ouR Vision
Be the sAfest, most customeR-focused, And successful
tRAnspoRtAtion compAny in the woRld
Three Commercial Place | Norfolk, Virginia 23510 | www.nscorp.com
© 2014 Norfolk Southern Corporation - All Rights Reserved 10.0114.6657.105k
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finAnciAl highlights
noRfolk southeRn coRpoRAtion & suBsidiARies
foR the yeAR
(numbers in millions, except per-share amounts)
Railway operating revenues
Income from railway operations
Net income
Per share – basic
Per share – diluted
Dividends per share
Dividend pay-out ratio
Cash provided by operating activities
Property additions
Free cash flow2
At yeAR end
Total assets
Total debt
Stockholders’ equity
Shares outstanding
Stockholders’ equity per share
finAnciAl RAtios
Operating ratio
Debt-to-total-capitalization ratio
Total Stockholder Returns1
(dollars)
$ 350
$ 300
$ 250
$ 200
$ 150
$ 100
$ 50
$
0
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
2013
11,245
3,257
1,910
6.10
6.04
2.04
33%
3,078
1,971
1,107
32,483
9,448
11,289
308.9
36.55
71.0%
45.6%
2012
11,040
$
$
$
$
$
$
$
$
$
$
$
$
$
3,124
1,749
5.42
5.37
1.94
36%
3,065
2,241
824
30,342
8,682
9,760
314.0
31.08
71.7%
47.1%
2011
11,172
3,213
1,916
5.52
5.45
1.66
30%
3,227
2,160
1,067
28,538
7,540
9,911
330.4
30.00
71.2%
43.2%
Railway
Operating
Revenues
(in millions)
$11,172
$11,245
$11,040
Income from
Railway
Operations
(in millions)
$3,213$3,124
$3,257
Free Cash
Flow2
(in millions)
$1,067
$1,107
$824
12/08
12/09
12/10
12/11
12/12
12/13
Norfolk Southern Corp. Common Stock
S&P Railroad Stock Price Index
S&P Composite-500 Stock Price Index
11
12
13
11
12
13
11
12
13
1 This graph provides an indicator of cumulative total stockholder returns for Norfolk Southern Corporation as compared to the other identified indices. Assumes that the value of the investment in Norfolk Southern
Corporation common stock and each index was $100 on Dec. 31, 2008, and that all dividends were reinvested. Data furnished by Bloomberg Financial Markets.
2 Free cash flow as used here is defined as cash provided by operating activities minus property additions and is a measure of cash available for other investing activities and financing activities, including
dividends and repurchases of common stock.
descRiption of Business
Norfolk Southern Corporation (NYSE: NSC) is one of the nation’s premier transportation companies. Our Norfolk Southern Railway Company subsidiary
operates approximately 20,000 route miles in 22 states and the District of Columbia, serves every major container port in the eastern United States,
and provides efficient connections to other rail carriers. We operate the most extensive intermodal network in the East and are a major transporter of
coal, automotive, and industrial products.
stockholdeR infoRmAtion
common stock
Ticker symbol: NSC
Our common stock is listed and traded
on the New York Stock Exchange.
puBlicAtions
The following reports and publications are
available on our website at www.nscorp.com
and, upon written request, will be furnished in
printed form to stockholders free of charge:
- Annual Reports on Form 10-K
- Quarterly Reports on Form 10-Q
- Corporate Governance Guidelines
- Board Committee Charters
- Thoroughbred Code of Ethics
- Code of Ethical Conduct
for Senior Financial Officers
- Categorical Independence Standards
for Directors
Stockholders desiring a printed copy of one
or more of these reports and publications
should send their request to the corporate
secretary:
Denise W. Hutson
Corporate Secretary
Norfolk Southern Corporation
Three Commercial Place
Norfolk, Va. 23510
757.823.5567
A notice and proxy statement for the annual
meeting of stockholders are furnished to
stockholders in advance of the meeting.
Amendments to or waivers of the
Thoroughbred Code of Ethics and/or the
Code of Ethical Conduct for Senior Financial
Officers that are required to be disclosed
pursuant to Item 5.05 of the current report on
Form 8-K will be disclosed on our website.
ethics & compliAnce hotline
High ethical standards always have been
key to our success. Anyone who may be
aware of a violation of our corporation’s
Thoroughbred Code of Ethics is encouraged
to contact our Ethics & Compliance Hotline
at 800.732.9279.
diVidends
At its January 2014 meeting, our board of
directors declared a quarterly dividend of
54 cents per share on its common stock,
payable on March 10, 2014, to stockholders
of record on Feb. 7, 2014.
We usually pay quarterly dividends on our
common stock on or about March 10,
June 10, Sept. 10, and Dec. 10, when and
if declared by our board of directors to
stockholders of record. We have paid 126
consecutive quarterly dividends since our
inception in 1982.
Account AssistAnce
For assistance with lost stock certificates,
transfer requirements, the INVESTORS
CHOICE Plan, address changes, dividend
checks, and direct deposit of dividends,
contact:
American Stock Transfer
& Trust Company, LLC
6201 15th Avenue
Brooklyn, N.Y. 11219
877.864.4750
inVestoRs choice
We and our transfer agent, American Stock
Transfer & Trust Company LLC (AST), offer
the INVESTORS CHOICE Plan for investors
wishing to purchase or sell Norfolk Southern
Corporation Common Stock. This plan is
available to both present stockholders of
record and individual investors wishing to
make an initial purchase of Norfolk Southern
Corporation Common Stock. Once enrolled in
the plan, you can invest cash dividends when
paid and make optional cash investments
simply and conveniently.
To take advantage of the INVESTORS
CHOICE Plan, contact AST at 877.864.4750
or visit www.amstock.com. Once you are
on this page, you may go to Invest Online to
access information about the NS INVESTORS
CHOICE Plan.
finAnciAl inquiRies
Marta R. Stewart
Executive Vice
President Finance and
Chief Financial Officer
Norfolk Southern Corp.
Three Commercial Place
Norfolk, Va. 23510
757.629.2770
inVestoR inquiRies
Michael Hostutler
Director Investor Relations
Norfolk Southern Corp.
Three Commercial Place
Norfolk, Va. 23510
757.629.2861
coRpoRAte offices
Executive Offices
Norfolk Southern Corp.
Three Commercial Place
Norfolk, Va. 23510
757.629.2600
RegionAl offices
1200 Peachtree St. N.E.
Atlanta, Ga. 30309
110 Franklin Road S.E.
Roanoke, Va. 24042
AnnuAl RepoRt
Requests & Information
800.531.6757
AnnuAl meeting
May 8, 2014
8:30 a.m. EDT
Williamsburg Lodge
Conference Center
310 South England St.
Williamsburg, Va. 23185
MeSSage to StockholDerS
Dear Fellow StockholDerS:
2013 was a big year for Norfolk Southern.
We achieved record performance levels
as our investments in network capacity,
technology, and new talent delivered the
safe, efficient, and dependable service
our transportation customers deserve.
We set new precedents for railway
operating revenues and income from
railway operations and achieved new
landmarks for net income, earnings per
share, and operating ratio.
At our 2013 annual meeting, I shared
my optimism that, “The best is still to
come.” I couldn’t foresee that a sluggish
economic first half of the year would turn
around significantly in the second half,
but that’s what happened. Our fourth
quarter set records in railway operating
income, net income, and earnings per
share not only for a breakthrough year,
but in Norfolk Southern history.
Looking at the numbers for the year, we came in at a record $11.2 billion in revenues.
That’s our third consecutive year at $11 billion-plus revenues. Net income in 2013 was
up 9 percent, and earnings per share were up 12 percent, both setting records. We
delivered on our commitment to holding expenses to a 1 percent increase, contributing
to a record-best operating ratio of 71 percent – tribute to our measurable productivity
and efficiency enhancements. We also continued our tradition of a solid dividend policy,
raising the dividend on the company’s common stock by 5 percent, along with $627
million in share repurchases.
Total traffic volume was up 3 percent in 2013, despite a decline of coal shipments of 5
percent. Intermodal traffic led overall volume growth, up 6 percent driven by increases
in both domestic and international business fed by our multiyear investments in corridor
infrastructure. Merchandise volume increased 4 percent for the year, as chemicals and
automotive showed significant gains, and all merchandise categories trended upward at
year-end.
Norfolk Southern is reinventing our markets and adapting to changes in our coal traffic.
We’re developing emerging energy markets and revitalizing our existing network to
change not with the times, but lead with innovation and determination ahead of them,
while remaining strongly committed to the coal business.
In 2013, we celebrated 50 years of serving the world’s energy needs at our Pier 6 coal
transload facility, one of the world’s largest and most efficient. The Norfolk facility set
U.S. records for vessel loadings in 2013.
our ManageMent teaM
(left to right top to bottom)
Don Seale
Cindy Earhart
Jim Hixon
Marta Stewart
Mark Manion
Jim Squires
Wick Moorman
Deb Butler
In an effort to prepare for operating in shifting markets
and to provide the best possible customer service, we
invested $2 billion in capital improvements in 2013.
We opened new Crescent Corridor intermodal facilities
at Greencastle, Pa., and Charlotte, N.C., an inland port
facility at Greer, S.C., and new bulk transfer facilities at
Knoxville, Tenn., and Columbia, S.C. All of these projects
were designed with one underlying commitment in mind:
to provide service excellence for our customers for the
long term.
In line with our standard of excellence, we helped with
the location of 67 new industries and the expansion of
25 existing industries on our lines in 2013. Together, our
work represents a customer investment of $2.3 billion,
will lead to an expected creation of 3,100 new jobs, and
will bring more than 136,000 carloads of new rail traffic
annually.
Holding firm to our belief that Norfolk Southern is at its
best when the communities we serve are at their best, we
continued corporate responsibility leadership in 2013. We
purchased fuel-efficient locomotives and increased our
use of idle-reduction and train-handling technologies. As
a result, our efforts to reduce Norfolk Southern’s carbon
footprint and environmental impacts are marching steadily
forward. We’re giving back to the communities that give
us so much through the Norfolk Southern Foundation.
Internally, we’re refining our culture to step up productivity
and improve our working environment – they go hand-
in-hand. Lastly, and arguably most importantly,
we’re hiring a new generation of railroaders for the
Thoroughbred of Transportation, with an emphasis on
bringing military veterans into the Norfolk Southern
family.
But make no mistake: The rail industry faces a plethora
of legislative and regulatory challenges. The task of
launching the congressionally mandated positive
train control nationwide is expensive and complex
and will certainly take longer than Congress originally
decreed. We face high levels of scrutiny over transport
of hazardous materials. Efforts to reregulate the rail
industry persist, along with truck size and weight issues.
These matters notwithstanding, we’ll continue to firmly
advocate for policies and rules that support America’s
rail transportation infrastructure as a strong, competitive
asset in the international marketplace.
2013 marked a year of remarkable achievement by
many measures. For that, we have to thank the people
behind our brand. Their talents, ingenuity, and hard
work brought us to new heights today and will take us
even further in the years ahead.
We named new leaders to our senior management
team this year, including Jim Squires as president, along
with Cindy Earhart and Marta Stewart as executive vice
presidents. We have the best people in the business,
the most capable leadership team anywhere, and
because of them, I am confident in the future of Norfolk
Southern and the rail industry and in our ability to help
move the nation’s economy forward.
Chairman and Chief Executive Officer
BoarD oF DirectorS
thoMaS D. Bell Jr., 64, of Atlanta, Ga., is chairman
of Mesa Capital Partners LLC and formerly served as
chairman and chief executive officer of Cousins Properties
Inc. and Young and Rubicam Inc. His board service
began in 2010.
