Served as Vice President Human Resources from April 1, 2016 to April 1, 2019.
Paul B. Duncan, 44, Executive Vice President and Chief Operating Officer			Present position since January 1, 2023. Served as Senior Vice President Transportation and Network Operations from September 1, 2022 to January 1, 2023. Served as Vice President Network Planning and Operations from March 1, 2022 to September 1, 2022. Prior to joining Norfolk Southern, served as Vice President of Service Design and Performance for BNSF Railway from October 1, 2018 to March 1, 2022.
Claude E. Elkins, Jr., 58, Executive Vice President and Chief Marketing Officer			Present position since December 1, 2021. Served as Vice President Industrial Products from April 1, 2018 to December 1, 2021.
Mark R. George, 56,   Executive Vice President and   Chief Financial Officer			Present position since November 1, 2019. Prior to joining Norfolk Southern, served as Vice President, Finance and Chief Financial Officer at segments of United Technologies Corporation. The positions were Vice President Finance, Strategy, IT and Chief Financial Officer at Otis Elevator Company from October 2015 to May 2019, and Vice President Finance and Chief Financial Officer at Carrier Corporation from June 2019 until joining Norfolk Southern.
Nabanita C. Nag, 48,   Executive Vice President and   Chief Legal Officer			Present position since July 1, 2022. Served as Senior Vice President and Chief Legal Officer from March 1, 2022 to July 1, 2022. Served as General Counsel - Corporate from August 31, 2020 to March 1, 2022. Prior to joining Norfolk Southern, served as Vice President and Corporate Counsel in the Financial Management Law Group at Prudential Financial from March 3, 2014 to August 1, 2020.
Claiborne L. Moore, 44, Vice President and Controller			Present position since March 1, 2022. Served as Assistant Vice President Corporate Accounting from March 15, 2019 to March 1, 2022. Served as Director Investor Relations from July 1, 2017 to March 15, 2019.

 

 

Common Stock is owned by 18,962 stockholders of record as of December 31, 2023, and is traded on the New York Stock Exchange under the symbol “NSC.”

 

 

(1)Of this amount, 4,104 represent shares tendered by employees in connection with the exercise of stock options under the stockholder-approved Long-Term Incentive Plan (LTIP).

(2)On March 29, 2022, our Board of Directors authorized a new program for the repurchase of up to $10.0 billion of Common Stock beginning April 1, 2022. As of December 31, 2023, $6.9 billion remains authorized for repurchase, until such amount is exhausted.

 

 

The following discussion and analysis should be read in conjunction with the Consolidated Financial Statements and Notes. Refer to Item 8 “Notes to Consolidated Financial Statements” for all “Note” references.

 

 

We are one of the nation’s premier transportation companies, moving goods and materials that help drive the U.S. economy. We connect customers to markets and communities to economic opportunity with safe, reliable, and cost-effective shipping solutions. Our Norfolk Southern Railway Company subsidiary operates in 22 states and the District of Columbia. We are a major transporter of industrial products, including agriculture, forest and consumer products, chemicals, and metals and construction materials. In addition, in the East we serve every major container port and operate the most extensive intermodal network. We are also a principal carrier of coal, automobiles, and automotive parts.

Our 2023 financial results were impacted by a February 2023 derailment in Eastern Ohio. The derailment of 38 railcars resulted in the release of certain chemicals that were being transported for our customers. Following the Incident (as defined and as further described in Note 17) and throughout the remainder of the year, we have worked to clean the derailment site safely and thoroughly and to monitor for any impact on public health and the environment. As a result of the Incident, we incurred $1.1 billion of expenses primarily related to our environmental cleanup and remediation efforts at and around the site, related legal proceedings, and other Incident-related costs. As a result, income from railway operations, net income, and diluted earnings per share declined compared to 2022, most significantly as a result of the direct costs from the Incident. Our financial results were further impacted by lower revenues and higher non-Incident-related operating expenses.

Income from railway operations, net income and diluted earnings per share declined in 2023 compared to 2022, driven by expenses incurred with our response efforts to the Incident (Note 17), lower railway operating revenues, and higher non-Incident-related railway operating expenses. Railway operating revenues declined 5% due to lower average revenue per unit, the result of lower fuel surcharge revenue and decreased intermodal storage service revenues partially offset by favorable pricing and mix. Additionally, lower volumes contributed to the decline in revenues. Expenses associated with the Incident for the year were $1.1 billion. In addition to costs resulting from the Incident, railway operating expenses increased due to inflationary pressures, investments in operational resiliency, and higher service-related costs, offset partially by lower fuel prices. The decline in net income and diluted earnings per share also reflects the absence of a prior year $136 million deferred tax benefit, a result of an enactment of a change in the corporate income tax rate in the Commonwealth of Pennsylvania in 2022. Railway operating ratio (a measure of the amount of operating revenues consumed by operating expenses) deteriorated to 76.5 percent.

