10q10k10q10k.net

What changed in Norfolk Southern's 10-K — 2022 vs 2023

vs

Paragraph-level year-over-year comparison of Norfolk Southern's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+214 added−180 removedSource: 10-K (2024-02-05) vs 10-K (2023-02-03)

Top changes in Norfolk Southern's 2023 10-K

214 paragraphs added · 180 removed · 145 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

27 edited+9 added−4 removed28 unchanged
Biggest changeK6 Equipment – At December 31, 2022, we owned or leased the following units of equipment: Owned Leased Total Capacity of Equipment Locomotives: (Horsepower) Multiple purpose 3,046 — 3,046 11,845,600 Auxiliary units 140 — 140 — Switching 4 — 4 4,400 Total locomotives 3,190 — 3,190 11,850,000 Freight cars: (Tons) Gondola 17,391 2,836 20,227 2,265,085 Hopper 7,818 — 7,818 892,800 Covered hopper 5,571 — 5,571 619,424 Box 2,530 703 3,233 295,536 Flat 1,390 676 2,066 152,719 Other 1,555 — 1,555 69,649 Total freight cars 36,255 4,215 40,470 4,295,213 Other: Chassis 35,393 1,100 36,493 Containers 18,047 — 18,047 Work equipment 5,408 243 5,651 Vehicles 2,976 14 2,990 Miscellaneous 2,243 — 2,243 Total other 64,067 1,357 65,424 The following table indicates the number and year built for locomotives and freight cars owned at December 31, 2022: 2022 2021 2020 2019 2018 2013- 2017 2008- 2012 2007 & Before Total Locomotives: No. of units — 1 10 36 15 260 231 2,637 3,190 % of fleet — % — % — % 1 % 1 % 8 % 7 % 83 % 100 % Freight cars: No. of units 236 — — 200 — 4,202 8,843 22,774 36,255 % of fleet 1 % — % — % — % — % 12 % 24 % 63 % 100 % K7 The following table shows the average age of our owned locomotive and freight car fleets at December 31, 2022 and information regarding 2022 retirements: Locomotives Freight Cars Average age – in service 27.6 years 25.9 years Retirements 22 units 1,209 units Average age – retired 25.2 years 45.5 years Track Maintenance – Of the 35,100 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.
Biggest changeAt 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 % K7 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.
Approximately 80% of our railroad employees – referred to as “craft” employees – are covered by collective bargaining agreements with various labor unions. 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.
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.
K10 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.
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.
K10 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.
Further, all shipments that we have under contract are effectively removed from commercial regulation for the duration of the contract. Approximately 90% K9 of our revenues comes from either exempt shipments or shipments moving under transportation contracts; the remainder comes from shipments moving under public tariff rates.
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.
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 K3 RAILROAD OPERATIONS – At December 31, 2022, we operated approximately 19,100 route miles in 22 states and the District of Columbia.
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 K3 RAILROAD OPERATIONS – At December 31, 2023, we operated approximately 19,100 route miles in 22 states and the District of Columbia.
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 reinforces the importance of working safely. We measure K8 employee safety performance through internal metrics such as accidents, injuries, and serious injuries per 200,000 employee-hours.
Our commitment to an injury-free workplace is outlined in our Foundation of Safety policy which focuses on rules compliance, responsibility, relationships, and responsiveness. K8 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.
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. RAILWAY PROPERTY Our railroad infrastructure makes us capital intensive with net properties of approximately $32 billion on a historical cost basis.
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. RAILWAY PROPERTY Our railroad infrastructure makes us capital intensive with net properties of approximately $33 billion on a historical cost basis.
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 training effectiveness and safety outcomes. We also use modern learning and performance technologies to offer robust professional growth opportunities.
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.
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 quarterly surveys among management employees, to identify new initiatives that will help boost engagement and drive business results.
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.
Railroads are also subject to the enactment of laws by Congress and regulation by the U.S. Department of Transportation (DOT) (including the Federal Railroad Administration) 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.
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.
In 2022, 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 approximately 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.
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.
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 2023.
K9 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 AAR Security Plan defines four Alert Levels and details the actions and countermeasures that are being applied across the railroad industry to mitigate the risk of terrorist, violent extremist or seriously disruptive cyber-attack increases or decreases.
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.
Approximately 40% of our lines, excluding rail operated pursuant to trackage rights, carried 20 million or more gross tons per track mile during 2022.
Approximately 39% of our lines, excluding rail operated pursuant to trackage rights, carried 20 million or more gross tons per track mile during 2023.
Property Additions – Property additions for the past five years were as follows: 2022 2021 2020 2019 2018 ($ in millions) Road and other property $ 1,345 $ 1,041 $ 1,046 $ 1,371 $ 1,276 Equipment 603 429 448 648 675 Total $ 1,948 $ 1,470 $ 1,494 $ 2,019 $ 1,951 Our capital spending and replacement programs are and have been designed to assure the ability to provide safe, efficient, and reliable rail transportation services.
Property Additions – Property additions for the past five years were as follows: 2023 2022 2021 2020 2019 ($ in millions) Road and other property $ 1,547 $ 1,345 $ 1,041 $ 1,046 $ 1,371 Equipment 802 603 429 448 648 Total $ 2,349 $ 1,948 $ 1,470 $ 1,494 $ 2,019 Our capital spending and replacement programs are and have been designed to support our ability to provide safe, efficient, and reliable rail transportation services.
The following table sets forth certain statistics relating to our operations for the past five years: Years ended December 31, 2022 2021 2020 2019 2018 Revenue ton miles (billions) 179 178 164 194 207 Revenue per thousand revenue ton miles $ 71.35 $ 62.56 $ 59.67 $ 58.21 $ 55.25 Revenue ton miles (thousands) per railroad employee 9,513 9,694 8,191 7,939 7,822 Ratio of railway operating expenses to railway operating revenues (railway operating ratio) 62.3% 60.1% 69.3% 64.7% 65.4% RAILWAY OPERATING REVENUES – Total railway operating revenues were $12.7 billion in 2022.
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.
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.
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.
In 2022, we handled 2.2 million merchandise carloads, which accounted for 57% of our total railway operating revenues. K5 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.
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.
The following table summarizes several measurements regarding our track roadway additions and replacements during the past five years: 2022 2021 2020 2019 2018 Track miles of rail installed 541 458 418 449 416 Miles of track surfaced 4,155 4,225 4,785 5,012 4,594 Crossties installed (millions) 2.2 2.0 1.8 2.4 2.2 Traffic Control – Of the 16,200 route miles we dispatch, 11,300 miles are signalized, including 8,500 miles of centralized traffic control (CTC) and 2,800 miles of automatic block signals.
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.
We handled 77 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.
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.
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) • Birmingham to Meridian • Cleveland to Kansas City • Memphis to Chattanooga K4 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, 2022 Route Miles Second and Other Main Track Passing Track, Crossovers and Turnouts Way and Yard Switching Total Owned 14,312 2,676 1,957 8,158 27,103 Operated under lease, contract or trackage rights 4,825 1,889 406 841 7,961 Total 19,137 4,565 2,363 8,999 35,064 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, Maryland Department of Transportation, and Michigan Department of Transportation.