Committees: Finance (chair), Executive, Compensation
erSkine B. BowleS, 68, of Charlotte, N.C., is a senior
advisor to Carousel Capital and co-chairman of the
National Commission on Fiscal Responsibility and Reform.
He formerly served as president of the University of North
Carolina’s 16-campus system and as chief of staff to
President Bill Clinton. His board service began in 2011.
Committees: Compensation, Finance
roBert a. BraDway, 51, of Thousand Oaks, Calif., is
chairman and chief executive officer of Amgen. His board
service began in 2011.
Committees: Audit, Governance and Nominating
weSley g. BuSh, 52, of McLean, Va., is chairman,
chief executive officer and president of Northrop
Grumman Corporation. His board service began in 2012.
Committees: Compensation, Finance
Daniel a. carp, 65, of Naples, Fla., is nonexecutive
chairman of Delta Air Lines, Inc., and formerly served as
chairman and chief executive officer of Eastman Kodak
Company. His board service began in 2006.
Committees: Compensation (chair), Executive,
Governance and Nominating
karen n. horn, 70, of DeLand, Fla., is a partner with
Brock Capital Group and director of the National Bureau
of Economic Research. She previously served as president
of private client services and managing director of Marsh
Inc., a subsidiary of MMC; chair and chief executive officer
of Bank One; and president of the Federal Reserve Bank
of Cleveland. Her board service began in 2008.
Committees: Audit, Governance and Nominating
All directors stand for re-election annually. In accord with
the director retirement policy of our corporate governance
guidelines, one director, Burton M. Joyce, will retire from
the board as of the 2014 annual meeting. Information
below is as of Feb. 1, 2014.
(left to right top to bottom)
Wesley G. Bush, Martin H. Nesbitt, Michael D. Lockhart, John
R. Thompson, Robert A. Bradway, Thomas D. Bell Jr., Erskine B.
Bowles, Daniel A. Carp, Steven F. Leer, Karen N. Horn, Charles
W. Moorman, Burton M. Joyce. (Not pictured are Amy E. Miles
and James A. Squires, who joined the board Jan. 21, 2014.)
Burton M. Joyce, 71, of Gulfport, Fla., is former chairman
of IPSCO Inc., a leading steel producer. His board service
began in 2003.
Committees: Audit (chair), Executive, Finance
Steven F. leer, 61, of St. Louis, Mo., is executive chairman
of Arch Coal, Inc., one of the nation’s largest coal
producers. His board service began in 1999.
Committees: Compensation, Executive, Governance and
Nominating (chair)
Michael D. lockhart, 64, of Lancaster, Pa., is former
chairman, president, and chief executive officer of
Armstrong World Industries, Inc. His board service
began in 2008.
Committees: Audit, Finance
aMy e. MileS, 47, of Knoxville, Tenn., is chief executive
officer and a director of Regal Entertainment Group Inc.,
the largest movie theater company in the U.S. Her board
service began in 2014.
Committees: Audit, Finance
charleS w. MoorMan, 61, of Virginia Beach, Va., is
chairman and chief executive officer of Norfolk Southern
Corporation. His board service began in 2005.
Committee: Executive (chair)
Martin h. neSBitt, 51, of Chicago, Ill., is co-founder of
The Vistria Group, a private equity firm. He served as
managing director of Green Courte Partners LLC, a real
estate investment firm, and president and chief executive
officer of PRG Parking Holding LLC until 2012. His board
service began in 2013.
Committees: Audit, Finance
JaMeS a. SquireS, 52, of Norfolk, Va., is president of Norfolk
Southern Corporation. His board service began in 2014.
John r. thoMpSon, 62, of Baltimore, Md., is a government
relations consultant for Best Buy Co. Inc. and formerly
served as senior vice president and general manager of
BestBuy.com. His board service began in 2013.
Committees: Audit, Governance and Nominating
equal eMployMent
opportunity policy
Norfolk Southern
Corporation’s policy
is to comply with
all applicable laws,
regulations, and
executive orders
concerning equal
employment opportunity
and nondiscrimination
and to offer employment
on the basis of
qualification and
performance, regardless
of race, religion, color,
national origin, gender,
age, sexual orientation,
veteran status, the
presence of a disability,
or any other legally
protected status.
thoMaS e. hurlBut
Vice President and Controller
DaviD F. Julian
Vice President Safety and Environmental
roBert M. keSler Jr.
Vice President Taxation
DaviD t. lawSon
Vice President Coal
Bruno MaeStri
Vice President Government Relations
roBert e. Martínez
Vice President Business Development
Michael r. Mcclellan
Vice President Industrial Products
alan h. Shaw
Vice President Intermodal Operations
Scott r. weaver
Vice President Labor Relations
thoMaS g. werner
Vice President and Treasurer
Michael J. wheeler
Vice President Engineering
F. Blair wiMBuSh
Vice President Real Estate
and Corporate Sustainability Officer
DeniSe w. hutSon
Corporate Secretary
oFFicerS
charleS w. MoorMan
Chairman and Chief Executive Officer
JaMeS a. SquireS
President
DeBorah h. Butler
Executive Vice President Planning
and Chief Information Officer
cynthia c. earhart
Executive Vice President Administration
JaMeS a. hixon
Executive Vice President Law
and Corporate Relations
Mark D. Manion
Executive Vice President
and Chief Operating Officer
DonalD w. Seale
Executive Vice President
and Chief Marketing Officer
Marta r. Stewart
Executive Vice President Finance
and Chief Financial Officer
clyDe h. alliSon Jr.
Vice President Audit and Compliance
Juan k. cunninghaM
Vice President Human Resources
FreDric M. ehlerS
Vice President Information Technology
terry n. evanS
Vice President Transportation
John h. FrieDMann
Vice President Strategic Planning
williaM a. galanko
Vice President Law
DonalD D. graaB
Vice President Mechanical
Jerry w. hall
Vice President Network and
Service Management
JeFFrey S. heller
Vice President Intermodal and
Automotive Marketing
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
for the fiscal year ended DECEMBER 31, 2013
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
for the transition period from ___________ to___________
Commission file number 1-8339
NORFOLK SOUTHERN CORPORATION
(Exact name of registrant as specified in its charter)
Virginia
(State or other jurisdiction of incorporation)
Three Commercial Place
Norfolk, Virginia
(Address of principal executive offices)
Registrant’s telephone number, including area code:
52-1188014
(IRS Employer Identification No.)
23510-2191
Zip Code
(757) 629-2680
Securities registered pursuant to Section 12(b) of the Act:
Title of each Class
Name of each exchange on which registered
Norfolk Southern Corporation
Common Stock (Par Value $1.00)
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes (X) No ( )
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ( ) No (X)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or Section 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes (X) No ( )
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulations S-T during the preceding 12 months. Yes (X) No ( )
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of the Form 10-K or any
amendment to this Form 10-K. (X)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer or smaller reporting company.
See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer (X) Accelerated filer ( ) Non-accelerated filer ( ) Smaller reporting company ( )
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ( ) No (X)
The aggregate market value of the voting common equity held by non-affiliates at June 30, 2013, was $22,587,575,039 (based on the closing price as
quoted on the New York Stock Exchange on that date).
The number of shares outstanding of each of the registrant’s classes of common stock, at January 31, 2014: 309,715,149 (excluding 20,320,777
shares held by the registrant's consolidated subsidiaries).
Portions of the Registrant’s definitive proxy statements to be filed electronically pursuant to Regulation 14A not later than 120 days after the end of
the fiscal year, are incorporated herein by reference in Part III.
DOCUMENTS INCORPORATED BY REFERENCE:
TABLE OF CONTENTS
NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES
Part I.
Items 1 and 2. Business and Properties
Item 1A.
Item 1B.
Item 3.
Item 4.
Risk Factors
Unresolved Staff Comments
Legal Proceedings
Mine Safety Disclosures
Executive Officers of the Registrant
Part II.
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Market for Registrant’s Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and
Results of Operations
Quantitative and Qualitative Disclosures about Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Controls and Procedures
Other Information
Part III. Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Directors, Executive Officers, and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
Part IV. Item 15.
Exhibits and Financial Statements Schedules
Power of Attorney
Signatures
K2
Page
K3
K13
K16
K17
K17
K18
K19
K20
K21
K38
K39
K79
K79
K79
K80
K80
K81
K84
K84
K85
K97
K97
PART I
NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES
Item 1. Business and Item 2. Properties
GENERAL – Norfolk Southern Corporation is a Norfolk, Virginia based company that owns a major freight
railroad, Norfolk Southern Railway Company. Norfolk Southern Corporation was incorporated on July 23, 1980,
under the laws of the Commonwealth of Virginia. Our common stock (Common Stock) is listed on the New York
Stock Exchange (NYSE) under the symbol “NSC.”
Unless indicated otherwise, Norfolk Southern Corporation and its subsidiaries, including Norfolk Southern
Railway Company, are referred to collectively as NS, we, us, and our.
We are primarily engaged in the rail transportation of raw materials, intermediate products, and finished goods
primarily in the Southeast, East, and Midwest and, via interchange with rail carriers, to and from the rest of the
United States. We also transport overseas freight through several Atlantic and Gulf Coast ports. We provide
comprehensive logistics services and offer the most extensive intermodal network in the eastern half of the United
States.
We make available free of charge through our website, www.nscorp.com, our annual report on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports as soon as
reasonably practicable after such material is electronically filed with or furnished to the U.S. Securities and
Exchange Commission (SEC). In addition, the following documents are available on our website and in print to
any shareholder who requests them:
(cid:120) Corporate Governance Guidelines
(cid:120) Charters of the Committees of the Board of Directors
(cid:120) The Thoroughbred Code of Ethics
(cid:120) Code of Ethical Conduct for Senior Financial Officers
(cid:120) Categorical Independence Standards for Directors
K3
RAILROAD OPERATIONS – At December 31, 2013, our railroads operated approximately 20,000 miles of
road in 22 states and the District of Columbia.
Our system reaches many individual industries, electric generating facilities, mines (in western Virginia, eastern
Kentucky, southern and northern West Virginia, western Pennsylvania, and southern Illinois and Indiana),
distribution centers, transload facilities, and other businesses located in our service area.
Corridors with heaviest freight volume:
(cid:120) New York City area to Chicago (via Allentown and Pittsburgh)
(cid:120) Chicago to Macon (via Cincinnati, Chattanooga, and Atlanta)
(cid:120) Appalachian coal fields of Virginia, West Virginia, and Kentucky to Norfolk, Virginia and Sandusky,
Ohio
(cid:120) Cleveland to Kansas City
(cid:120) Birmingham to Meridian
(cid:120) Memphis to Chattanooga
K4
The miles operated, which include major leased lines between Cincinnati, Ohio, and Chattanooga, Tennessee, and
an exclusive operating agreement for trackage rights over property owned by North Carolina Railroad Company,
were as follows:
Mileage Operated at December 31, 2013
Second
and
Other
Main
Track
Miles
of
Road
Passing
Track,
Crossover Way and
and
Yard
Turnouts Switching Total
Owned
Operated under lease, contract or trackage rights
15,181
4,780
2,750
1,910
1,989
397
8,281
831
28,201
7,918
Total
19,961
4,660
2,386
9,112
36,119
Triple Crown Operations – Triple Crown Services Company (Triple Crown), one of our subsidiaries, provides
bimodal truckload transportation service primarily utilizing RoadRailer® trailers, a hybrid technology that
facilitates both over-the-road and on-the-rail transportation utilizing enclosed trailers that are pulled over the
highways in tractor-trailer configuration and over the rails by locomotives. In addition, Triple Crown utilizes
conventional trailers that are also moved on rail flatcars. Triple Crown provides service in the eastern United
States, as well as Ontario and Quebec, through a network of terminals strategically located in 13 cities.