Income from railway operations increased in 2022 compared to 2021, driven by higher railway operating revenues. Revenue growth was the result of higher fuel surcharge revenues and pricing gains, which more than offset the impact of volume declines. The rise in revenues was partly offset by increased railway operating expenses, driven by higher fuel prices, other inflationary pressures, service-related costs, increased labor-related costs primarily resulting from labor union negotiations, and higher claims-related expenses. Incremental expenses incurred in 2022 that resulted from finalized labor agreements for wages earned in 2021 and prior periods lowered diluted earnings per share by $0.18. Additionally, net income included a $136 million deferred tax benefit resulting from a state corporate income tax rate change, which increased diluted earnings per share by $0.58. Our share repurchase activity resulted in the percentage increase in diluted earnings per share that exceeded that of net income. Railway operating ratio deteriorated to 62.3 percent.

The following table adjusts our 2023 U.S. Generally Accepted Accounting Principles (GAAP) financial results to exclude the effects of the Incident. The income tax effects of this non-GAAP adjustment were calculated based on the applicable tax rates to which the non-GAAP adjustment related. We use these non-GAAP financial measures internally and believe this information provides useful supplemental information to investors to facilitate making period-to-period comparisons by excluding the 2023 costs arising from the Incident. While we believe that these non-GAAP financial measures are useful in evaluating our business, this information should be considered as supplemental in nature and is not meant to be considered in isolation from, or as a substitute for, the related financial information prepared in accordance with GAAP. In addition, these non-GAAP financial measures may not be the same as similar measures presented by other companies.

In the table below, references to 2023 results and related comparisons use the adjusted, non-GAAP results from the reconciliation in the table above.

On a non-GAAP basis excluding the impact of direct costs resulting from the Incident, income from railway operations decreased in 2023 due to lower railway operating revenues and higher railway operating expenses. Railway operating revenues declined due to decreased fuel surcharge revenue, decreased intermodal storage revenues, and lower volume, partially offset by increased pricing and favorable mix compared to the prior year. Railway operating expenses increased due to inflationary pressures, investments in operational resiliency, and higher service-related costs, partially offset by lower fuel prices.

The following tables present a three-year comparison of revenues, volumes (units), and average revenue per unit by commodity group.

			Revenues																		2023						2022
			2023						2022						2021						vs. 2022						vs. 2021
			($ in millions)																		(% change)
Merchandise:
Agriculture, forest and consumer     products			$	2,530					$	2,493					$	2,251					1		%				11		%
Chemicals			2,054						2,148						1,951						(4		%)				10		%
Metals and construction			1,634						1,652						1,562						(1		%)				6		%
Automotive			1,135						1,038						905						9		%				15		%
Merchandise			7,353						7,331						6,669						—		%				10		%
Intermodal			3,090						3,681						3,163						(16		%)				16		%
Coal			1,713						1,733						1,310						(1		%)				32		%
Total			$	12,156					$	12,745					$	11,142					(5		%)				14		%

Revenues decreased $589 million in 2023 but increased $1.6 billion in 2022 compared to the prior years. Revenues declined in 2023 as a result of lower average revenue per unit, driven by decreases in fuel surcharge revenue and intermodal storage revenues, and volume declines. Higher revenue for 2022 was the result of increased average revenue per unit, driven by higher fuel surcharge revenue, pricing gains, improved mix, and increased intermodal storage service charges, partially offset by volume declines.

The table below reflects the components of the revenue change by major commodity group.

 

Approximately 95% of our revenue base is covered by contracts that include negotiated fuel surcharges. Fuel surcharge revenues totaled $1.2 billion, $1.6 billion, and $622 million in 2023, 2022, and 2021, respectively. The change in fuel surcharge revenues in each period was primarily driven by fluctuations in fuel commodity prices.

For 2024, we expect that revenue will increase modestly driven by higher volumes.