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 K4 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.
Of the 8,500 miles of CTC, 7,600 miles are controlled by data radio originating at 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.
ENVIRONMENTAL MATTERS – Compliance with federal, state, and local laws and regulations relating to the protection of the environment is one of our principal goals.
We also use metrics established by the Federal Railroad Administration (FRA) to measure FRA reportable accidents and injuries per 200,000 employee-hours. Given the importance of safety among our workforce and business, in 2020, our Board of Directors established a standing Safety Committee that, among other duties, reviews, monitors, and evaluates our compliance with our safety programs and practices.
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.
We strive to create a diverse, equitable, and inclusive workplace where a wide range of perspectives and experiences are represented, valued, and empowered to thrive.
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.
To date, such compliance has not had a material effect on our financial position, results of operations, liquidity, or competitive position. See Note 17 to the Consolidated Financial Statements. HUMAN CAPITAL MANAGEMENT Workforce – We employed an average of 18,900 employees during 2022, and 19,300 employees at the end of 2022.
For further information on the Incident and environmental matters, see Note 17 in Item 8 “Notes to Consolidated Financial Statements.” HUMAN CAPITAL MANAGEMENT Workforce – We employed an average of 20,300 employees during 2023, and 20,700 employees at the end of 2023.
To advance that commitment, senior leaders from across the company serve on an Inclusion Leadership Council, which partners with the Diversity, Equity, and Inclusion Strategy team in implementing our enterprise inclusion strategy, articulating measurable goals, and holding ourselves accountable.
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.
Removed
In 2022, we handled 3.9 million intermodal units, which accounted for 29% of our total railway operating revenues. COAL – Coal revenues accounted for 14% of our total railway operating revenues in 2022.
Added
The transaction is scheduled to close on March 15, 2024.
Removed
Through on-demand digital course offerings, custom-built learning paths, and performance-management tools, our platforms deliver a contemporary, convenient, and inclusive approach to professional development. Diversity, Equity, and Inclusion – As a leading transportation service company, we understand that competing in the global marketplace requires recruiting the most qualified, talented, and diverse people.
Added
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.
Removed
While our current workforce reflects a broad range of backgrounds and experiences, we continue to focus on building an even more diverse workforce, using technology-driven outreach and multiple recruiting relationships to maintain a robust pipeline of diverse talent.
Added
K5 • 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.
Removed
To underscore our commitment to cultivating a workplace experience where the unique experiences, perspectives, and contributions of all our people are valued, our CEO recently signed the CEO Action for Diversity & Inclusion pledge, which outlines specific actions to create a welcoming environment for discussions and ideas about diversity and inclusion.
Added
K6 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.
Added
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.
Added
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.
Added
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.
Added
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.
Added
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.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

27 edited+23 added−1 removed37 unchanged
Biggest changeAlthough we maintain comprehensive security programs designed to protect our information technology systems, we are continually targeted by threat actors attempting to access our networks. While we have previously experienced cybersecurity events that have had minimal impact, future events may result in more significant impacts to our operations, reputation or results of operations.
Biggest changeWhile 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.
K11 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.
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.
K14 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.
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.
MACROECONOMIC AND MARKET RISKS 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.
K16 MACROECONOMIC AND MARKET RISKS 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 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.
K15 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.
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, K13 custody, or control caused by certain acts of terrorism.
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, our failure to comply with 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. K12 Our business may be seriously harmed if we fail to develop, implement, maintain, upgrade, enhance, protect and integrate our information technology systems.
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. K13 Our business may be seriously harmed if we fail to develop, implement, maintain, upgrade, enhance, protect and integrate our information technology systems.
HUMAN CAPITAL RISKS 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.
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.
Additionally, any significant consolidations, mergers or operational changes among other railroads may significantly redefine 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.
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.
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 quarantined from contraction of or exposure to the disease or if governmental orders prevent our employees or critical suppliers from working.
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.
Deterioration in the supply chain or operations of 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.
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 K14 routes, which could result in significant additional costs and network inefficiencies.
Congress can enact laws, agencies can promulgate regulations, and Executive Orders can be issued that increase or alter regulation that negatively affects 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.
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.
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.
We consumed approximately 376 million gallons of diesel fuel in 2022. Fuel availability could be affected by limitation in the fuel supply or by imposition of mandatory allocation or rationing regulations.
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.
Although we recently entered into updated labor agreements with these labor unions, 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.
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.
We have obtained insurance for potential losses for third-party liability and first-party property damages (see Note 17 to the 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. We face competition from other transportation providers.
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.
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, regardless of risk.
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.
If we experience significant disruption or failure of one or more of information technology systems operated by us or under control of third parties, including computer hardware, software, and communications equipment, we could experience a service interruption, data breach, or other operational difficulties.
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.
OPERATIONAL RISKS 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.
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.
These potentially impactful events could include 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 in our supply chain.
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.
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.
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.
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.
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.
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.
LITIGATION RISKS 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.
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.” REGULATORY AND LEGISLATIVE RISKS 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.
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).
Changes in the competitive landscapes of these limited supplier markets could result in increased prices or significant shortages of materials. LITIGATION RISKS We may be subject to various claims and lawsuits that could result in significant expenditures.
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.
Transportation of certain hazardous materials could create catastrophic 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 could exceed our insurance coverage.
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.
A significant cybersecurity incident or other disruption to our technology infrastructure could disrupt our business operations. We rely on information technology, and improvements in that technology, in all aspects of our business.
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. OPERATIONAL RISKS A significant cybersecurity incident or other disruption to our technology infrastructure could disrupt our business operations.
Removed
K15 Item 3. Legal Proceedings For information on our legal proceedings, see Note 17 “Commitments and Contingencies” in the Consolidated Financial Statements.
Added
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.” INCIDENT RISKS 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.
Added
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.
Added
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”).
Added
Set forth below are additional risks pertaining to an investment in the Company that are related to the Incident and the Incident Proceedings.
Added
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.
Added
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.
Added
K11 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.
Added
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.
Added
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.
Added
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.
Added
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.
Added
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.
Added
REGULATORY AND LEGISLATIVE RISKS 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.
Added
We are addressing multiple governmental actions as a result of the Incident, as noted in “Incident Risks” above. K12 Federal and state environmental laws and regulations could negatively impact us and our operations.
Added
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.
Added
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.
Added
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.
Added
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.
Added
The costs of a catastrophic rail accident involving hazardous materials or third party-owned equipment could exceed our insurance coverage.
Added
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.
Added
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.
Added
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.
Added
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. HUMAN CAPITAL RISKS Failure to attract and retain key executive officers, or skilled professional or technical employees could adversely impact our business and operations.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−1 removed0 unchanged
Biggest changeItem 3. Legal Proceedings K 16 Item 4. Mine Safety Disclosures K 16 Information About Our Executive Officers K 17 Part II. Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities K 18 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations K 19 Item 7A.