The following table sets forth certain statistics relating to our railroads’ operations for the past 5 years:
Years ended December 31,
2013
2012
2011
2010
2009
159
Revenue ton miles (billions)
67.5
Freight train miles traveled (millions)
$0.0581 $0.0595 $0.0582 $0.0523 $0.0503
Revenue per ton mile
3,376 3,153 3,207 3,218 2,900
Revenue ton miles per employee-hour worked
Ratio of railway operating expenses to railway operating revenues 71.0% 71.7% 71.2% 71.9% 75.4%
192
75.7
194
74.8
186
76.3
182
72.6
RAILWAY OPERATING REVENUES – Total railway operating revenues were $11.2 billion in 2013.
Following is an overview of our three major market groups.
COAL – Coal is our largest commodity group as measured by revenues. Revenues from coal accounted for about
23% of our total railway operating revenues in 2013. We handled 150.1 million tons, or 1.3 million carloads, in
2013, most of which originated on our lines from major eastern coal basins, with the balance from major western
coal basins received via the Memphis and Chicago gateways. Our coal franchise supports the electric generation
market, serving approximately 100 coal generation plants, as well as the export, metallurgical and industrial
markets, primarily through direct rail and river, lake, and coastal facilities, including various terminals on the
Ohio River, Lambert’s Point in Norfolk, Virginia, the Port of Baltimore, and Lake Erie.
See the discussion of coal revenues and tonnage, by type of coal, in Part II, Item 7, “Management’s Discussion
and Analysis of Financial Condition and Results of Operations.”
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GENERAL MERCHANDISE – Our general merchandise market group is composed of five major commodity
groupings:
(cid:120) Chemicals includes sulfur and related chemicals, petroleum products (including crude oil), chlorine and
bleaching compounds, plastics, rubber, industrial chemicals, and chemical wastes.
(cid:120) Agriculture, consumer products, and government includes soybeans, wheat, corn, fertilizer, livestock and
poultry feed, food oils, flour, beverages, canned goods, sweeteners, consumer products, ethanol,
transportation equipment, and items for the U.S. military.
(cid:120) Metals and construction includes steel, aluminum products, machinery, scrap metals, cement, aggregates,
sand, and minerals.
(cid:120) Automotive includes finished vehicles for BMW, Chrysler, Ford, General Motors, Honda, Hyundai,
Mercedes-Benz, Mitsubishi, Subaru, Toyota, and Volkswagen, and auto parts for BMW, Chrysler, Ford,
General Motors, Honda, Hyundai, Mazda, Mitsubishi, Nissan, Subaru, Toyota, and Volkswagen.
(cid:120) Paper, clay and forest products includes lumber and wood products, pulp board and paper products, wood
fibers, wood pulp, scrap paper, and clay.
In 2013, 119 million tons of general merchandise freight, or approximately 62% of total general merchandise
tonnage we handled, originated on our lines. The balance of general merchandise freight was received from
connecting carriers at interterritorial gateways. Our principal interchange points for received freight included
Chicago, New Orleans, East St. Louis, Memphis, Detroit, Kansas City, Buffalo, Toledo, and Meridian. General
merchandise carloads handled in 2013 were 2.4 million, the revenues from which accounted for 56% of our total
railway operating revenues.
See the discussion of general merchandise revenues by commodity group in Part II, Item 7, “Management’s
Discussion and Analysis of Financial Condition and Results of Operations.”
INTERMODAL – Our intermodal market group consists of shipments moving in trailers, domestic and
international containers, and RoadRailer® equipment. These shipments are handled on behalf of intermodal
marketing companies, international steamship lines, truckers, and other shippers. Intermodal units handled in
2013 were 3.6 million, the revenues from which accounted for 21% of our total railway operating revenues.
See the discussion of intermodal revenues in Part II, Item 7, “Management’s Discussion and Analysis of Financial
Condition and Results of Operations.”
FREIGHT RATES – Private contracts and exempt price quotes are our predominant pricing mechanisms. Thus,
a major portion of our freight business is not economically regulated by the federal government. In general,
market forces are the primary determinant of rail service prices.
In 2013, our railroads were found by the U.S. Surface Transportation Board (STB), the regulatory board that has
broad jurisdiction over railroad practices, to be “revenue adequate” on an annual basis based on results for the
year 2012. The STB has not made its revenue adequacy determination for the year 2013. A railroad is “revenue
adequate” on an annual basis under the applicable law when its return on net investment exceeds the rail
industry’s composite cost of capital. This determination is made pursuant to a statutory requirement.
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PASSENGER OPERATIONS – Amtrak operates regularly scheduled passenger trains on our lines between the
following locations:
(cid:120) Alexandria and Lynchburg, Virginia
(cid:120) Alexandria, Virginia and New Orleans, Louisiana
(cid:120) Alexandria and Orange, Virginia
(cid:120) Petersburg and Norfolk, Virginia
(cid:120) Raleigh and Charlotte, North Carolina
(cid:120) Selma and Charlotte, North Carolina
(cid:120) Chicago, Illinois, and Porter, Indiana
(cid:120) Chicago, Illinois, and Cleveland, Ohio
(cid:120) Chicago, Illinois, and Pittsburgh, Pennsylvania
(cid:120) Kalamazoo and Battle Creek, Michigan
(cid:120) Kalamazoo and Detroit, Michigan
(cid:120) Pittsburgh and Harrisburg, Pennsylvania
Two transportation commissions of the Commonwealth of Virginia operate commuter trains on our line between
Manassas and Alexandria.
We lease the Chicago to Manhattan, Illinois, line to the Commuter Rail Division of the Regional Transportation
Authority of Northeast Illinois (METRA).
We operate freight service over lines with significant ongoing Amtrak and commuter passenger operations, and
conduct freight operations over trackage owned or leased by:
(cid:120) Amtrak
(cid:120) New Jersey Transit
(cid:120) Southeastern Pennsylvania Transportation Authority
(cid:120) Metro-North Commuter Railroad Company
(cid:120) Maryland Department of Transportation
Amtrak and various commuter agencies conduct passenger operations over trackage owned by Conrail in the
Shared Assets Areas (Note 5 to the Consolidated Financial Statements).
NONCARRIER OPERATIONS – Our noncarrier subsidiaries engage principally in the acquisition, leasing, and
management of coal, oil, gas and minerals; the development of commercial real estate; telecommunications; and
the leasing or sale of rail property and equipment. In 2013, no such noncarrier subsidiary or industry segment
grouping of noncarrier subsidiaries met the requirements for a reportable business segment under relevant
authoritative accounting guidance.
RAILWAY PROPERTY
Our railroad system extends across 22 states and the District of Columbia. The railroad infrastructure makes us
capital intensive with net property of approximately $27 billion on a historical cost basis.
Property Additions – Property additions for the past five years were as follows (including capitalized leases):
2013
2012
2011
($ in millions)
2010
2009
Road and all other property
Equipment
Total
$
$
1,421 $
550
1,465 $
776
1,222 $
938
1,153 $
317
1,128
171
1,971 $
2,241 $
2,160 $
1,470 $
1,299
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Our capital spending and replacement programs are and have been designed to assure the ability to provide safe,
efficient, and reliable rail transportation services. For 2014, we have budgeted $2.2 billion of property additions.
We have invested and will continue to invest in various projects and corridor initiatives to expand our rail
network to increase capacity and improve transit times, while returning value to shareholders. Initiatives include
the following:
(cid:120) The Crescent Corridor consists of a program of projects for infrastructure and other facility improvements
geared toward creating seamless, high-capacity intermodal routes spanning 11 states from New Jersey to
Louisiana and offering truck-competitive service along several major interstate highway corridors,
including I-81, I-85, I-20, I-40, I-59, I-78, and I-75.
(cid:120) The Heartland Corridor is a seamless, high-capacity intermodal route across Virginia and West Virginia
to Midwest markets.
(cid:120) Meridian Speedway LLC, a joint venture with Kansas City Southern, owns and operates a 320-mile rail
line between Meridian, Mississippi and Shreveport, Louisiana designed to increase capacity and improve
service.
(cid:120) Pan Am Southern LLC, a joint venture with Pan Am Railways, Inc., owns and operates a 155-mile main
line track that runs between Mechanicville, New York and Ayer, Massachusetts, along with 281 miles of
secondary and branch lines, including trackage rights in New York, Connecticut, Massachusetts, New
Hampshire, and Vermont designed to increase intermodal and automotive capacity.
(cid:120) The MidAmerica Corridor is an arrangement between us and Canadian National Railway (CN) to share
track between Chicago, St. Louis, Kentucky, and Mississippi in order to establish more efficient routes
for shipments moving between the Midwest and Southeast, including potential shipments from CN-served
Illinois Basin coal producers to southeastern utility plants we serve.
(cid:120) The CREATE project is a public-private partnership to reduce rail and highway congestion and add
freight and passenger capacity in the metropolitan Chicago area. We and other railroads have agreed to
participate in CREATE.
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Equipment – At December 31, 2013, we owned or leased the following units of equipment:
Owned(1)
Leased(2)
Total
Capacity of
Equipment
(Horsepower)
Locomotives:
Multiple purpose
Auxiliary units
Switching
Total locomotives
Freight cars:
Gondola
Hopper
Box
Covered hopper
Flat
Other
Total freight cars
Other:
Highway trailers and containers
RoadRailer®
Work equipment
Vehicles
Miscellaneous
Total other
3,877
131
105
4,113
30,933
13,072
11,340
10,251
2,362
4,602
72,560
9,553
6,350
4,547
3,785
15,050
39,285
79
-
-
79
3,956
131
105
4,192
14,479,300
-
157,750
14,637,050
(Tons)
3,748,088
1,514,656
1,062,685
1,149,345
323,910
221,441
8,020,125
3,533
523
1,378
158
1,129
14
6,735
8,623
27
243
-
7,778
16,671
34,466
13,595
12,718
10,409
3,491
4,616
79,295
18,176
6,377
4,790
3,785
22,828
55,956
(1)
Includes equipment leased to outside parties and equipment subject to equipment trusts, conditional sale
agreements, and capitalized leases.
(2) Includes short-term and long-term operating leases. Freight cars include 523 units leased from Consolidated
Rail Corporation.
The following table indicates the number and year built for locomotives and freight cars owned at December 31,
2013:
Locomotives:
No. of units
% of fleet
Freight cars:
No. of units
% of fleet
2013
2012
2011
2010
2009
2004-
2008
1999-
2003
1998&
Before Total
50
1%
60
1%
90
2%
42
1%
-
-%
568
14%
605
15%
2,698
66%
4,113
100%
-
-%
2,025
3%
3,836
5%
150
-%
513
1%
4,031
6%
1,537 60,468 72,560
100%
83%
2%
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The following table shows the average age of our owned locomotive and freight car fleets at December 31, 2013,
and information regarding 2013 retirements:
Average age – in service
Retirements
Average age – retired
Locomotives
Freight Cars
22.5 years
17 units
38.7 years
30.2 years
6,522 cars
42.3 years
Our ongoing locomotive and freight car maintenance programs are intended to ensure the highest standards of
safety, reliability, customer satisfaction, and equipment availability. The locomotive bad order ratio includes all
units (owned and leased) out of service for required periodic inspections, unscheduled maintenance and program
work which includes such activity as overhauls.
