Norfolk Southern (NSC) risk factors, 2025 10-K

Other

1. 01To the Stockholders and Board of Directors
2. 02Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting
3. 03Definition and Limitations of Internal Control Over Financial Reporting
4. 04Sufficiency of audit evidence related to the capitalization of property expenditures
5. 05Net income $ 2,622 $ 1,827 $ 3,270
6. 06Liabilities and stockholders’ equity
7. 07Total liabilities 29,376 28,871
8. 08Gains and losses on properties (490) (49) (82)
9. 09Supplemental disclosures of cash flow information
10. 10Balance at December 31, 2021 $ 242 $ 2,215 $ (402) $ 11,586 $ 13,641
11. 11Balance at December 31, 2022 230 2,157 (351) 10,697 12,733
12. 12Balance at December 31, 2023 227 2,179 (320) 10,695 12,781
13. 13Description of Business and Operating Segments
14. 14Allowance for Doubtful Accounts
15. 15New Accounting Pronouncements
16. 162. Railway Operating Revenues
17. 17Total $ 12,123 $ 12,156 $ 12,745
18. 18Revenues related to interline transportation services that involve another railroad are reported on a net basis. Therefore, the portion of the amount that relates to another party is not reflected in revenues
19. 19Accounts receivable – net $ 1,069 $ 1,147
20. 203. Restructuring and Other Charges
21. 21Total current taxes 531 542 777
22. 22Reconciliation of Statutory Rate to Effective Rate
23. 23Income taxes $ 707 21.2 $ 493 21.3 $ 860 20.8
24. 24Deferred Tax Assets and Liabilities
25. 25Net deferred tax assets 425 539
26. 26Deferred income taxes $ (7,420) $ (7,225)
27. 27Balance at end of year $ 82 $ 55
28. 286. Fair Value Measurements
29. 29Level 1 Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that we have the ability to access
30. 30Fair Values of Financial Instruments
31. 31Total long-term investments $ 3,370 $ 3,839
32. 32We and six other North American railroads collectively own TTX, a railcar pooling company that provides its owner-railroads with standardized fleets of intermodal, automotive, and general use railcars at stated rates. We have a 19.78% ownership interest in TTX
33. 33Land $ 4,125 $ — $ 4,125 —
34. 34Total roadway 33,909 (9,552) 24,357
35. 35Land $ 2,439 $ — $ 2,439 —
36. 36Total roadway 32,625 (9,006) 23,619
37. 37Acquisition of Assets of Cincinnati Southern Railway
38. 38On September 6, 2024, we consummated an agreement with the City of Charlotte to sell a railway line between Charlotte and Mecklenburg County, NC in exchange for $74 million. The cash proceeds from the transaction were received at closing and the transaction resulted in a gain of $57 million
39. 39Long-term debt excluding current maturities and short-term debt $ 16,651 $ 17,175
40. 40Credit Agreement and Debt Covenants
41. 41Leases with an initial term of twelve months or less are not recorded on the balance sheet. We recognize lease expense for these leases on a straight-line basis over the lease term
42. 42Total lease liabilities $ 272 $ 392
43. 43Total lease expense $ 196 $ 214 $ 174
44. 44Weighted-average discount rates on operating leases 3.96 % 3.78 %
45. 4513. Pensions and Other Postretirement Benefits
46. 46Benefit obligation at end of year 2,038 2,151 278 310
47. 47Funded status at end of year $ 513 $ 352 $ (133) $ (172)
48. 48Prior service benefit (4) (5) (113) (156)
49. 49Net benefit $ (54) $ (72) $ (57)
50. 50The service cost component of defined benefit pension cost and other postretirement benefit cost are reported within “Compensation and benefits” and all other components are presented in “Other income – net” on the Consolidated Statements of Income
51. 51Net gains arising during the year for both pension benefits and other postretirement benefits were due primarily to an increase in discount rates, in addition to higher actual returns on plan assets for our other postretirement benefit plan assets
52. 52Pension and Other Postretirement Benefits Assumptions
53. 53Discount rate 5.52 % 5.11 % 5.45 %
54. 54Health care trend rate 6.50 % 7.00 % 6.50 %
55. 55Health Care Cost Trend Assumptions
56. 56Common collective trusts: The readily determinable fair value is based on the published fair value per unit of the trusts. The common collective trusts hold equity securities, fixed income securities and cash and cash equivalents