Biggest changeItem 3. Legal Proceedings K 20 Item 4. Mine Safety Disclosures K 20 Information About Our Executive Officers K 21 Part II. Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities K 22
Removed
Quantitative and Qualitative Disclosures About Market Risk K 32 Item 8. Financial Statements and Supplementary Data K 33

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

9 edited+0 added−1 removed1 unchanged
Biggest changePrior to joining Norfolk Southern, served as Vice President of Service Design and Performance for BNSF Railway from October 1, 2018 to March 1, 2022 and as Assistant Vice President for Capacity Planning from June 1, 2015 to October 1, 2018. Claude E. Elkins, Jr., 57, Executive Vice President and Chief Marketing Officer Present position since December 1, 2021.
Biggest changeServed 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.
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, 2023, relating to our officers.
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.
Prior to joining Norfolk Southern, served as Vice President & Corporate Counsel in the Financial Management Law Group at Prudential Financial from March 3, 2014 to August 1, 2020. Claiborne L. Moore, 43, 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.
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.
Name, Age, Present Position Business Experience During Past Five Years Alan H. Shaw, 55, 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.
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.
Nabanita C. Nag, 47, Executive Vice President and Chief Legal Officer Present position since July 1, 2022. Served as Senior Vice President & Chief Legal Officer from March 1, 2022 to July 1, 2022. Served as General Counsel - Corporate from August 31, 2020 to March 1, 2022.
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.
Item 4. Mine Safety Disclosures Not applicable. K16 Information About Our Executive Officers Our executive officers generally are elected and designated annually by the Board of Directors (Board) at its first meeting held after the annual meeting of stockholders, and they hold office until their successors are elected.
Item 4. Mine Safety Disclosures Not applicable. K20 Information About Our Executive Officers 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.
Served as Director Investor Relations from July 1, 2017 to March 15, 2019. K17 PART II NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES
Served as Director Investor Relations from July 1, 2017 to March 15, 2019. K21 PART II NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES
Adams, 52, 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, 43, Executive Vice President and Chief Operating Officer Present position since January 1, 2023.
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 Vice President Industrial Products from April 1, 2018 to December 1, 2021. Served as Group Vice President Chemicals from March 1, 2016 to April 1, 2018. Mark R. George, 55, Executive Vice President and Chief Financial Officer Present position since November 1, 2019.
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.
Removed
Served as Senior Vice President Transportation & Network Operations from September 1, 2022 to January 1, 2023. Served as Vice President Network Planning & Operations from March 1, 2022 to September 1, 2022.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

2 edited+0 added−0 removed0 unchanged
Biggest changeMarket for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities STOCK INFORMATION Common Stock is owned by 19,796 stockholders of record as of December 31, 2022, and is traded on the New York Stock Exchange under the symbol “NSC.” ISSUER PURCHASES OF EQUITY SECURITIES Period Total Number of Shares (or Units) Purchased (1) Average Price Paid per Share (or Unit) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs (2) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that may yet be Purchased under the Plans or Programs (2) October 1-31, 2022 1,027,142 $ 217.12 1,027,142 $ 8,092,825,748 November 1-30, 2022 1,023,706 243.00 1,023,706 7,844,066,906 December 1-31, 2022 1,422,612 249.05 1,422,438 7,489,805,905 Total 3,473,460 3,473,286 (1) Of this amount, 174 represent shares tendered by employees in connection with the exercise of stock options under the stockholder-approved Long-Term Incentive Plan (LTIP).
Biggest changeMarket for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities STOCK INFORMATION 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.” ISSUER PURCHASES OF EQUITY SECURITIES Period Total Number of Shares (or Units) Purchased (1) Average Price Paid per Share (or Unit) Total Number of Shares (or Units) Purchased as Part of the Publicly Announced Plans or Programs (2) Approximate Dollar Value of Shares that may yet be Purchased under the Publicly Announced Plans or Programs (2) October 1-31, 2023 270,465 $ 197.70 269,938 $ 6,933,309,430 November 1-30, 2023 159,957 202.48 156,646 6,901,566,364 December 1-31, 2023 145,664 229.80 145,398 6,868,152,575 Total 576,086 571,982 (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, 2022, $7.5 billion remains authorized for repurchase. Our previous share repurchase program terminated on March 31, 2022. K18
(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. Item 6. [Reserved] K22

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

79 edited+37 added−28 removed26 unchanged
Biggest changeRevenues 2022 2021 2022 2021 2020 vs. 2021 vs. 2020 ($ in millions) (% change) Merchandise: Agriculture, forest and consumer products $ 2,493 $ 2,251 $ 2,116 11 % 6 % Chemicals 2,148 1,951 1,809 10 % 8 % Metals and construction 1,652 1,562 1,333 6 % 17 % Automotive 1,038 905 830 15 % 9 % Merchandise 7,331 6,669 6,088 10 % 10 % Intermodal 3,681 3,163 2,654 16 % 19 % Coal 1,733 1,310 1,047 32 % 25 % Total $ 12,745 $ 11,142 $ 9,789 14 % 14 % Units 2022 2021 2022 2021 2020 vs. 2021 vs. 2020 (in thousands) (% change) Merchandise: Agriculture, forest and consumer products 723.0 725.5 704.4 — % 3 % Chemicals 540.1 529.7 482.0 2 % 10 % Metals and construction 634.6 669.0 601.2 (5 %) 11 % Automotive 339.1 345.4 329.7 (2 %) 5 % Merchandise 2,236.8 2,269.6 2,117.3 (1 %) 7 % Intermodal 3,913.1 4,104.1 3,992.1 (5 %) 3 % Coal 684.6 658.0 574.1 4 % 15 % Total 6,834.5 7,031.7 6,683.5 (3 %) 5 % Revenue per Unit 2022 2021 2022 2021 2020 vs. 2021 vs. 2020 ($ per unit) (% change) Merchandise: Agriculture, forest and consumer products $ 3,448 $ 3,102 $ 3,004 11 % 3 % Chemicals 3,978 3,684 3,753 8 % (2 %) Metals and construction 2,604 2,334 2,216 12 % 5 % Automotive 3,059 2,621 2,518 17 % 4 % Merchandise 3,277 2,938 2,875 12 % 2 % Intermodal 941 771 665 22 % 16 % Coal 2,532 1,991 1,824 27 % 9 % Total 1,865 1,584 1,465 18 % 8 % K21 Revenues increased $1.6 billion in 2022 and $1.4 billion in 2021 compared to the prior years.