Locomotives
Freight cars
Annual Average Bad Order Ratio
2011
7.3%
5.7%
2010
6.7%
5.8%
2012
7.1%
5.3%
2013
7.1%
4.9%
2009
6.1%
4.5%
Encumbrances – Certain railroad equipment is subject to the prior lien of equipment financing obligations
totaling $15 million at December 31, 2013.
Track Maintenance – Of the 36,119 total miles of track we operate, we are responsible for maintaining 28,957
miles, with the remainder being operated under trackage rights from other parties responsible for maintenance.
Over 82% of the main line trackage (including first, second, third, and branch main tracks, all excluding rail
operated pursuant to trackage rights) has rail ranging from 131 to 155 pounds per yard with the standard
installation currently at 136 pounds per yard. Approximately 44% of our lines, excluding rail operated pursuant
to trackage rights, carried 20 million or more gross tons per track mile during 2013.
The following table summarizes several measurements regarding our track roadway additions and replacements
during the past five years:
Track miles of rail installed
Miles of track surfaced
New crossties installed (millions)
2013
549
5,475
2.5
2012
509
5,642
2.6
2011
484
5,441
2.7
2010
422
5,326
2.6
2009
434
5,568
2.7
Microwave System – Our microwave system, consisting of approximately 6,968 radio route miles, 421 core
stations, 30 secondary stations, and five passive repeater stations, provides communications between most
operating locations. We use the microwave system primarily for voice communications, VHF radio control
circuits, data and facsimile transmissions, traffic control operations, and AEI data transmissions.
Traffic Control – Of the approximately 16,500 route miles we dispatch, about 11,025 miles are signalized,
including 8,200 miles of centralized traffic control (CTC) and 2,825 miles of automatic block signals. Of the
8,200 miles of CTC, approximately 6,836 miles are controlled by data radio originating at 336 base station radio
sites.
Computers – A computer network consisting of a centralized production and backup data center near Atlanta,
Georgia, and various distributed computers throughout the company connects the yards, terminals, transportation
offices, rolling stock repair points, sales offices, and other key system locations. Operating and traffic data are
processed and stored to provide customers with information on their shipments throughout the system. Computer
systems provide current information on the location of every train and each car on line, as well as related waybill
and other train and car movement data. In addition, our computer systems assist us in the performance of a
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variety of functions and services, including payroll, car and revenue accounting, billing, sourcing, inventory
management activities and controls, and special studies.
ENVIRONMENTAL MATTERS – Compliance with federal, state, and local laws and regulations relating to
the protection of the environment is one our principal goals. To date, such compliance has not had a material
effect on our financial position, results of operations, liquidity, or competitive position. See “Legal Proceedings,”
Part I, Item 3; “Personal Injury, Environmental, and Legal Liabilities” in Part II, Item 7, “Management’s
Discussion and Analysis of Financial Condition and Results of Operations,” and Note 16 to the Consolidated
Financial Statements.
EMPLOYEES – The following table shows the average number of employees and the average cost per employee
for wages and benefits:
Average number of employees
Average wage cost per employee $
Average benefit cost per employee $
2013
30,103
72,000
40,000
$
$
2012
30,943
69,000
38,000
$
$
2011
30,329
71,000
39,000
$
$
2010
28,559
69,000
37,000
$
$
2009
28,593
63,000
32,000
More than 80% of our railroad employees are covered by collective bargaining agreements with various labor
unions. See the discussion of “Labor Agreements” in Part II, Item 7, “Management’s Discussion and Analysis of
Financial Condition and Results of Operations.”
GOVERNMENT REGULATION – In addition to environmental, safety, securities, and other regulations
generally applicable to all business, our railroads are subject to regulation by the STB. The STB has jurisdiction
over some rates, routes, fuel surcharges, conditions of service, and the extension or abandonment of rail
lines. The STB also has jurisdiction over the consolidation, merger, or acquisition of control of and by rail
common carriers. The Federal Railroad Administration (FRA) regulates certain track and mechanical equipment
standards.
The relaxation of economic regulation of railroads, following the Staggers Rail Act of 1980, included exemption
from STB regulation of the rates and most service terms for intermodal business (trailer-on-flat-car, container-on-
flat-car), rail boxcar shipments, lumber, manufactured steel, automobiles, and certain bulk commodities such as
sand, gravel, pulpwood, and wood chips for paper manufacturing. Further, all shipments that we have under
contract are effectively removed from regulation for the duration of the contract. About 88% of our revenues
comes from either exempt shipments or shipments moving under transportation contracts; the remainder comes
from shipments moving under public tariff rates.
Efforts have been made over the past several years to re-subject the rail industry to increased federal economic
regulation, and such efforts are expected to continue in 2014. The Staggers Rail Act of 1980 substantially
balanced the interests of shippers and rail carriers, and encouraged and enabled rail carriers to innovate, invest in
their infrastructure, and compete for business, thereby contributing to the economic health of the nation and to the
revitalization of the industry. Accordingly, we will continue to oppose efforts to reimpose increased economic
regulation.
Government regulations concerning the safety and security of our railroads are discussed within the “Security of
Operations” section contained herein.
COMPETITION – There is continuing strong competition among rail, water, and highway carriers. Price is
usually only one factor of importance as shippers and receivers choose a transport mode and specific hauling
company. Inventory carrying costs, service reliability, ease of handling, and the desire to avoid loss and damage
during transit are also important considerations, especially for higher-valued finished goods, machinery, and
consumer products. Even for raw materials, semi-finished goods, and work-in-progress, users are increasingly
sensitive to transport arrangements that minimize problems at successive production stages.
K11
Our primary rail competitor is CSX Corporation; both railroads operate throughout much of the same
territory. Other railroads also operate in parts of the territory. We also compete with motor carriers, water
carriers, and with shippers who have the additional options of handling their own goods in private carriage,
sourcing products from different geographic areas, and using substitute products.
Certain marketing strategies among railroads and between railroads and motor carriers enable railroads to
compete more effectively in specific markets.
SECURITY OF OPERATIONS – We continue to take measures to provide enhanced security for our rail
system. Our comprehensive security plan is modeled on and was developed in conjunction with the security plan
prepared by the Association of American Railroads (AAR) post September 11, 2001. The AAR Security Plan
defines four Alert Levels and details the actions and countermeasures that are being applied across the railroad
industry as a terrorist threat increases or decreases. The Alert Level actions include countermeasures that will be
applied in three general areas: (1) operations (including transportation, engineering, and mechanical); (2)
information technology and communications; and, (3) railroad police. Although security concerns preclude
public disclosure of its contents, our System Security Plan outlines the protocol within our company for all
concerned to be notified of AAR Alert Level changes. All of our Operations Division employees are advised by
their supervisors or train dispatchers, as appropriate, of any change in Alert Level and any additional
responsibilities they may incur due to such change.
Our plan also effectively addresses and complies with U.S. Department of Transportation (DOT) security
regulations pertaining to training and security plans with respect to the transportation of hazardous materials. As
part of the plan, security awareness training is given to all railroad employees who directly affect hazardous
material transportation safety, and this training is integrated into recurring hazardous material training and re-
certification programs. Toward that end, we, working closely with the National Transit Institute at Rutgers
University, developed a four-module uniform national training program. We have also worked with the
Transportation Security Administration (TSA) in developing other industry training programs. More in-depth
security training has been given to select employees of ours who have been given specific security
responsibilities, and additional, location-specific security plans are in place for certain metropolitan areas and
each of the six port facilities we serve. With respect to the ports, each facility plan has been approved by the
applicable Captain of the Port and remains subject to inspection by the U.S. Coast Guard.
Additionally, we continue to engage in close and regular coordination with numerous federal and state agencies,
including the U.S. Department of Homeland Security (DHS), the TSA, the Federal Bureau of Investigation (FBI),
the FRA, the U.S. Coast Guard, U.S. Customs and Border Protection, and various state Homeland Security
offices. As one notable example, one of our Police Special Agents in Charge (SAC), under the auspices of the
AAR, continues to serve at the National Joint Terrorism Task Force (NJTTF) operated by the FBI, and located at
the National Counter Terrorism Center (NCTC) in Arlington, Virginia to represent and serve as liaison to the
North American rail industry. This arrangement improves logistical flow of vital security and law enforcement
information with respect to the rail industry as a whole, while having the post filled by one of our SACs also
serves to foster a strong working relationship between us and the FBI. We also are a member of the Customs-
Trade Partnership Against Terrorism (C-TPAT) program sponsored by U.S. Customs. C-TPAT allows us to work
closely with U.S. Customs and our customers to develop measures that will help ensure the integrity of freight
shipments moving on our railroads, particularly those moving to or from a foreign country. Based on
participation in C-TPAT, we have ensured that our plan meets all current applicable security recommendations
made by U.S. Customs.
Similarly, we continue to be guided in our operations by various supplemental security action items issued by
DHS and DOT, U.S. Coast Guard Maritime Security requirements, as well as voluntary security action items
developed in collaboration with TSA, DOT, and the freight railroads. Many of the action items are based on
lessons learned from DHS and DOT security assessments of rail corridors in High Threat Urban Areas (HTUA).
Particular attention is aimed at reducing risk in HTUA by: (1) the establishment of secure storage areas for rail
K12
cars carrying toxic-by-inhalation (TIH) materials; (2) the expedited movement of trains transporting rail cars
carrying TIH materials; (3) the minimization of unattended loaded tank cars carrying TIH materials; and (4)
cooperation with federal, state, local and tribal governments to identify, through risk assessments, those locations
where security risks are the highest. These action items and our compliance initiatives are outlined in the various
departmental sections of our System Security Plan. We have taken appropriate actions to be compliant with the
TSA Final Security Rule addressing Rail Security Sensitive Materials (RSSM) to ensure these shipments are
properly inspected and that positive chain-of-custody is maintained when required. We are in compliance with
the Pipeline and Hazardous Materials Safety Administration (PHMSA) rail-routing regulations outlined in Docket
HM-232E. We conduct ongoing route evaluations. In 2011, as part of the FRA’s bi-annual review, this
methodology and selected routes were found to be compliant with the regulation. The next review by the FRA is
expected mid-year 2014.
In 2013, through participation in the Transportation Community Awareness and Emergency Response
(TRANSCAER) Program, we provided rail accident response training to approximately 4,900 emergency
responders, such as local police and fire personnel. Our other training efforts throughout 2013 included
participation in 17 drills for local, state, and federal agencies. We also have ongoing programs to sponsor local
emergency responders at the Security and Emergency Response Training Course conducted at the AAR
Transportation Technology Center in Pueblo, Colorado.
Improvements in equipment design also are expected to play a role in enhancing rail security. PHMSA, in
coordination with the FRA, has amended the Hazardous Materials Regulations to prescribe enhanced safety for
rail transportation of TIH materials, has provided interim design standards for railroad tank cars. The rule
mandates commodity-specific improvements in safety features and design standards for newly manufactured
DOT specification tank cars and an improved top fittings performance standard. The interim standards
established in this rule will enhance the accident survivability of TIH tank cars.
Item 1A. Risk Factors
We are subject to significant governmental legislation and regulation over commercial, operating and
environmental matters. Railroads are subject to the enactment of laws by Congress that could increase
economic regulation of the industry. Railroads presently are subject to commercial regulation by the Surface
Transportation Board (STB), which has jurisdiction over some rates, routes, fuel surcharges, conditions of service,
and the extension or abandonment of rail lines. The STB also has jurisdiction over the consolidation, merger, or
acquisition of control of and by rail common carriers. Additional economic regulation of the rail industry by
Congress or the STB, whether under new or existing laws, could have a significant negative impact on our ability
to determine prices for rail services and result in a material adverse effect in the future on our financial position,
results of operations, or liquidity in a particular year or quarter. This potential material adverse effect could also
result in reduced capital spending on our rail network or abandonment of lines.