MERCHANDISE revenues increased in both 2023 and 2022 compared with the prior years. In 2023, revenues were slightly higher as pricing and volume gains were nearly offset by lower fuel surcharge revenue and unfavorable mix. Increased volumes in automotive and agriculture, forest and consumer shipments were partially offset by decreased chemicals shipments. In 2022, revenues rose due to higher average revenue per unit, driven by higher fuel surcharge revenue and increased pricing, partially offset by lower volume. Decreased volumes in metal and construction and automotive shipments more than offset higher chemical shipments.

Agriculture, forest and consumer products revenues increased in both 2023 and 2022 compared with the prior years. In 2023, the rise was the result of increased volume. Average revenue per unit was flat, the result of lower fuel surcharge revenue offset by pricing gains. Increases in ethanol and fertilizer shipments more than offset declines in shipments of wood chips and graphic paper. Increased market demand led to volume gains in ethanol and fertilizer. Volume declines in wood chips were due to customer mill closures, while lower market demand led to the decline in graphic paper. In 2022, the rise was the result of increased average revenue per unit, the result of higher fuel surcharge revenue and pricing gains, while volumes were nearly flat. Declines in pulpboard, fertilizer, and pulp, were offset by increases in soybeans, feed, and corn. Pulpboard and pulp shipments declined due to decreased demand, equipment availability, service disruptions, and production down time. Lower fertilizer shipments were driven by high fertilizer prices causing customers to draw down on existing inventories or delay purchases as well as production disruptions. Soybean volumes were higher due to increased opportunity for exports. Feed shipments were higher due to increased customer demand. Increased corn shipments were due to improved equipment cycle times.

Chemicals revenues decreased in 2023 but increased in 2022 compared with the prior years. In 2023, the decrease was as a result of volume declines. Reduced shipments of crude oil, organic chemicals, and natural gas liquids, more than offset the increases in solid waste and other petroleum products. Volume declines for crude oil were driven by soft demand in the energy markets. Organic chemicals and natural gas liquids volume declined as a result of lower demand.

Volume gains in solid waste were due to growth with existing customers, while the gains in petroleum products were due to growth with existing customers and new business opportunities. In 2022, the increase was the result of higher average revenue per unit, driven by fuel surcharge revenue and pricing gains, and volume growth. Increases in sand and solid waste shipments were partially offset by declines in plastics, inorganic chemicals, organic chemicals, and natural gas liquids. The increase in sand was due to greater demand resulting from sustained high natural gas prices. Solid waste shipments increased due to growth with existing customers. Plastics shipments decreased due to softening of the housing market. Declines in inorganic chemicals, organic chemicals, and natural gas liquids shipments were due to decreased demand and reduced production.

Metals and construction revenues were lower in 2023 but higher in 2022 compared with the prior years. In 2023, the decline in revenue was driven by lower average revenue per unit, the result of decreased fuel surcharge revenue partially offset by increased price. Volumes were nearly unchanged as reduced shipments of kaolin and construction materials were offset by volume gains in coil steel and scrap metal. The volume declines in kaolin were largely driven by lower demand, while the declines in construction materials were due to lower demand, extended cycle times and service challenges. Gains in coil steel volume were due to increased equipment available to handle demand, while scrap metal volume increased due to higher demand. In 2022, revenue growth was driven by higher average revenue per unit, the result of higher fuel surcharge revenue and pricing gains, partially offset by lower volume. Volumes fell largely as a result of decreased shipments of coil steel, iron and steel, and scrap metal driven by service disruptions and slower equipment cycle times.

Automotive revenues rose in both 2023 and 2022 compared with the prior years. The increase in revenues in 2023 was driven by increased volume and higher average revenue per unit, driven by favorable price. Volume increases were due to higher finished vehicle inventory levels available for rail transportation and improved equipment cycle times. The increase in revenues in 2022 was driven by higher average revenue per unit, due to higher fuel surcharge revenue and pricing gains, partially offset by volume declines. Volume declines were the result of slower equipment cycle times partially offset by fewer parts supply issues due to easing supply chain congestion when compared to the prior year.

INTERMODAL revenues decreased in 2023 but increased in 2022 compared with the prior years. The decrease in 2023 was the result of lower average revenue per unit, driven by reduced storage service charges and lower fuel surcharge revenue, and decreased volume. The increase in 2022 was the result of higher average revenue per unit, due to higher fuel surcharge revenue, pricing gains, and increased storage service charges, partially offset by decreased volume.