Biggest changeRevenues 2023 2022 2023 2022 2021 vs. 2022 vs. 2021 ($ 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 % Units 2023 2022 2023 2022 2021 vs. 2022 vs. 2021 (in thousands) (% change) Merchandise: Agriculture, forest and consumer products 734.3 723.0 725.5 2 % — % Chemicals 515.0 540.1 529.7 (5 %) 2 % Metals and construction 634.1 634.6 669.0 — % (5 %) Automotive 361.5 339.1 345.4 7 % (2 %) Merchandise 2,244.9 2,236.8 2,269.6 — % (1 %) Intermodal 3,822.4 3,913.1 4,104.1 (2 %) (5 %) Coal 677.1 684.6 658.0 (1 %) 4 % Total 6,744.4 6,834.5 7,031.7 (1 %) (3 %) Revenue per Unit 2023 2022 2023 2022 2021 vs. 2022 vs. 2021 ($ per unit) (% change) Merchandise: Agriculture, forest and consumer products $ 3,445 $ 3,448 $ 3,102 — % 11 % Chemicals 3,989 3,978 3,684 — % 8 % Metals and construction 2,577 2,604 2,334 (1 %) 12 % Automotive 3,140 3,059 2,621 3 % 17 % Merchandise 3,275 3,277 2,938 — % 12 % Intermodal 808 941 771 (14 %) 22 % Coal 2,530 2,532 1,991 — % 27 % Total 1,802 1,865 1,584 (3 %) 18 % K26 Revenues decreased $589 million in 2023 but increased $1.6 billion in 2022 compared to the prior years.
K22 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.
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.
“Properties” are stated principally at cost and are depreciated using the group method whereby assets with similar characteristics, use, and expected lives are grouped together in asset classes and depreciated using a composite depreciation rate. See Note 1 for a more detailed discussion of assumptions and estimates.
“Properties” are stated principally at cost and are depreciated using the group method whereby assets with similar characteristics, use, and expected lives are grouped K35 together in asset classes and depreciated using a composite depreciation rate. See Note 1 for a more detailed discussion of assumptions and estimates.
OTHER MATTERS Labor Agreements Approximately 80% of our railroad employees are covered by collective bargaining agreements with various labor unions. Pursuant to the Railway Labor Act (RLA), these agreements remain in effect until new agreements are reached, or until the bargaining procedures mandated by the RLA are completed.
OTHER MATTERS Labor Agreements Approximately 80% of our railroad employees are covered by collective bargaining agreements with various labor unions. Pursuant to the Railway Labor Act, these agreements remain in effect until new agreements are reached, or until the bargaining procedures mandated by the Railway Labor Act are completed.
Information about us, including information that may be deemed material, may also be announced by posts on our social media channels, including Twitter (www.twitter.com/nscorp) and LinkedIn (www.linkedin.com/company/norfolk-southern). We may also use our website and social media channels for the purpose of complying with our disclosure obligations under Regulation FD.
Information about us, including information that may be deemed material, may also be announced by posts on our social media channels, including X (formerly known as Twitter) (www.twitter.com/nscorp) and LinkedIn (www.linkedin.com/company/norfolk-southern). We may also use our website and social media channels for the purpose of complying with our disclosure obligations under Regulation FD.
Market risk for fixed-rate debt is estimated as the potential increase in fair value resulting from a one-percentage point decrease in interest rates as of December 31, 2022 and amounts to an increase of approximately $1.3 billion to the fair value of our debt at December 31, 2022.
Market risk for fixed-rate debt is estimated as the potential increase in fair value resulting from a one-percentage point decrease in interest rates as of December 31, 2023 and amounts to an increase of approximately $1.7 billion to the fair value of our debt at December 31, 2023.
A significant portion of our annual capital spending relates to self-constructed assets. Costs related to repairs and K29 maintenance activities that, in our judgment, do not extend an asset’s useful life or increase its utility are expensed when such repairs are performed. Depreciation expense for 2022 totaled $1.2 billion.
A significant portion of our annual capital spending relates to self-constructed assets. Costs related to repairs and maintenance activities that, in our judgment, do not extend an asset’s useful life or increase its utility are expensed when such repairs are performed. Depreciation expense for 2023 totaled $1.3 billion.
Our composite depreciation rates for 2022 are disclosed in Note 7; a one-year increase (or decrease) in the estimated average useful lives of depreciable assets would have resulted in an approximate $44 million decrease (or increase) to annual depreciation expense.
Our composite depreciation rates for 2023 are disclosed in Note 7; a one-year increase (or decrease) in the estimated average useful lives of depreciable assets would have resulted in an approximate $47 million decrease (or increase) to annual depreciation expense.
Income Taxes Our net deferred tax liability totaled $7.3 billion at December 31, 2022 (Note 4). This liability is estimated based on the expected future tax consequences of items recognized in the financial statements.
Income Taxes Our net deferred tax liability totaled $7.2 billion at December 31, 2023 (Note 4). This liability is estimated based on the expected future tax consequences of items recognized in the financial statements.
Off balance sheet arrangements consist primarily of unrecognized obligations, including unconditional purchase obligations and future interest payments on fixed-rate long-term debt, which are included in the table above. Cash used in investing activities was $1.6 billion in 2022, and $1.2 billion in both 2021 and 2020.
Off balance sheet arrangements consist primarily of unrecognized obligations, including future interest payments on fixed-rate long-term debt, the pending purchase of the assets of CSR, and unconditional purchase obligations which are included in the table above. Cash used in investing activities was $2.2 billion in 2023, $1.6 billion in 2022, and $1.2 billion in 2021.
A valuation allowance is recorded if we expect that it is more likely than not that deferred tax assets will not be realized. We have a $41 million valuation allowance on $373 million of deferred tax assets as of December 31, 2022, reflecting the expectation that substantially all of these assets will be realized.
A valuation allowance is recorded if we expect that it is more likely than not that deferred tax assets will not be realized. We have a $31 million valuation allowance on $570 million of deferred tax assets as of December 31, 2023, reflecting the expectation that substantially all of these assets will be realized.
Compensation and benefits increased in 2022, reflecting changes in: • increased 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).
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).
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 includes a $136 million deferred tax benefit resulting from a corporate income tax rate change in the Commonwealth of Pennsylvania, which increased diluted earnings per share by $0.58.
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.
A one-percentage point change to this discount rate assumption would result in a $3 million change in annual pension expense. Properties and Depreciation Most of our assets are long-lived railway properties (Note 7).
A one-percentage point decrease to this discount rate assumption would result in a $15 million increase in annual pension expense. Properties and Depreciation Most of our assets are long-lived railway properties (Note 7).
In addition, we have investments in general purpose COLI policies and had the ability to borrow against these policies up to $610 million and $715 million at December 31, 2022 and December 31, 2021, respectively. Our debt-to-total capitalization ratio was 54.4% at December 31, 2022, compared with 50.4% at December 31, 2021.
In addition, we have investments in general purpose COLI policies and had the ability to borrow against these policies up to $640 million and $610 million at December 31, 2023 and December 31, 2022, respectively. Our debt-to-total capitalization ratio was 57.3% at December 31, 2023, compared with 54.4% at December 31, 2022.
We consumed 376 million gallons of diesel fuel in 2022, compared with 384 million gallons in 2021 and 368 million gallons in 2020. Depreciation expense increased in both periods, a reflection of reinvestment in our infrastructure, rolling stock, and technology.
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.
Other expense increased in 2022, 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. In 2021, other expense decreased primarily due to higher gains from sales of operating property.
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 $82 million in 2023, 2022, and 2021, respectively.
In 2022, revenues rose due to higher average revenue per unit, driven by higher fuel surcharge revenue and increased pricing, partially offset by lower volume. Decreased volumes in metal and construction and automotive shipments more than offset higher chemical shipments.