Railroads are subject to safety and security regulation by the U.S. Department of Transportation and the U.S.
Department of Homeland Security, which regulate most aspects of our operations. Compliance with the Rail
Safety Improvement Act of 2008 will result in additional operating costs associated with the statutorily mandated
implementation of positive train control by 2015. In addition to increased capital expenditures, implementation
may result in reduced operational efficiency and service levels, as well as increased compensation and benefits
expenses, and increased claims and litigation costs.
Our operations are subject to extensive federal and state environmental laws and regulations concerning, among
other things, emissions to the air; discharges to waterways or groundwater supplies; handling, storage,
transportation, and disposal of waste and other materials; and the cleanup of hazardous material or petroleum
releases. The risk of incurring environmental liability – for acts and omissions, past, present, and future – is
inherent in the railroad business. This risk includes property owned by us, whether currently or in the past, that is
or has been subject to a variety of uses, including our railroad operations and other industrial activity by past
owners or our past and present tenants.
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Environmental problems that are latent or undisclosed may exist on these properties, and we could incur
environmental liabilities or costs, the amount and materiality of which cannot be estimated reliably at this time,
with respect to one or more of these properties. Moreover, lawsuits and claims involving other unidentified
environmental sites and matters are likely to arise from time to time, and the resulting liabilities could have a
significant effect on our financial position, results of operations, or liquidity in a particular year or quarter.
As a common carrier by rail, we must offer to transport hazardous materials, regardless of risk.
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. A catastrophic rail
accident involving hazardous materials could have a material adverse effect on our financial position, results of
operations, or liquidity to the extent not covered by insurance. We have obtained insurance for potential losses
for third-party liability and first-party property damages; however, insurance is available from a limited number
of insurers and may not continue to be available or, if available, may not be obtainable on terms acceptable to us.
We may be 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 and may adversely affect our financial
position, results of operations, or liquidity in a particular year or quarter. Because we play a critical role in the
nation’s transportation system, we could become the target of such an attack or have a significant role in the
government’s preemptive approach or response to an attack or war.
Although we currently maintain insurance coverage for third-party liability arising out of war and acts of
terrorism, we maintain only limited insurance coverage for first-party property damage and damage to property in
our care, custody, or control caused by certain acts of terrorism. In addition, premiums for some or all of our
current insurance programs covering these losses could increase dramatically, or insurance coverage for certain
losses could be unavailable to us in the future.
We may be affected by general economic conditions. Prolonged negative changes in domestic and global
economic conditions affecting the producers and consumers of the commodities we carry may have an adverse
effect on our financial position, results of operations, or liquidity in a particular year or quarter. Economic
conditions resulting in bankruptcies of one or more large customers could have a significant impact on our
financial position, results of operations, or liquidity in a particular year or quarter.
We may be affected by climate change legislation or regulation. Concern over climate change has led to
significant federal, state, and international legislative and regulatory efforts to limit greenhouse gas (GHG)
emissions. Moreover, even without such legislation or regulation, government incentives and adverse publicity
relating to GHGs could affect certain of our customers and the markets for certain of the commodities we
carry. Restrictions, caps, taxes, or other controls on GHG emissions, including diesel exhaust, could significantly
increase our operating costs, decrease the amount of traffic handled, and decrease the value of coal reserves we
own, and thus could have an adverse effect on our financial position, results of operations, or liquidity in a
particular year or quarter. Such restrictions could affect our customers that (1) use commodities that we carry to
produce energy, including coal, (2) use significant amounts of energy in producing or delivering the commodities
we carry, or (3) manufacture or produce goods that consume significant amounts of energy.
We face competition from other transportation providers. We are subject to competition from motor carriers,
railroads and, to a lesser extent, ships, barges, and pipelines, on the basis of transit time, pricing, and quality and
reliability of service. While we have used primarily internal resources to build or acquire and maintain our rail
system, trucks and barges have been able to use public rights-of-way maintained by public entities. Any future
improvements or expenditures materially increasing the quality or reducing the cost of alternative modes of
transportation in the regions in which we operate, or legislation granting materially greater latitude for motor
carriers with respect to size or weight limitations, could have a material adverse effect on our financial position,
results of operations, or liquidity in a particular year or quarter.
K14
The operations of carriers with which we interchange may adversely affect our operations. Our ability to
provide rail service to customers in the U.S. and Canada depends in large part upon our ability to maintain
cooperative relationships with connecting carriers with respect to, among other matters, freight rates, revenue
division, car supply and locomotive availability, data exchange and communications, reciprocal switching,
interchange, and trackage rights. Deterioration in the 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.
We rely on technology and technology improvements in our business operations. If we experience
significant disruption or failure of one or more of our information technology systems, including computer
hardware, software, and communications equipment, we could experience a service interruption, a security
breach, or other operational difficulties. Additionally, if we do not have sufficient capital to acquire new
technology or we are unable to implement new technology, we may suffer a competitive disadvantage within the
rail industry and with companies providing other modes of transportation service. Any of these factors could
have a material adverse effect on our financial position, results of operations, or liquidity in a particular year or
quarter.
The vast majority of our employees belong to labor unions, and labor agreements, strikes, or work
stoppages could adversely affect our operations. More than 80% of our railroad employees are covered by
collective bargaining agreements with various labor unions. If unionized workers were to engage in a strike, work
stoppage, or other slowdown, we could experience a significant disruption of our operations. Additionally, future
national labor agreements, or renegotiation of labor agreements or provisions of labor agreements, could
significantly increase our costs for healthcare, wages, and other benefits. Any of these factors could have a
material adverse impact on our financial position, results of operations, or liquidity in a particular year or quarter.
We may be subject to various claims and lawsuits that could result in significant expenditures. The nature
of our business exposes us to the potential for various claims and litigation related to labor and employment,
personal injury, commercial disputes, freight loss and other property damage, and other matters. Job-related
personal injury and occupational claims are subject to the Federal Employer’s Liability Act (FELA), which is
applicable only to railroads. FELA’s fault-based tort system produces results that are unpredictable and
inconsistent as compared with a no-fault worker’s compensation system. The variability inherent in this system
could result in actual costs being very different from the liability recorded.
Any material changes to current litigation trends or a catastrophic rail accident involving any or all of freight loss
property damage, personal injury, and environmental liability could have a material adverse effect on our
financial position, results of operations, or liquidity to the extent not covered by insurance. We have obtained
insurance for potential losses for third-party liability and first-party property damages. Specified levels of risk are
retained on a self-insurance basis (currently up to $50 million and above $1 billion per occurrence and/or policy
year for bodily injury and property damage to third parties and up to $25 million and above $175 million per
occurrence and/or policy year for property owned by us or in our care, custody, or control). 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.
Severe weather could result in significant business interruptions and expenditures. Severe weather
conditions and other natural phenomena, including hurricanes, floods, fires, and earthquakes, may cause
significant business interruptions and result in increased costs, increased liabilities, and decreased revenues,
which could have an adverse effect on our financial position, results of operations, or liquidity in a particular year
or quarter.
Unpredictability of demand for rail services resulting in the unavailability of qualified personnel could
adversely affect our operational efficiency and ability to meet demand. Workforce demographics, training
requirements, and the availability of qualified personnel, particularly engineers and trainmen, could each have a
K15
negative impact on our ability to meet demand for rail service. Unpredictable increases in demand for rail
services may exacerbate such risks, which could have a negative impact on our operational efficiency and
otherwise have a material adverse effect on our financial position, results of operations, or liquidity in a particular
year or quarter.
We may be affected by supply constraints resulting from disruptions in the fuel markets or the nature of
some of our supplier markets. We consumed 477 million gallons of diesel fuel in 2013. Fuel availability could
be affected by any limitation in the fuel supply or by any imposition of mandatory allocation or rationing
regulations. A severe fuel supply shortage arising from production curtailments, increased demand in existing or
emerging foreign markets, disruption of oil imports, disruption of domestic refinery production, damage to
refinery or pipeline infrastructure, political unrest, war or other factors, could have a material adverse effect on
our financial position, results of operations, or liquidity in a particular year or quarter. Also, such an event could
impact us as well as our customers and other transportation companies.
Due to the capital intensive nature and industry-specific requirements of the rail industry, high barriers of entry
exist for potential new suppliers of core railroad items, such as locomotives and rolling stock equipment.
Additionally, we compete with other industries for available capacity and raw materials used in the production of
certain track materials, such as rail and ties. Changes in the competitive landscapes of these limited-supplier
markets could result in increased prices or significant shortages of materials that could have a material adverse
effect on our financial position, results of operations, or liquidity in a particular year or quarter.
The state of capital markets could adversely affect our liquidity. From time-to-time we rely on the capital
markets to provide some of our capital requirements, including the issuance of long-term debt instruments and
commercial paper, as well as the sale of certain receivables. Significant instability or disruptions of the capital
markets, including the credit markets, or deterioration of our financial condition due to internal or external factors
could restrict or eliminate our access to, and/or significantly increase the cost of, various financing sources,
including bank credit facilities and issuance of corporate bonds. Instability or disruptions of the capital markets
and deterioration of our financial condition, alone or in combination, could also result in a reduction in our credit
rating to below investment grade, which could prohibit or restrict us from accessing external sources of short- and
long-term debt financing and/or significantly increase the associated costs.
Item 1B. Unresolved Staff Comments
None.
K16
Item 3. Legal Proceedings
On November 6, 2007, various antitrust class actions filed against us and other Class I railroads in various Federal
district courts regarding fuel surcharges were consolidated in the District of Columbia by the Judicial Panel on
Multidistrict Litigation. On June 21, 2012, the court certified the case as a class action. The defendant railroads
appealed this certification, and on August 9, 2013, the Court of Appeals for the District of Columbia vacated the
District Court’s decision and remanded the case for further consideration. We believe the allegations in the
complaints are without merit and intend to vigorously defend the cases. We do not believe the outcome of these
proceedings will have a material effect on our financial position, results of operations, or liquidity. A lawsuit
containing similar allegations against us and four other major railroads that was filed on March 25, 2008, in the
U.S. District Court for the District of Minnesota was voluntarily dismissed by the plaintiff subject to a tolling
agreement entered into in August 2008, and most recently extended in August 2013.
We received a Notice of Violation (NOV) issued by the Tennessee Department of Environmental Conservation
concerning soil runoff in connection with construction of the Memphis Regional Intermodal Facility in Rossville,
Tennessee. Although we will contest liability and the imposition of any penalties, we describe this matter here
consistent with SEC rules and requirements concerning governmental proceedings with respect to environmental
laws and regulations. We do not believe that the outcome of this proceeding will have a material effect on our
financial position, results of operations, or liquidity.
Item 4. Mine Safety Disclosures
Not applicable.
K17
Executive Officers of the Registrant
Our executive officers generally are elected and designated annually by the Board of Directors at its first meeting
held after the annual meeting of stockholders, and they hold office until their successors are elected. Executive
officers also may be elected and designated throughout the year as the Board of Directors 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, 2014, relating to our officers.
Name, Age, Present Position
Business Experience During Past Five Years
Charles W. Moorman, 61,
Chairman and
Chief Executive Officer
James A. Squires, 52,
President
Deborah H. Butler, 59,
Executive Vice President –
Planning and Chief
Information Officer
Cindy C. Earhart, 52,
Executive Vice President –
Administration
James A. Hixon, 60,
Executive Vice President –
Law and Corporate Relations
Mark D. Manion, 61,
Executive Vice President and
Chief Operating Officer
Donald W. Seale, 61,
Executive Vice President and
Chief Marketing Officer
Marta R. Stewart, 56,
Executive Vice President –
Finance and Chief Financial Officer
Thomas E. Hurlbut, 49,
Vice President and Controller
Present position since February 1, 2006.