57. 57Commingled funds: The readily determinable fair value is based on the published fair value per unit of the funds. The commingled funds hold equity securities
58. 58Common stock $ 1,054 $ — $ 1,054
59. 59Domestic equity securities — 346 346
60. 60Common stock $ 1,192 $ — $ 1,192
61. 61Domestic equity securities — 166 166
62. 62The following is a description of the valuation methodologies used for other postretirement benefit plan assets measured at fair value
63. 63In 2025, we expect to contribute approximately $21 million to our unfunded pension plans for payments to pensioners and approximately $30 million to our other postretirement benefit plans for retiree health and death benefits. We do not expect to contribute to our funded pension plan in 2025
64. 64Other Postretirement Coverage
65. 6514. Stock-Based Compensation
66. 66PSUs 64,990 258.60 59,200 236.16 58,945 272.22
67. 67options during the vesting period. For 2024, 2023, and 2022, a dividend yield of 2.25%, 2.24%, and 1.85%, respectively, was used for the vested period during the remaining expected option term for LTIP options
68. 68Average expected option term 6.7 years 7.0 years 6.5 years
69. 69Outstanding at December 31, 2024 372,664 179.14
70. 70Related tax benefits realized 8 6 12
71. 71Related tax benefits realized $ 1 $ 1 $ 5
72. 72Related tax benefits realized $ — $ — $ 1
73. 73Shares Available and Issued
74. 74TSOP 437,746 436,571 436,402
75. 75Accumulated Other Comprehensive Loss
76. 76Other Comprehensive Income
77. 77Year ended December 31, 2024
78. 78Year ended December 31, 2023
79. 79Year ended December 31, 2022
80. 8016. Stock Repurchase Programs
81. 81Earnings per share $ 11.58 $ 8.04 $ 13.92 $ 11.57 $ 8.02 $ 13.88
82. 82At December 31, 2024 and December 31, 2023, we have also recorded a deferred tax asset (Note 5) of $211 million and $249 million, respectively, related to the Incident expecting that certain expenses will be deductible for tax purposes in future periods or offset with insurance recoveries
83. 83Legal Proceedings and Claims (Non-Environmental) – To date, numerous non-environmental legal actions have commenced with respect to the Incident, including those more specifically set forth below
84. 84Inquiries and Investigations
85. 85when the railroads and unions may propose changes to the agreements. We largely bargain nationally in concert with other major railroads, represented by the NCCC
86. 86Change-In-Control Arrangements
87. 87Disclosure Controls and Procedures
88. 88Management’s Annual Report on Internal Control Over Financial Reporting
89. 89Changes in Internal Control Over Financial Reporting
90. 90Director and Officer Trading Arrangements
91. 91Item 10. Directors, Executive Officers and Corporate Governance
92. 92Item 11. Executive Compensation
93. 93of Certain Beneficial Owners and Management and Related Stockholder Matters
94. 94Norfolk Southern Corporation Long-Term Incentive Plan
95. 95Norfolk Southern Corporation Thoroughbred Stock Option Plan
96. 96The Plan was adopted on January 1, 1994, and was designed to increase ownership of Common Stock by our non-employee Directors so as to further align their ownership interest in our company with that of our stockholders. The Plan has not been and is not required to have been approved by our stockholders
97. 97Item 13. Certain Relationships and Related Transactions, and Director Independence
98. 98Our independent registered public accounting firm is KPMG LLP, Atlanta, GA, Auditor Firm ID: 185
99. 99Item 15. Exhibits and Financial Statement Schedules
100. 100Notes to Consolidated Financial Statements
101. 101Schedule II – Valuation and Qualifying Accounts
102. 102Exhibit Number Description
103. 103Section 1350 Certifications
104. 104104** Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
105. 105Financial statement schedules and separate financial statements specified by this Item are included in Item 15(A)2 or are otherwise not required or are not applicable
106. 106(President and Chief Executive Officer)
107. 107included in other liabilities 221 152
108. 108included in other liabilities 218 153