Intermodal units by market were as follows:

																					2023						2022
			2023						2022						2021						vs. 2022						vs. 2021
			(units in thousands)																		(% change)
Domestic			2,371.6						2,573.6						2,630.6						(8		%)				(2		%)
International			1,450.8						1,339.5						1,473.5						8		%				(9		%)
Total			3,822.4						3,913.1						4,104.1						(2		%)				(5		%)

Domestic volume decreased in both 2023 and 2022 compared with the prior years. In 2023, volume declined due to a decrease in freight demand as a result of reduced consumer consumption combined with high inventories, and increased truck competition. In 2022, volume declined due to service disruptions, terminal congestion, strong over-the-road competition, and increased truck availability.

International volume increased in 2023 but decreased in 2022. The increase in 2023 was driven by ocean carriers favoring inland point intermodal traffic, partially offset by a decrease in imports. The decline in 2022 was the result of supply chain constraints, chassis shortages, and excess retail inventory.

COAL revenues decreased in 2023 but increased in 2022 compared with the prior years. The decrease in 2023 was a result of decreased volumes. Average revenue per unit was flat as lower fuel surcharge revenue and pricing declines were offset by positive mix. The increase in 2022 was due to higher average revenue per unit, driven by pricing gains and higher fuel surcharge revenue, and increased volumes.

As shown in the following table, total tonnage decreased in 2023 but increased 2022.

																					2023						2022
			2023						2022						2021						vs. 2022						vs. 2021
			(tons in thousands)																		(% change)
Utility			30,419						35,705						33,169						(15		%)				8		%
Export			31,005						25,887						24,886						20		%				4		%
Domestic metallurgical			11,096						11,307						11,804						(2		%)				(4		%)
Industrial			3,372						3,765						3,595						(10		%)				5		%
Total			75,892						76,664						73,454						(1		%)				4		%

    

Utility coal tonnage decreased in 2023 but increased in 2022 compared with the prior years. The decrease in 2023 was due to low natural gas prices, high stockpiles, and unplanned customer outages. The increase in 2022 was due to increased demand and service improvements.

Export coal tonnage increased in both periods compared with prior years. The increases in both years were a result of increased demand and coal supply.

 

Domestic metallurgical coal tonnage decreased in both 2023 and 2022 compared with the prior years. The decrease in 2023 was due to reduced coke shipments resulting from idled customer facilities. The decrease in 2022 was the result of reduced coke shipments related to customer sourcing changes and idled customer facilities.

Industrial coal tonnage decreased in 2023 but increased in 2022 compared with the prior years. The decrease in 2023 was due to reduced coal shipments related to customer sourcing changes. The increase in 2022 was the result of increased demand.

Railway operating expenses summarized by major classifications were as follows:

In 2023, expenses increased as we incurred $1.1 billion of costs related to environmental matters and legal proceedings resulting from the Incident (Note 17). Additionally, railway operating expenses reflected higher costs due to inflationary pressures, investments in operational resiliency, and higher service-related costs. Partially offsetting these increases were the impacts of lower fuel prices and the absence of retroactive wage increases recorded in 2022. In 2022, expenses increased primarily as a result of higher fuel prices, other inflationary pressures, service-related costs, increased labor-related costs resulting from labor union negotiations, and higher claims expense.

Compensation and benefits increased in 2023, reflecting changes in:

•employee activity levels (up $138 million),

•pay rates (up $86 million),

•overtime (up $9 million),

•incentive and stock-based compensation (down $30 million), and

•other (down $5 million).

In 2022, compensation and benefits increased, a result of changes in:

•pay rates (up $188 million),

•employee activity levels (up $51 million),

•overtime (up $18 million),

•incentive and stock-based compensation (down $79 million), and

•other (up $1 million).

Pay rates in 2022 were impacted by the outcome of completed labor negotiations, which resulted in retroactive wage increases and other benefits pertaining to prior years. These wage increases and benefits increased compensation and benefits by $54 million.

Our employment averaged 20,300 in 2023, compared with 18,900 in 2022, and 18,500 in 2021.

Purchased services and rents includes the costs of services purchased from external vendors and contractors, including the net costs of operating joint facilities with other railroads and the net cost of equipment rentals.

The increase in purchased services in 2023 was due to higher technology-related costs, increased operational and transportation expenses, and higher engineering activity. The increase in purchased services in 2022 was due to inflationary pressures which resulted in higher intermodal-related expenses, and increased operational and transportation expenses, as well as higher technology-related costs.