Present position since June 1, 2013.
Served as Executive Vice – Administration from
August 1, 2012 to June 1, 2013 .
Served as Executive Vice President – Finance and Chief
Financial Officer from July 1, 2007 to August 1, 2012.
Present position since June 1, 2007.
Present position since June 1, 2013.
Served as Vice President Human Resources from
March 1, 2007 to June 1, 2013.
Present position since October 1, 2005.
Present position since April 1, 2009.
Served as Executive Vice President – Operations from
October 1, 2004 to April 1, 2009.
Present position since April 1, 2006.
Present position since November 1, 2013.
Served as Vice President and Treasurer from April 1, 2009
to November 1, 2013. Served as Vice President and
Controller from December 1, 2003 to April 1, 2009.
Present position since November 1, 2013.
Served as Vice President Audit and Compliance from
February 1, 2010 to November 1, 2013. Served as
Assistant Vice President Internal Audit from
February 1, 2008 to February 1, 2010.
K18
PART II
NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
STOCK PRICE AND DIVIDEND INFORMATION
Common Stock is owned by 30,990 stockholders of record as of December 31, 2013 and is traded on the New
York Stock Exchange under the symbol “NSC.” The following table shows the high and low sales prices as
reported by Bloomberg L.P. on its internet-based service and dividends per share, by quarter, for 2013 and 2012.
2013
1st
2nd
3rd
4th
Quarter
Market Price
High
Low
Dividends per share
2012
Market Price
High
Low
Dividends per share
$
$
75.59 $
61.63
0.50
79.32 $
69.55
0.50
77.84 $
70.73
0.52
92.87
75.82
0.52
1st
2nd
3rd
4th
78.24 $
64.45
0.47
74.41 $
63.67
0.47
75.10 $
63.63
0.50
67.71
56.34
0.50
ISSUER PURCHASES OF EQUITY SECURITIES
Total
of Shares
(or Units)
Purchased (1)
Average
Price Paid
per Share
(or Unit)
Period
Total
Number of
Shares (or Units)
Purchased as
Part of Publicly
Announced Plans
(2)
or Programs
Maximum Number
(or Approximate
Dollar Value)
of Shares (or Units)
that may yet be
Purchased under
the Plans or Programs (2)
October 1-31, 2013
November 1-30, 2013
December 1-31, 2013
Total
$
818,038
1,024
4,960
824,022
78.46
87.11
90.58
808,800
-
-
808,800
38,278,367
38,278,367
38,278,367
(1) Of this amount, 15,222 represents shares tendered by employees in connection with the exercise of stock options
under the stockholder-approved Long-Term Incentive Plan.
(2) Our Board of Directors authorized a share repurchase program, pursuant to which up to 125 million shares of
Common Stock could be purchased through December 31, 2014. On August 1, 2012, our Board of Directors
authorized the repurchase of up to an additional 50 million shares of Common Stock through December 31, 2017.
K19
Item 6. Selected Financial Data
FIVE-YEAR FINANCIAL REVIEW
2013
2012
2011
($ in millions, except per share amounts)
2010
2009
RESULTS OF OPERATIONS
Railway operating revenues
Railway operating expenses
Income from railway operations
Other income – net
Interest expense on debt
Income before income taxes
$ 11,245 $
7,988
3,257
233
525
2,965
11,040 $
7,916
3,124
11,172 $
7,959
3,213
9,516 $
6,840
2,676
7,969
6,007
1,962
129
495
2,758
160
455
2,918
153
462
2,367
127
467
1,622
Provision for income taxes
1,055
1,009
1,002
871
588
Net income
$
1,910 $
1,749 $
1,916 $
1,496 $
1,034
PER SHARE DATA
Net income – basic
– diluted
Dividends
Stockholders’ equity at year end
FINANCIAL POSITION
Total assets
Total debt
Stockholders’ equity
OTHER
Property additions
Average number of shares outstanding (thousands)
Number of stockholders at year end
Average number of employees:
Rail
Nonrail
Total
$
6.10 $
6.04
2.04
36.55
5.42 $
5.37
1.94
31.08
5.52 $
5.45
1.66
30.00
4.06 $
4.00
1.40
29.85
2.79
2.76
1.36
28.06
$ 32,483 $
9,448
11,289
30,342 $
8,682
9,760
28,538 $
7,540
9,911
28,199 $ 27,369
7,153
7,025
10,353
10,669
$
1,971 $
2,241 $
2,160 $
1,470 $
1,299
311,916 320,864 345,484 366,522 367,077
37,486
33,381
30,990
35,416
32,347
29,698
405
30,543
400
29,933
396
28,160
399
28,173
420
30,103
30,943
30,329
28,559
28,593
See accompanying consolidated financial statements and notes thereto.
K20
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Norfolk Southern Corporation and Subsidiaries
Management’s Discussion and Analysis of
Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with the Consolidated Financial Statements
and Notes and the Selected Financial Data.
OVERVIEW
We are one of the nation’s premier transportation companies. Our Norfolk Southern Railway Company
subsidiary operates approximately 20,000 miles of road in 22 states and the District of Columbia, serves every
major container port in the eastern United States, and provides efficient connections to other rail carriers. We
operate the most extensive intermodal network in the East and are a major transporter of coal, automotive, and
industrial products.
Our net income increased 9% in 2013, compared with 2012, and earnings per share improved 12%, reflecting
improved operating results, a large gain from a nonoperating transaction, and share repurchases. Higher revenues
and increased network efficiencies improved our railway operating ratio (a measure of the amount of operating
revenues consumed by operating expenses) from 71.7% in 2012 to 71.0% in the current year.
Cash provided by operating activities totaled $3.1 billion, which along with proceeds from borrowings and cash
on hand, allowed for property additions, dividends, share repurchases, and debt repayments. During 2013, we
repurchased 8.3 million shares of Common Stock at a total cost of $627 million. Since inception of our stock
repurchase program in 2006, we have repurchased and retired 136.7 million shares of Common Stock at a total
cost of $8.1 billion. At December 31, 2013, cash, cash equivalents, and short-term investments totaled
$1.6 billion.
In 2014, we expect revenues to increase, reflecting higher volumes. We will continue to focus on safety, cost
control, productivity, service levels, operational efficiency, and an ongoing market-based approach to pricing.
K21
SUMMARIZED RESULTS OF OPERATIONS
2013 Compared with 2012
Net income in 2013 was $1.9 billion, or $6.04 per diluted share, up $161 million, or 9%, compared with
$1.7 billion, or $5.37 per diluted share, in 2012, a reflection of a 4% increase in income from railway operations,
in addition to the favorable impact of the recognition of the gain from the sale of certain assets to the Michigan
Department of Transportation (MDOT), which benefited net income by $60 million and earnings per share by
$0.19. Railway operating revenues rose 2%, while operating expenses increased 1%, driven largely by higher
volume-related expenses.
2012 Compared with 2011
Net income in 2012 was $1.7 billion, or $5.37 per diluted share, down $167 million, or 9%, compared with
$1.9 billion, or $5.45 per diluted share, in 2011. The decrease in net income was due to lower income from
railway operations, lower nonoperating income items, higher interest expense on debt, and a higher effective
income tax rate (Note 3). Railway operating revenues decreased modestly, $132 million, reflecting lower average
revenue per unit, including fuel surcharges. Railway operating expenses also decreased modestly, $43 million,
largely driven by the absence of the $58 million unfavorable arbitration ruling in 2011 and declines related to
network efficiency and productivity gains, offset by higher depreciation and intermodal volume-related expenses.
DETAILED RESULTS OF OPERATIONS
Railway Operating Revenues
Railway operating revenues were $11.2 billion in 2013, $11.0 billion in 2012, and $11.2 billion in 2011. The
following table presents a three-year comparison of revenues, volumes, and average revenue per unit by market
group.
2013
Revenues
2012
($ in millions)
2011
2013
Units
2012
2011
(in thousands)
2013
Revenue per Unit
2012
($ per unit)
2011
Coal
General merchandise:
Chemicals
Agr./consumer/gov’t.
Metals/construction
Automotive
Paper/clay/forest
General merchandise
Intermodal
Total
$
2,543 $
2,879 $
3,458
1,346.7
1,414.1
1,619.6 $
1,888 $
2,036 $
2,135
1,667
1,467
1,405
984
795
6,318
1,467
1,446
1,335
897
775
5,920
1,368
1,439
1,241
780
756
5,584
449.2
594.3
666.9
402.1
309.4
2,421.9
388.8
595.9
669.7
374.6
305.8
2,334.8
373.7
599.4
665.0
332.2
314.3
2,284.6
3,711
2,468
2,106
2,448
2,570
2,609
3,772
2,427
1,993
2,395
2,536
2,536
3,662
2,400
1,867
2,348
2,404
2,444
2,384
2,241
2,130
3,572.3
3,358.3
3,210.5
667
667
663
$ 11,245 $ 11,040 $ 11,172
7,340.9
7,107.2
7,114.7 $
1,532 $
1,553 $
1,570
K22
Revenues increased $205 million in 2013, but decreased $132 million in 2012. As reflected in the table below,
the increase in 2013 resulted from higher volumes, partially offset by lower average revenue per unit as lower
market-based export coal rates, the effects of changes in the mix of business, and slightly lower fuel surcharges
more than offset rate increases. The decrease in 2012 was due to lower average revenue per unit (as the negative
effects of changes in the mix of business offset rate increases and slightly higher fuel surcharges) and slightly
lower volume. Fuel surcharge revenue totaled $1,254 million in 2013, $1,278 million in 2012, and $1,255 million
in 2011. If fuel prices remain at or near year-end 2013 levels, fuel surcharge revenue will be relatively flat in
2014.
Revenue Variance Analysis
Increase (Decrease)
2013 vs. 2012
2012 vs. 2011
($ in millions)
Volume (units)
Revenue per unit
Total
$
$
363
(158)
$
205
$
(12)
(120)
(132)
Many of our negotiated fuel surcharges for coal and industrial products shipments are based on the monthly
average price of West Texas Intermediate Crude Oil (WTI Average Price). These surcharges are reset the first day
of each calendar month based on the WTI Average Price for the second preceding calendar month. This two-
month lag in applying WTI Average Price decreased fuel surcharge revenue by approximately $29 million in
2013, increased fuel surcharge revenue by approximately $39 million in 2012, and decreased fuel surcharge
revenue by approximately $44 million in 2011.
Two of our customers, DuPont and Sunbelt Chlor Alkai Partnership (“Sunbelt”), have rate reasonableness
complaints pending before the Surface Transportation Board (STB) alleging that our tariff rates for transportation
of regulated movements are unreasonable. We dispute these allegations. Since June 1, 2009, in the case of
DuPont, and April 1, 2011, in the case of Sunbelt, we have been billing and collecting amounts based on the
challenged tariff rates. We presently expect resolution of these cases to occur in 2014 and believe the estimate of
reasonably possible loss will not have a material effect on our financial position, results of operations, or
liquidity. With regard to rate cases, we record adjustments to revenues in the periods, if and when, such
adjustments are probable and estimable.
COAL revenues decreased $336 million, or 12%, compared with 2012, reflecting a 5% decrease in carload
volume (tonnage hauled declined 4%) primarily due to fewer shipments of utility and domestic metallurgical coal.