In 2022, revenues rose due to higher average revenue per unit, driven by higher fuel surcharge revenue and increased pricing, partially offset by lower volume. Decreased volumes in metal and construction and automotive shipments more than offset higher chemical shipments. Agriculture, forest and consumer products revenues increased in both 2023 and 2022 compared with the prior years.
K31 Additional Information Investors and others should note that we routinely use the Investor Relations, Performance Metrics and Sustainability sections of our website (www.norfolksouthern.com/content/nscorp/en/investor-relations.html, http://www.nscorp.com/content/nscorp/en/investor-relations/performance-metrics.html, & www.nscorp.com/content/nscorp/en/about-ns/sustainability.html) to post presentations to investors and other important information, including information that may be deemed material to investors.
K37 Additional Information Investors and others should note that we routinely use the Investor Relations, Performance Metrics and Sustainability sections of our website (norfolksouthern.investorroom.com/key-investor-information, norfolksouthern.investorroom.com/weekly-performance-reports & www.norfolksouthern.com/sustainability) to post presentations to investors and other important information, including information that may be deemed material to investors.
Purchased services and rents includes the costs of services purchased from external vendors and contractors, including the net costs of operating joint (or leased) facilities with other railroads and the net cost of equipment rentals. 2022 2021 2022 2021 2020 vs. 2021 vs. 2020 ($ in millions) (% change) Purchased services $ 1,565 $ 1,409 $ 1,387 11 % 2 % Equipment rents 357 317 300 13 % 6 % Total $ 1,922 $ 1,726 $ 1,687 11 % 2 % 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.
K30 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. 2023 2022 2023 2022 2021 vs. 2022 vs. 2021 ($ in millions) (% change) Purchased services $ 1,683 $ 1,565 $ 1,409 8 % 11 % Equipment rents 387 357 317 8 % 13 % Total $ 2,070 $ 1,922 $ 1,726 8 % 11 % The increase in purchased services in 2023 was due to higher technology-related costs, increased operational and transportation expenses, and higher engineering activity.
Intermodal units by market were as follows: 2022 2021 2022 2021 2020 vs. 2021 vs. 2020 (units in thousands) (% change) Domestic 2,573.6 2,630.6 2,568.7 (2 %) 2 % International 1,339.5 1,473.5 1,423.4 (9 %) 4 % Total 3,913.1 4,104.1 3,992.1 (5 %) 3 % Domestic volume decreased in 2022 but increased in 2021 compared with the prior years.
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.
INTERMODAL revenues increased in both 2022 and 2021 compared with the prior years. The increase in 2022 was the result of higher average revenue per unit, driven by higher fuel surcharge revenue, pricing gains, and increased storage service charges, partially offset by 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.
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.
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.
The table below reflects the components of the revenue change by major commodity group. 2022 vs. 2021 2021 vs. 2020 Increase (Decrease) Increase (Decrease) ($ in millions) Merchandise Intermodal Coal Merchandise Intermodal Coal Volume $ (96) $ (147) $ 53 $ 438 $ 75 $ 153 Fuel surcharge revenue 455 417 79 91 178 4 Rate, mix and other 303 248 291 52 256 106 Total $ 662 $ 518 $ 423 $ 581 $ 509 $ 263 Approximately 95% of our revenue base is covered by contracts that include negotiated fuel surcharges.
The table below reflects the components of the revenue change by major commodity group. 2023 vs. 2022 2022 vs. 2021 Increase (Decrease) Increase (Decrease) ($ in millions) Merchandise Intermodal Coal Merchandise Intermodal Coal Volume $ 26 $ (85) $ (19) $ (96) $ (147) $ 53 Fuel surcharge revenue (119) (208) (23) 455 417 79 Rate, mix and other 115 (298) 22 303 248 291 Total $ 22 $ (591) $ (20) $ 662 $ 518 $ 423 Approximately 95% of our revenue base is covered by contracts that include negotiated fuel surcharges.
In 2021, the increase reflects higher repurchases of Common Stock and debt repayments, partially offset by increased proceeds from borrowings. Share repurchases of $3.1 billion in 2022, $3.4 billion in 2021, and $1.4 billion in 2020 resulted in the retirement of 12.6 million, 12.7 million, and 7.4 million shares, respectively.
In 2022, the decrease in cash used in financing activities reflects lower repurchases of Common Stock and increased proceeds from borrowings, partially offset by higher dividends. K33 Share repurchases of $622 million in 2023, $3.1 billion in 2022, and $3.4 billion in 2021 resulted in the retirement of 2.8 million, 12.6 million, and 12.7 million shares, respectively.
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.
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.
For 2023, we expect an effective income tax rate between 23% and 24%. FINANCIAL CONDITION, LIQUIDITY, AND CAPITAL RESOURCES Cash provided by operating activities, our principal source of liquidity, was $4.2 billion in 2022, $4.3 billion in 2021, and $3.6 billion in 2020. The decrease in 2022 reflected changes in working capital, offset in part by improved operating results.
FINANCIAL CONDITION, LIQUIDITY, AND CAPITAL RESOURCES 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.
Cash used in financing activities was $3.0 billion in 2022, compared with $3.3 billion in 2021, and $1.9 billion in 2020. The decrease in 2022 reflects lower repurchases of Common Stock, and increased proceeds from borrowings, partially offset by higher dividends.
Cash provided by financing activities was $115 million in 2023, while cash used in financing activities was $3.0 billion in 2022 and $3.3 billion in 2021. The increase in cash provided by financing activities in 2023 reflects lower repurchases of Common Stock and increased proceeds from borrowings, partially offset by higher debt repayments.
As shown in the following table, total tonnage increased in both 2022 and 2021. 2022 2021 2022 2021 2020 vs. 2021 vs. 2020 (tons in thousands) (% change) Utility 35,705 33,169 32,479 8 % 2 % Export 25,887 24,886 18,900 4 % 32 % Domestic metallurgical 11,307 11,804 9,441 (4 %) 25 % Industrial 3,765 3,595 3,566 5 % 1 % Total 76,664 73,454 64,386 4 % 14 % Utility coal tonnage increased in both 2022 and 2021 compared with the prior years.
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 increase in 2022 was due to higher average revenue per unit, driven by pricing gains and higher fuel surcharge revenue, and increased volumes. The increase in 2021 was due to increased volumes and higher average revenue per unit driven by pricing gains and positive mix.
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.
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. The decrease in 2021 was primarily the result of lower costs associated with derailments and personal injuries.
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.
We also have in place and available an $800 million credit agreement expiring in March 2025, which provides for borrowings at prevailing rates and includes covenants. We had no amounts outstanding under this facility at either December 31, 2022 or December 31, 2021, and we are in compliance with all of its covenants.
The amended agreement expires in January 2029, and provides for borrowings at prevailing rates and includes covenants. We had no amounts outstanding under this facility at either December 31, 2023 or December 31, 2022, and we are in compliance with all of its covenants.