Equipment rents, which includes our cost of using equipment (mostly freight cars) owned by other railroads or private owners less the rent paid to us for the use of our equipment, increased in both periods. In 2023, the increase was due to increased intermodal equipment expenses, higher freight car lease costs, and decreased equity in TTX Company's (TTX) earnings. In 2022, the increase was the result of lower network fluidity which led to greater time-and-mileage expenses, increased automotive and intermodal equipment expenses, and higher short-term locomotive resource costs.

Fuel expense, which includes the cost of locomotive fuel as well as other fuel used in railway operations, decreased in 2023 but increased in 2022. The decrease in 2023 was due to lower locomotive fuel prices (down 20%), which decreased fuel expense by $275 million. The increase in 2022 was due to higher locomotive fuel prices (up 87%) which increased expenses by $634 million. Locomotive fuel consumption was nearly flat in 2023 and decreased 2% in 2022. We consumed 377 million gallons of diesel fuel in 2023, compared with 376 million gallons in 2022 and 384 million gallons in 2021.

Depreciation expense increased in both periods. In both periods, the increase was a reflection of reinvestment in our infrastructure, rolling stock, and technology. The increase in 2023 also reflects the impact of changes in group depreciable lives as a result of our periodic roadway study.

Materials and other expenses increased in both 2023 and 2022 as shown in the following table.

 

Materials expense increased in both 2023 and 2022. The increases in both years were due to increased locomotive, freight car, and track materials costs.

Claims expense includes costs related to personal injury, property damage, and environmental matters. The decrease in 2023 was primarily the result of lower personal injury case development, lower costs related to environmental remediation matters unrelated to the Incident, and a claims-related recovery. The increase in 2022 was primarily the result of higher costs associated with unfavorable personal injury case development, increased environmental remediation expenses, and higher lading and property damage costs.

Other expense increased in 2023 primarily due to lower gains from operating property sales and increased travel-related expenses. In 2022, other expense increased primarily due to higher travel-related expenses, increased non-income-based taxes, and lower gains from sales of operating property, partially offset by lower relocation expenses. Gains from operating property sales amounted to $43 million, $76 million, and $82 million in 2023, 2022, and 2021, respectively.

During 2023, we recorded $1.1 billion for costs primarily associated with environmental matters and legal proceedings. We recorded $101 million of recoveries from claims made under our insurance policies, which are included in the total amount recorded in 2023. For further details regarding the Incident, see Note 17 in Item 8 “Notes to Consolidated Financial Statements.”

Other income – net increased in 2023 but decreased in 2022. The increase in 2023 was the result of higher net returns on corporate-owned life insurance (COLI) and increased interest income, partially offset by lower gains from non-operating property sales. The decrease in 2022 was driven by lower net returns on COLI partially offset by a higher net pension benefit and increased interest income.

 

The effective income tax rate was 21.3% in 2023, compared with 20.8% in 2022 and 22.5% in 2021.  The current year benefited from tax credits and higher COLI returns offset by reduced benefits from stock-based compensation. The effective income tax rate in 2022 and 2021 reflects favorable benefits associated with stock-based compensation and various state law changes (Note 4), while 2021 also benefited from higher COLI returns.

For 2024, we expect an effective income tax rate between 23% and 24%.

 

Cash provided by operating activities, our principal source of liquidity, was $3.2 billion in 2023, $4.2 billion in 2022, and $4.3 billion in 2021. The decrease in 2023 reflects lower operating results, offset in part by changes in working capital. The decrease in 2022 reflected changes in working capital, offset in part by improved operating results. We had working capital of $639 million at December 31, 2023 and negative working capital of $642 million at December 31, 2022. Cash and cash equivalents totaled $1.6 billion and $456 million at December 31, 2023, and 2022, respectively. We expect that cash on hand combined with cash provided by operating activities will be sufficient to meet our ongoing obligations. In addition, we believe our currently-available borrowing capacity, access to additional financing, ability to reduce shareholder distributions, including share repurchases, and ability to moderate or defer property additions provide additional flexibility to meet our ongoing obligations in the short- and long-term.

Contractual obligations at December 31, 2023, including those that may have material cash requirements, include interest on fixed-rate long-term debt, long-term debt (Note 9), asset purchase of CSR (Note 17), unconditional purchase obligations (Note 17), long-term advances from Conrail Inc. (Conrail) (Note 6), operating leases (Note 10), agreements with Consolidated Rail Corporation (CRC) (Note 6), and unrecognized tax benefits (Note 4).