Average revenue per unit was down 7%, the result of lower pricing (mainly market-based export coal) and
decreased fuel surcharge revenue, partially offset by the positive effect of changes in mix.
In 2012, coal revenues decreased $579 million, or 17%, compared with 2011, reflecting a 13% decrease in carload
volume (tonnage was 12% lower) primarily due to fewer shipments of utility coal. Coal average revenue per unit
was down 5% compared with 2011, the result of lower pricing (mainly market-based export metallurgical coal)
and decreased fuel surcharge revenue, partially offset by the positive effect of changes in mix.
For 2014, coal revenues are expected to decrease, although more modestly, due to fewer carloads and lower
average revenue per unit.
K23
Coal represented 23% of our revenues in 2013, and 79% of shipments handled originated on our lines. As shown
in the following table, tonnage decreased in our utility and domestic metallurgical markets but increased slightly
in our export and industrial markets.
Coal Tonnage by Market
2013
2012
(tons in thousands)
2011
Utility
Export
Domestic metallurgical
Industrial
97,146
28,631
16,905
7,388
101,636
28,304
18,793
7,376
122,004
28,461
19,702
7,713
Total
150,070
156,109
177,880
Utility coal tonnage was down 4% in 2013 as compared to 2012. Utility coal shipments in our southern region
decreased due to lower demand as utility stockpiles remained high and natural gas prices remained low. This
decrease was partially offset by increased shipments in our northern region as higher coal burn necessitated
stockpile replenishments to maintain targeted levels.
In 2012, utility coal tonnage dropped 17%, compared with 2011, reflecting competition from low natural gas
prices and reduced electrical demand in NS-served regions. Additional tonnage declines resulted from plant
closures and maintenance.
For 2014, we expect utility coal tonnage to decrease driven by continued weak demand as well as the loss of a
contract.
Export coal tonnage increased 1% in 2013, compared with 2012. Despite strong global competition, we handled
higher export thermal and metallurgical coal shipments as an increase in steel production in developing markets
offset weakness in the European market. Volume through Norfolk was up 2.1 million tons, or 11%, whereas
Baltimore volume decreased 1.4 million tons, or 17%. Other export volume decreased 0.4 million tons, or 36%.
In 2012, export coal tonnage decreased 1% compared with 2011, a reflection of weaker global demand for
metallurgical coal used in steel production in NS-served markets, in addition to the negative impact of the return
of Australian supply, offset in part by increased thermal shipments. Volume through Norfolk was down
1.3 million tons, or 6%, whereas volume through Baltimore increased 0.3 million tons, or 4%. Other export coal
volume increased 0.8 million tons.
For 2014, export coal tonnage is expected to decrease as a result of strong competition in the Western European
metallurgical coal market, in addition to soft demand and an oversupply of thermal coal.
K24
Domestic metallurgical coal tonnage was down 10% in 2013, compared with 2012, due to weaker domestic steel
production, sourcing shifts away from coal origins we serve, and the permanent closure of a steel plant in mid-
2012 that impacted the year-over-year comparison for the first half of 2013.
In 2012, domestic metallurgical coal tonnage was down 5% compared with 2011, as declines in coke and iron ore
shipments (primarily due to the plant closure) offset improved domestic steel production experienced in the first
half of 2012.
For 2014, domestic metallurgical coal tonnage is expected to be flat with 2013, as improved steel demand should
offset losses due to sourcing shifts.
Industrial coal tonnage increased slightly in 2013, compared with 2012, as increased shipments to existing
customers was partially offset by weaker industrial demand in the print paper and cement sectors.
In 2012, industrial coal tonnage decreased 4% compared to 2011, as weak industrial demand was partially offset
by new business.
For 2014, industrial coal tonnage is expected to increase slightly due to higher demand in the U.S. industrial
sector.
GENERAL MERCHANDISE revenues in 2013 increased $398 million, or 7%, compared with 2012, reflecting
4% growth in carload volume and a 3% improvement in average revenue per unit that reflected favorable changes
in the mix of traffic (increases in higher-than-average revenue per unit traffic) as well as higher rates and fuel
surcharges.
In 2012, general merchandise revenues increased $336 million, or 6%, compared with 2011, reflecting a 4% rise
in average revenue per unit as a result of higher rates and fuel surcharges. Carload volume increased 2%.
Chemicals revenues in 2013 increased 14%, compared with 2012, reflecting 16% growth in volume partially
offset by a 2% decline in average revenue per unit that resulted from the negative effect of the changes in mix due
to increased crude oil shipments. The volume improvement was primarily the result of more carloads of crude oil
from the Bakken and Canadian oil fields. Additionally, there were more carloads of liquefied petroleum gas in
the Utica Shale region.
In 2012, chemicals revenues grew 7%, compared with 2011, reflecting 4% growth in volume and a 3% increase in
average revenue per unit that resulted from higher rates and fuel surcharges. The volume improvement was
largely the result of more carloads of crude oil from the Bakken and Canadian oil fields. Additionally, there were
more carloads of liquefied petroleum gas, as well as higher shipments of plastics driven by greater demand for
plastic bottles. These increases were offset in part by fewer shipments of rock salt as a mild winter resulted in
higher inventory levels throughout 2012.
For 2014, chemicals revenues are anticipated to increase, largely a result of more shipments of crude oil and
asphalt.
Agriculture, consumer products, and government revenues increased 1% in 2013, compared with 2012, as a
2% improvement in average revenue per unit (reflecting pricing improvements that were slightly offset by a
negative change in mix related to the increase of lower-rated shorter-haul movements of corn) was partially offset
by a slight decline in volume. The volume decline was driven by reduced shipments of soybeans and related
products caused by tightened supplies of domestic beans and a strong South American crop, in addition to fewer
revenue movements of empty equipment. Carload volume declines were partially offset by higher shipments of
food oils as we handled new business with existing customers and more biodiesel carloads in advance of the
anticipated elimination of the biodiesel tax credit. We also hauled more shipments of fertilizer due to a strong
farm economy and increased planting activity.
K25
In 2012, agriculture, consumer products, and government revenues were relatively flat, compared with 2011, as
higher average revenue per unit was offset by lower volume. The volume decline was driven by reduced corn
shipments (due to plant closures), fewer carloads of fertilizer (led by certain network classification changes), and
reduced shipments of wheat to the eastern U.S. (due to customer sourcing changes). These volume declines were
offset in part by more shipments of soybean and soybean meal due to a poor South American bean crop, as well
as higher shipments of corn-based feed to Texas.
For 2014, agriculture, consumer products, and government revenues are expected to improve as a result of higher
average revenue per unit offset in part by a slight decrease in volume. The projected decline in volume is based
primarily on fewer shipments of corn, as we anticipate that strong local production will prompt customer sourcing
changes, as well as reduced shipments of wheat feed, with a partial offset by anticipated market share growth in
perishables, beverages, and consumer products.
Metals and construction revenues increased 5% in 2013, compared with 2012. The revenue improvement
resulted from 6% higher average revenue per unit, which reflected the positive change in mix of business as we
transported higher-rated shipments of slag and fractionating sand for natural gas drilling, higher rates, and
increased fuel surcharges. Although we moved more slag and fractionating carloads, volume declined modestly
as we handled reduced shipments of iron and steel (driven by fewer import slabs and a steel plant closure during
the third quarter of 2012) and scrap metal (a result of weakening demand).
In 2012, metals and construction revenues increased 8%, compared with 2011. The improvement resulted from
7% higher average revenue per unit, which reflected higher rates and fuel surcharges. Volume improved 1%, the
result of more coil steel shipments driven by increased automotive production. The mild winter weather
experienced in early and late 2012 led to more shipments of cement for construction projects. There were also
higher shipments of fractionating sand for natural gas drilling. These increases were partially offset by fewer
aggregates carloads, primarily driven by weak market conditions in road/highway construction, and as lower coal
utility burn led to fewer shipments of scrubber stone.
For 2014, metals and construction revenues are expected to increase reflecting higher shipments of fractionating
sand and other materials used for natural gas drilling, as well as additional shipments of steel used by the
automotive and energy sectors. Average revenue per unit is also anticipated to improve.
Automotive revenues rose 10% compared to 2012, reflecting 7% growth in volume due to increased vehicle
production at plants we serve and new business from existing customers (including both auto parts and finished
vehicles). Average revenue per unit improved 2%, reflecting improved pricing and higher fuel surcharges.
In 2012, automotive revenues rose 15%, compared to 2011, reflecting a 13% rise in volume due to increased
vehicle production at plants we serve and a 2% improvement in average revenue per unit, including fuel
surcharges.
For 2014, automotive revenues are expected to grow as a result of volume gains driven by a continued increase in
domestic production at plants we serve, in addition to higher average revenue per unit.
Paper, clay and forest products revenues increased 3% in 2013, compared with 2012, reflecting 1% gains in
both volume and average revenue per unit. Volume increases for lumber, pulp, and pulpboard were offset by
reduced demand for newsprint and paper.
In 2012, paper, clay, and forest products revenues increased 3%, compared with 2011, reflecting a 5%
improvement in average revenue per unit due to increased rates, which more than offset the effects of a 3%
volume decline. The lower volume was due to reduced shipments of miscellaneous wood driven by the loss of
business and fewer carloads of pulp as a result of declining export market demand.
K26
For 2014, paper, clay, and forest products revenues are anticipated to decline as we expect reduced shipments of
miscellaneous wood (due to market share loss), in addition to fewer shipments of pulp and graphic paper as
demand declines, partially offset by improvements in the housing market and higher average revenue per unit.
INTERMODAL revenues increased $143 million, or 6%, compared with 2012, reflecting a 6% growth in
volume. Average revenue per unit was flat.
Domestic volume (including truckload and intermodal marketing companies, Triple Crown Services, and
Premium business) improved 7%, the result of continued highway-to-rail conversions and additional business
associated with the opening of new intermodal terminals. International traffic volume grew 6%, due to growth
with existing customers as the economy continued to improve.
In 2012, intermodal revenues increased $111 million, or 5%, compared with 2011, reflecting 5% growth in
volume largely due to increased domestic units resulting from continued highway-to-rail conversions. Average
revenue per unit improved 1% as a result of higher fuel surcharges, partially offset by lower pricing. Domestic
volume increased 8%, reflecting continued highway conversions. International volume declined 1%, as the loss of
business from a shipping line was partially offset by growth across remaining international customers.
For 2014, intermodal revenues are expected to increase due to higher volume and average revenue per unit as a
result of continued highway conversions and growth associated with our new intermodal terminals.
Railway Operating Expenses
Railway operating expenses in 2013 were $8.0 billion, up $72 million, or 1% compared to 2012. Expenses in
2012 were $7.9 billion, down $43 million, or 1%, compared to 2011. In 2013, higher wage rates and volume-
related expense increases were offset in part by lower costs resulting from network efficiencies. For 2012, the
decrease reflected the absence of 2011’s $58 million unfavorable arbitration ruling and lower costs due to gains in
network efficiency, offset in part by higher volume-related expenses.
The following table shows the changes in railway operating expenses summarized by major classifications.
Operating Expense Variances
Increase (Decrease)
2013 vs. 2012
2012 vs. 2011
($ in millions)
Compensation and benefits
Fuel
Purchased services and rents
Depreciation
Materials and other
Total
$
$
42
36
25
-
(31)
72
$
$
(14)
(12)
(6)
54
(65)
(43)
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Compensation and benefits, which represents 38% of total operating expenses, increased $42 million, or 1%, in
2013, reflecting changes in:
(cid:120) pay rates (up $59 million),
(cid:120)
(cid:120)
(cid:120) payroll taxes (down $16 million).
incentive and stock-based compensation (up $39 million),
lower activity levels (down $48 million) that reflected improved employee productivity, and
In 2012, compensation and benefits decreased $14 million compared with 2011, primarily due to changes in:
employee activity levels (down $40 million),
incentive and stock-based compensation (down $35 million),
(cid:120)
(cid:120)
(cid:120) pay rates (up $43 million), and
(cid:120) pension and postretirement benefit costs (up $16 million).