The increase in 2022 was due to increased demand and service improvements. The increase in 2021 was due to higher natural gas prices and increased demand from coal-sourced electrical generation. Export coal tonnage increased in both periods compared with prior years. The increase in 2022 was a result of strong global demand and increased coal supply.
The decrease in 2023 was due to low natural gas prices, high stockpiles, and unplanned customer outages. The increase in 2022 was due to increased demand and service improvements. Export coal tonnage increased in both periods compared with prior years. The increases in both years were a result of increased demand and coal supply.
Materials and other expenses increased in 2022 but decreased in 2021 as shown in the following table. 2022 2021 2022 2021 2020 vs. 2021 vs. 2020 ($ in millions) (% change) Materials $ 283 $ 250 $ 274 13 % (9 %) Claims 270 165 179 64 % (8 %) Other 160 132 200 21 % (34 %) Total $ 713 $ 547 $ 653 30 % (16 %) Materials expense increased in 2022 but decreased in 2021.
Materials and other expenses increased in both 2023 and 2022 as shown in the following table. 2023 2022 2023 2022 2021 vs. 2022 vs. 2021 ($ in millions) (% change) Materials $ 364 $ 283 $ 250 29 % 13 % Claims 242 270 165 (10 %) 64 % Other 226 160 132 41 % 21 % Total $ 832 $ 713 $ 547 17 % 30 % Materials expense increased in both 2023 and 2022.
The increase in 2021 was a result of strong seaborne pricing, improved global economic conditions, and greater global demand. Domestic metallurgical coal tonnage decreased in 2022 but increased in 2021 compared with the prior years. The decrease in 2022 was the result of reduced coke shipments related to customer sourcing changes and idled customer facilities.
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.
In November 2022, we entered into an asset purchase and sale agreement with the Board of Trustees of the Cincinnati Southern Railway to purchase approximately 337 miles of railway line that extends from Cincinnati, Ohio to Chattanooga, Tennessee which we currently operate under a lease agreement.
For 2024, we expect property additions, excluding the purchase of the CSR, to approximate $2.3 billion. In November 2022, we entered into an asset purchase and sale agreement with the Board of Trustees of the CSR, which was amended and restated in June 2023, to purchase approximately 337 miles of railway line that extends from Cincinnati, Ohio to Chattanooga, Tennessee.
Fuel surcharge revenues totaled $1.6 billion, $622 million, and $349 million in 2022, 2021, and 2020, respectively. The increase in fuel surcharge revenues in 2022 and 2021 was driven by higher fuel commodity prices. For 2023, we expect that revenue growth will be a challenge, as there is substantial economic uncertainty.
Fuel surcharge revenues totaled $1.2 billion, $1.6 billion, and $622 million in 2023, 2022, and 2021, respectively. The change in fuel surcharge revenues in each period was primarily driven by fluctuations in fuel commodity prices. For 2024, we expect that revenue will increase modestly driven by higher volumes.
In 2022, the increase was the result of lower network fluidity which led to greater time-and-mileage expenses, increased automotive and K25 intermodal equipment expenses, and higher short-term locomotive resource costs. In 2021, equipment rents were higher for general-use equipment due to decreased network velocity and increased volume.
In 2022, the increase was the result of lower network fluidity which led to greater time-and-mileage expenses, increased automotive and intermodal equipment expenses, and higher short-term locomotive resource costs. Fuel expense, which includes the cost of locomotive fuel as well as other fuel used in railway operations, decreased in 2023 but increased in 2022.
Contractual obligations at December 31, 2022, including those that may have material cash requirements, include interest on fixed-rate long-term debt, long-term debt (Note 9), unconditional purchase obligations (Note 17), long-term advances from Conrail (Note 6), operating leases (Note 10), agreements with Consolidated Rail Corporation (CRC) (Note 6), and unrecognized tax benefits (Note 4).
K32 Contractual obligations at December 31, 2023, including those that may have material cash requirements, include interest on fixed-rate long-term debt, long-term debt (Note 9), asset purchase of CSR (Note 17), unconditional purchase obligations (Note 17), long-term advances from Conrail Inc.
SUMMARIZED RESULTS OF OPERATIONS 2022 2021 2022 2021 2020 vs. 2021 vs. 2020 ($ in millions, except per share amounts) (% change) Income from railway operations $ 4,809 $ 4,447 $ 3,002 8 % 48 % Net income $ 3,270 $ 3,005 $ 2,013 9 % 49 % Diluted earnings per share $ 13.88 $ 12.11 $ 7.84 15 % 54 % Railway operating ratio (percent) 62.3 60.1 69.3 4 % (13 %) Income from railway operations increased in 2022 compared to 2021, driven by higher railway operating revenues.
SUMMARIZED RESULTS OF OPERATIONS 2023 2022 2023 2022 2021 vs. 2022 vs. 2021 ($ in millions, except per share amounts) (% change) Income from railway operations $ 2,851 $ 4,809 $ 4,447 (41 %) 8 % Net income $ 1,827 $ 3,270 $ 3,005 (44 %) 9 % Diluted earnings per share $ 8.02 $ 13.88 $ 12.11 (42 %) 15 % Railway operating ratio (percent) 76.5 62.3 60.1 23 % 4 % 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.
The increase in 2021 was primarily the result of improved operating results. We had negative working capital of $642 million at December 31, 2022 and $354 million at December 31, 2021. Cash and cash equivalents totaled $456 million and $839 million at December 31, 2022, and 2021, respectively.
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.
The increase in 2022 is due to increased locomotive, freight car, and track materials costs. In 2021, the decrease was due primarily to lower maintenance requirements as a result of fewer locomotives and freight cars in service. Claims expense includes costs related to personal injury, property damage, and environmental matters.
The increases in both years were due to increased locomotive, freight car, and track materials costs. K31 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.
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.
OVERVIEW 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.
That said, we understand the imperative to continue improving quality of life for our craft employees and are actively engaged in voluntary discussions (which carry no risk of a work stoppage) with all of our unions on this important issue. Market Risks We manage overall exposure to fluctuations in interest rates by issuing both fixed- and floating- rate debt instruments.
K36 In addition, we understand the imperative to continue improving quality of life for our craft employees and remain actively engaged with our unions in voluntary local discussions (none of which carry the risk of a work stoppage) on this important issue.
The change in both years was due to higher locomotive fuel prices (up 87% in 2022 and 43% in 2021) which increased expenses by $634 million in 2022 and $224 million in 2021. Locomotive fuel consumption decreased 2% in 2022, but increased 4% in 2021.
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 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 2020 charges.
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.
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.
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.
The timing and volume of future share repurchases will be guided by our assessment of market conditions and other pertinent factors. Repurchases may be executed in the open market, through derivatives, accelerated repurchase and other negotiated transactions and through plans designed to comply with Rule 10b5-1(c) and Rule 10b-18 under the Securities and Exchange Act of 1934.
Repurchases may be executed in the open market, through derivatives, accelerated repurchase and other negotiated transactions and through plans designed to comply with Rule 10b5-1(c) and Rule 10b-18 under the Securities and Exchange Act of 1934. Any near-term purchases under the program are expected to be made with internally-generated cash, cash on hand, or proceeds from borrowings.
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, and ability to reduce property additions and shareholder distributions, including share repurchases, provides us additional flexibility 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.
Overall, our goal is to maintain a capital structure with appropriate leverage to support our business strategy and provide flexibility through business cycles.
We discuss our credit agreement and our accounts receivable securitization program in Note 9. Upcoming annual debt maturities are also disclosed in Note 9. Overall, our goal is to maintain a capital structure with appropriate leverage to support our business strategy and provide flexibility through business cycles.
In May 2022, we renewed our accounts receivable securitization program with a maximum borrowing capacity of $400 million. The term expires in May 2023. We had $100 million in borrowings outstanding under this program and our available borrowing capacity was $300 million at December 31, 2022 and $400 million at December 31, 2021.
We had no amounts outstanding under this program at December 31, 2023 and $100 million outstanding at December 31, 2022. Our available borrowing capacity was $400 million at December 31, 2023 and $300 million at December 31, 2022. In January 2024, we renewed and amended our $800 million credit agreement.
The total purchase price for the line and other associated real and personal property included in the transaction is approximately $1.6 billion.
We currently operate this railway line under a lease agreement. Following the June 2023 amendment, the total purchase price for the line and other associated real and personal property included in the transaction is expected to be approximately $1.7 billion.
Other income – net Other income – net decreased in both 2022 and 2021. Other income fell in 2022 due to lower net returns on corporate-owned life insurance (COLI) partially offset by a higher net pension benefit and increased interest income.
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.
For 2022, we assumed a long-term investment rate of return of 8.0%, which was supported by our long-term total rate of return on pension plan assets since inception, as well as our expectation of future returns. A one-percentage point change to this rate of return assumption would result in a $26 million change in annual pension expense.
We utilize an independent actuarial consulting firm’s studies to assist us in selecting appropriate actuarial assumptions and valuing related liabilities. For 2023, we assumed a long-term investment rate of return of 8.0%, which was supported by our long-term total rate of return on pension plan assets since inception, as well as our expectation of future returns.
Railway Operating Expenses Railway operating expenses summarized by major classifications were as follows: 2022 2021 2022 2021 2020 vs. 2021 vs. 2020 ($ in millions) (% change) Compensation and benefits $ 2,621 $ 2,442 $ 2,373 7 % 3 % Purchased services and rents 1,922 1,726 1,687 11 % 2 % Fuel 1,459 799 535 83 % 49 % Depreciation 1,221 1,181 1,154 3 % 2 % Materials and other 713 547 653 30 % (16 %) Loss on asset disposal — — 385 Total $ 7,936 $ 6,695 $ 6,787 19 % (1 %) K24 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 expenses.
K29 Railway Operating Expenses Railway operating expenses summarized by major classifications were as follows: 2023 2022 2023 2022 2021 vs. 2022 vs. 2021 ($ in millions) (% change) Compensation and benefits $ 2,819 $ 2,621 $ 2,442 8 % 7 % Purchased services and rents 2,070 1,922 1,726 8 % 11 % Fuel 1,170 1,459 799 (20 %) 83 % Depreciation 1,298 1,221 1,181 6 % 3 % Materials and other 832 713 547 17 % 30 % Eastern Ohio incident 1,116 — — Total $ 9,305 $ 7,936 $ 6,695 17 % 19 % 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).
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Norfolk Southern Corporation and Subsidiaries The following discussion and analysis should be read in conjunction with the Consolidated Financial Statements and Notes. OVERVIEW We are one of the nation’s premier transportation companies, moving goods and materials that help drive the U.S. economy.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Norfolk Southern Corporation and Subsidiaries 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.
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. In 2022, revenue growth led to year-over-year improvements in income from operations, net income and diluted earnings per share.
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.
K27 Capital spending and track and equipment statistics can be found within the “Railway Property” section of Part I of this report on Form 10-K. For 2023, we expect property additions will be approximately $2.1 billion.
The increase in 2023 was primarily driven by higher property additions and lower proceeds from property sales. In 2022, the increase is due to higher property additions partially offset by increased proceeds from property sales. Capital spending and track and equipment statistics can be found within the “Railway Property” section of Part I of this report on Form 10-K.
Our share repurchase activity resulted in the percentage increase in diluted earnings per share that exceeded that of net income. Railway operating ratio (a measure of the amount of operating revenues consumed by operating expenses) increased to 62.3 percent.
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.
In 2021, higher revenue was the result of increased average revenue per unit, driven by pricing gains, higher fuel surcharge revenue, increased intermodal storage service charges and improved mix, as well as volume growth.
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.
We make these estimates based on our historical experience and other information we deem pertinent under the circumstances (for example, expectations of future stock market performance). We utilize an independent actuarial consulting firm’s studies to assist us in selecting appropriate actuarial assumptions and valuing related liabilities.
In addition, the amounts recorded are affected by changes in the interest rate environment because the associated liabilities are discounted to their present value. We make these estimates based on our historical experience and other information we deem pertinent under the circumstances (for example, expectations of future stock market performance).
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.
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.
The decline in 2022 was the result of supply chain constraints, chassis shortages, and excess retail inventory. The increase in 2021 was the result of strong import demand despite being limited by various supply chain constraints, including chassis availability issues. K23 COAL revenues increased in both 2022 and 2021 compared with the prior years.
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. K28 COAL revenues decreased in 2023 but increased in 2022 compared with the prior years.
The current year benefited by $136 million due to an enacted reduction to the Pennsylvania corporate income tax rate while 2021 benefited by $34 million due to various state law changes (see Note 4). All years experienced favorable benefits associated with stock-based compensation, while 2021 and 2020 benefited from COLI returns.
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%.
In 2021, compensation and benefits increased, a result of changes in: • incentive and stock-based compensation (up $128 million), • overtime and recrews (up $47 million), • increased pay rates (up $41 million), • health and welfare benefits for craft employees (down $19 million), • employee activity levels (down $154 million), and • other (up $26 million).
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 $5 million).
In 2022, volume declined due to service disruptions, terminal congestion, strong over-the-road competition, and increased truck availability. In 2021, volume rose due to strong consumer demand which was partially offset by overall supply chain congestion, including equipment availability issues. International volume fell in 2022 but rose in 2021.
In 2023, volume declined due to a decrease in freight demand as a result of reduced consumer consumption combined with high inventories, and increased truck competition. In 2022, volume declined due to service disruptions, terminal congestion, strong over-the-road competition, and increased truck availability. International volume increased in 2023 but decreased in 2022.
In 2021, revenue growth was driven by increased volumes and higher average revenue per unit, the result of pricing gains and higher fuel surcharge revenue. Volume increased across almost all markets due to economic improvement since the beginning of the pandemic.
Volume gains in solid waste were due to growth with existing customers, while the gains in petroleum products were due to growth with existing customers and new business opportunities. In 2022, the increase was the result of higher average revenue per unit, driven by fuel surcharge revenue and pricing gains, and volume growth.
Total 2023 2024 - 2025 2026 - 2027 2028 and Subsequent ($ in millions) Interest on fixed-rate long-term debt $ 17,085 $ 643 $ 1,239 $ 1,144 $ 14,059 Long-term debt principal 16,012 603 957 1,223 13,229 Unconditional purchase obligations 1,650 757 736 80 77 Long-term advances from Conrail 534 — — — 534 Operating leases 462 103 182 96 81 Agreements with CRC 272 42 84 84 62 Unrecognized tax benefits* 22 — — — 22 Total $ 36,037 $ 2,148 $ 3,198 $ 2,627 $ 28,064 * This amount is shown in the 2028 and Subsequent column because the year of settlement cannot be reasonably estimated.
Total 2024 2025 - 2026 2027 - 2028 2029 and Subsequent ($ in millions) Interest on fixed-rate long-term debt $ 20,184 $ 772 $ 1,524 $ 1,429 $ 16,459 Long-term debt principal 18,112 4 1,158 1,223 15,727 Asset purchase of CSR 1,662 1,662 — — — Unconditional purchase obligations 1,405 687 455 79 184 Long-term advances from Conrail 534 — — — 534 Operating leases 444 116 190 72 66 Agreements with CRC 237 44 88 88 17 Unrecognized tax benefits* 55 — — — 55 Total $ 42,633 $ 3,285 $ 3,415 $ 2,891 $ 33,042 * This amount is shown in the 2029 and Subsequent column because the year of settlement cannot be reasonably estimated.
Non-GAAP Reconciliation for 2020 Reported (GAAP) Loss on Asset Disposal Investment Impairment Adjusted (non-GAAP) ($ in millions, except per share amounts) Railway operating expenses $ 6,787 $ (385) $ (99) $ 6,303 Income from railway operations $ 3,002 $ 385 $ 99 $ 3,486 Income before income taxes $ 2,530 $ 385 $ 99 $ 3,014 Income taxes $ 517 $ 97 $ 25 $ 639 Net income $ 2,013 $ 288 $ 74 $ 2,375 Diluted earnings per share $ 7.84 $ 1.12 $ 0.29 $ 9.25 Railway operating ratio (percent) 69.3 (3.9) (1.0) 64.4 In the table below, references to 2020 results and related comparisons use the adjusted, non-GAAP results from the table above. 2021 Adjusted 2022 vs.
Non-GAAP Reconciliation for 2023 Reported (GAAP) Eastern Ohio Incident Adjusted (non-GAAP) ($ in millions, except per share amounts) Income from railway operations $ 2,851 $ 1,116 $ 3,967 Income taxes $ 493 $ 270 $ 763 Net income $ 1,827 $ 846 $ 2,673 Diluted earnings per share $ 8.02 $ 3.72 $ 11.74 Railway operating ratio (percent) 76.5 (9.1) 67.4 K24 In the table below, references to 2023 results and related comparisons use the adjusted, non-GAAP results from the reconciliation in the table above.
Adjusted 2020 vs. 2020 2022 2021 (non-GAAP) 2021 (non-GAAP) ($ in millions, except per share amounts) (% change) Railway operating expenses $ 7,936 $ 6,695 $ 6,303 19 % 6 % Income from railway operations $ 4,809 $ 4,447 $ 3,486 8 % 28 % Income before income taxes $ 4,130 $ 3,878 $ 3,014 6 % 29 % Income taxes $ 860 $ 873 $ 639 (1 %) 37 % Net income $ 3,270 $ 3,005 $ 2,375 9 % 27 % Diluted earnings per share $ 13.88 $ 12.11 $ 9.25 15 % 31 % Railway operating ratio (percent) 62.3 60.1 64.4 4 % (7 %) K20 DETAILED RESULTS OF OPERATIONS Railway Operating Revenues The following tables present a three-year comparison of revenues, volumes (units), and average revenue per unit by commodity group.
(non-GAAP) 2022 2021 2022 2021 ($ in millions, except per share amounts) (% change) Income from railway operations $ 3,967 $ 4,809 $ 4,447 (18 %) 8 % Net income $ 2,673 $ 3,270 $ 3,005 (18 %) 9 % Diluted earnings per share $ 11.74 $ 13.88 $ 12.11 (15 %) 15 % Railway operating ratio (percent) 67.4 62.3 60.1 8 % 4 % 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.
Income from railway operations increased in 2021 compared to 2020, the result of a 14% increase in railway operating revenues and a 1% reduction in railway operating expenses. Revenue growth was driven by increased average revenue per unit and higher volumes, the result of improved customer demand.
Railway operating ratio (a measure of the amount of operating revenues consumed by operating expenses) deteriorated to 76.5 percent. K23 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.
Gains in ethanol, pulpboard, beverages, lumber and wood, and woodchips more than offset declines in soybeans and pulp. Chemicals revenues increased in both 2022 and 2021 compared with the prior years. In 2022, the increase was the result of higher average revenue per unit, driven by fuel surcharge revenue and pricing gains, and volume growth.
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.
The decrease in 2021 was driven by lower net returns on COLI and lower gains on sales of non-operating property. K26 Income taxes The effective income tax rate was 20.8% in 2022, compared with 22.5% in 2021 and 20.4% in 2020.
Income Taxes 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 following critical accounting estimates are a subset of our significant accounting policies described in Note 1. Pensions and Other Postretirement Benefits Accounting for pensions and other postretirement benefit plans requires us to make several estimates and assumptions (Note 12).
Pensions and Other Postretirement Benefits Accounting for pensions and other postretirement benefit plans requires us to make several estimates and assumptions (Note 12). These include the expected rate of return from investment of the plans’ assets and the expected retirement age of employees as well as their projected earnings and mortality.
Declines in inorganic chemicals, organic chemicals, and natural gas liquids shipments were due to decreased demand and reduced production. In 2021, the increase was the result of volume growth partially offset by lower average revenue per unit, driven by mix of traffic.
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.
The increase in 2021 was the result of strong recovery in the steel market. Industrial coal tonnage increased in both 2022 and 2021 compared with the prior year as a result of increased demand.
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.
In 2021, revenues rose due to increased volume and higher average revenue per unit driven by increased fuel surcharge revenue and pricing. Volumes increased in all merchandise commodity groups, reflecting economic recovery following the onset of the COVID-19 pandemic. Agriculture, forest and consumer products revenues increased in both 2022 and 2021 compared with the prior years.
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.
The rise in 2021 was primarily the result of higher average revenue per unit driven by increased storage service charges, higher fuel surcharge revenue and pricing gains.
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.
The increase in purchased services in 2021 was due to increased technology costs, higher intermodal-related expenses, and increased Conrail, Inc. (Conrail) costs. This was partially offset by the absence of a prior year $99 million impairment related to an equity method investment.
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.
Removed
Throughout the year, we focused on efforts to increase our network fluidity and improve service for our customers. These efforts included the hiring of new conductors in a tight labor market and evolving our operating plan, which collectively drove improvements in our network performance as we concluded the year and is providing strong momentum going into 2023.

… 64 more changes not shown on this page.

Other NSC 10-K year-over-year comparisons