Our employment averaged 30,103 in 2013, compared with 30,943 in 2012, and 30,329 in 2011. The decrease in
2013 reflected the benefit from operational efficiencies. Looking forward to 2014, we expect employment levels
to be consistent with those of 2013. In addition, as a result of net actuarial gains related to pension and other
postretirement benefits, we expect expenses associated with these benefits to be approximately $25 million lower
per quarter in 2014. We also expect favorable labor hour trends to continue. These declines are expected to be
offset in part by higher wage rates.
Fuel expense, which includes the cost of locomotive fuel as well as other fuel used in railway operations,
increased $36 million, or 2%, in 2013, but decreased $12 million, or 1%, in 2012. The increase in 2013 was
principally the result of higher locomotive fuel consumption (up 4%), offset in part by lower locomotive fuel
prices (down 2%).
The decrease in 2012 reflected lower locomotive fuel consumption (down 3%), offset in part by higher
locomotive fuel prices (up 3%).
Purchased services and rents includes the costs of services purchased from outside contractors, including the net
costs of operating joint (or leased) facilities with other railroads and the net cost of equipment rentals. This
category of expenses increased $25 million, or 2%, in 2013, but decreased $6 million in 2012.
2013
2012
($ in millions)
2011
Purchased services
Equipment rents
Total
$
$
1,353 $
276
1,321 $
283
1,272
338
1,629 $
1,604 $
1,610
The increase in 2013 for purchased services costs reflected higher volume-related activities and software
expenses, partially offset by lower professional and consulting fees and travel expenses. The increase in 2012
reflected higher professional and consulting fees, intermodal operations expenses, Conrail-related casualty costs
($15 million), and advertising expenses. These increases were partially offset by lower haulage expenses.
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, decreased in 2013 and 2012 as a result of
increased velocity and improved equipment utilization.
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Depreciation expense was flat in 2013, but increased $54 million, or 6%, in 2012. Both periods reflected our
larger roadway and equipment capital base as we continue to invest in our infrastructure and rolling stock. In
2013, that increase was completely offset by the favorable impact of an equipment study that was completed
during the first quarter of 2013. We expect depreciation expense in 2014 to be approximately $40 million higher
than 2013.
Materials and other expenses decreased $31 million, or 4%, in 2013, and $65 million, or 7%, in 2012, as shown
in the following table.
2013
2012
($ in millions)
2011
Materials
Casualties and other claims
Other
Total
$
$
422 $
90
316
408 $
130
321
828 $
859 $
408
216
300
924
In 2013, lower expenses for casualties and other claims more than offset higher costs for materials. Casualties and
other claims expenses include the estimates of costs related to personal injury (PI), property damage, and
environmental matters. Over the last two years, we have experienced lower PI expenses that have been offset in
part by higher environmental expenses, resulting in net benefits of $52 million in 2013 and $27 million in 2012.
The lower PI expenses have been driven by improved historical trend rates, resulting in favorable reserve
adjustments for prior years’ claim amounts. Going forward, if favorable trends continue for PI costs, we could
see additional favorable adjustments, however, likely not at the levels experienced in 2013.
The decrease in 2012 reflected the absence of 2011’s unfavorable arbitration ruling discussed below and the
favorable reserve developments discussed above. These favorable items were partially offset by higher costs
associated with property taxes.
The Consolidated Balance Sheets reflect long-term receivables for estimated recoveries from our insurance
carriers for claims associated with the January 6, 2005, derailment in Graniteville, S.C. In the first quarter of
2011, we received an unfavorable ruling for an arbitration claim with an insurance carrier and were denied
recovery of the contested portion of the claim. As a result, we recorded a $43 million charge for the receivables
associated with the contested portion of the claim and a $15 million charge for other receivables affected by the
ruling for which recovery was no longer probable.
PI cases involving occupational injuries comprised about 28% of total employee injury cases resolved and about
17% of total employee injury payments made. With our long-established commitment to safety, we continue to
work actively to eliminate all employee injuries and reduce the associated costs. With respect to occupational
injuries, which are not caused by a specific accident or event but allegedly result from a claimed exposure over
time, the benefits of any existing safety initiatives may not be realized immediately. The majority of these types
of claims are being asserted by former or retired employees, some of whom have not been actively employed in
the rail industry for decades. The rail industry remains uniquely susceptible to litigation involving job-related
accidental injury and occupational claims because of the Federal Employers’ Liability Act (FELA), which is
applicable only to railroads. FELA’s fault-based system, which covers employee claims for job-related injuries,
produces results that are unpredictable and inconsistent as compared with a no-fault workers’ compensation
system.
We maintain substantial amounts of insurance for potential third-party liability and property damage claims. We
also retain reasonable levels of risk through self-insurance (Note 16).
K29
Other Income – Net
Other income – net was $233 million in 2013, $129 million in 2012, and $160 million in 2011 (Note 2). The
increase in 2013 reflected a $97 million land sale gain in Michigan and higher net returns from corporate-owned
life insurance (COLI), which was partially offset by lower coal royalties.
The decline in 2012 reflected fewer gains on the sale of property, decreased coal royalties, and higher interest
expense (net) on uncertain tax positions offset in part by higher net returns from COLI, increased equity in the
earnings of Conrail, and higher rental income.
Income Taxes
Income tax expense in 2013 was $1.1 billion, an effective rate of 36%, compared with 37% in 2012 and 34% in
2011. The decrease in the rate for 2013 was primarily due to tax credits that became available in 2013 as a result
of the American Taxpayer Relief Act of 2012 (2012 Act), enacted January 2, 2013, and favorable reductions in
deferred tax expense for state law changes. The increase in the rate for 2012 primarily reflects the absence of
2011’s favorable resolution of the Internal Revenue Service (IRS) examination of our 2008 return and review of
certain claims for refund ($40 million) and the absence of a favorable reduction in deferred tax expense for state
law changes ($28 million).
The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act, enacted in 2010, allowed
100 percent bonus depreciation for 2011 and fifty-percent bonus depreciation in 2012. Additionally, the 2012 Act
as mentioned in the paragraph above, extended fifty-percent bonus depreciation for an additional year. While
bonus depreciation does not affect our total provision for income taxes or the effective rate, the absence of bonus
depreciation is expected to increase current income tax expense and the related cash outflows for the payment of
income taxes in 2014 by approximately $200 million. The 2012 Act also reinstated certain business tax credits
retroactively for 2012 and for 2013, but these provisions expired at the end of 2013.
IRS examinations have been completed for all years prior to 2011. We expect the IRS will begin auditing our
2011 and 2012 consolidated income tax returns in early 2014.
FINANCIAL CONDITION, LIQUIDITY, AND CAPITAL RESOURCES
Cash provided by operating activities, our principal source of liquidity, was $3.1 billion in both 2013 and 2012
and $3.2 billion in 2011. The decrease in 2012 reflected increased tax payments driven by reduced bonus
depreciation, in addition to lower operating results. We had working capital of $770 million at December 31,
2013, compared with $161 million at December 31, 2012, primarily reflecting higher cash and short-term
investment balances as a result of new debt issued and lower share repurchase activity in 2013, partially offset by
an increase in our current maturities of long-term debt. Cash, cash equivalents, and short-term investment
balances totaled $1.6 billion and $668 million at December 31, 2013 and 2012, respectively, and were invested in
accordance with our corporate investment policy as approved by the Board of Directors. The portfolio contains
securities that are subject to market risk. There are no limits or restrictions on our access to these assets. We
expect cash on hand combined with cash provided by operating activities will be sufficient to meet our ongoing
obligations.
K30
Contractual obligations at December 31, 2013, were comprised of interest on fixed-rate long-term debt and capital
leases, long-term debt and capital leases (Note 8), operating leases (Note 9), agreements with CRC (Note 5),
unconditional purchase obligations (Note 16), long-term advances from Conrail (Note 5), and unrecognized tax
benefits (Note 3):
Total
2014
2015 -
2016
2017 -
2018
($ in millions)
2019 and
Subsequent Other
Interest on fixed-rate long-term debt
and capital lease principal
Long-term debt and capital lease principal
Operating leases
Agreements with CRC
Unconditional purchase obligations
Long-term advances from Conrail
Unrecognized tax benefits*
$ 13,331 $
9,843
738
360
353
133
65
533 $
445
80
35
310
-
-
1,016 $
501
136
70
27
-
-
892 $
1,150
104
70
16
-
-
10,890 $
7,747
418
185
-
133
-
Total
$ 24,823 $
1,403 $
1,750 $
2,232 $
19,373 $
-
-
-
-
-
-
65
65
* When the amount and timing of liabilities for unrecognized tax benefits can be reasonably estimated, the
amount is shown in the table under the appropriate period. When the year of settlement cannot be reasonably
estimated, the amount is shown in the Other column.
Off balance sheet arrangements consist of obligations related to operating leases, which are included in the
table of contractual obligations above and disclosed in Note 9.
Cash used in investing activities was $1.9 billion in 2013, compared with $2.0 billion in 2012, and $1.8 billion
in 2011. The decrease in 2013 primarily reflects fewer property additions and property sales that were partially
offset by increased investment purchases, net of sales. The 2012 increase resulted from a decrease in investment
sales, net of purchases, and increased property additions that were offset in part by proceeds from property sales.
Property additions account for most of the recurring spending in this category. The following tables show capital
spending (including capital leases) and track and equipment statistics for the past five years.
Property Additions
2013
2012
2011
($ in millions)
2010
2009
Road and other property
Equipment
Total
$
$
1,421 $
550
1,465 $
776
1,222 $
938
1,153 $
317
1,128
171
1,971 $
2,241 $
2,160 $
1,470 $
1,299
Track Structure Statistics (Capital and Maintenance)
2013
2012
2011
2010
2009
Track miles of rail installed
Miles of track surfaced
New crossties installed (millions)
549
5,475
2.5
509
5,642
2.6
484
5,441
2.7
422
5,326
2.6
434
5,568
2.7
K31
Average Age of Owned Railway Equipment
2013
2012
2011
(years)
2010
2009
Freight cars
Locomotives
Retired locomotives
30.2
22.5
38.7
30.2
21.6
41.2
30.3
21.0
31.7
31.0
20.5
28.4
30.3
19.9
31.2
For 2014, we have budgeted $2.2 billion for property additions. The anticipated spending includes $910 million
for the normalized replacement of rail, ties and ballast and the improvement or replacement of bridges. Planned
equipment spending of $550 million includes new and rebuilt locomotives, coal cars, intermodal containers and
chassis, covered and open coil cars, and multilevel automobile racks. Investments in facilities and terminals are
anticipated to be $210 million, and include intermodal terminals and equipment to add capacity to the intermodal
network (including Crescent Corridor), continued progress on our multi-year project to expand the Bellevue Yard
in northern Ohio, and mechanical service shops. We have budgeted $220 million for the continued
implementation of positive train control (PTC) and expect remaining additional PTC-related property additions to
total at least $670 million. We also expect to spend $50 million on infrastructure improvements to increase
mainline capacity, accommodate business growth and provide our share of funding for various public/private
partnership investments such as Crescent Corridor and the Chicago CREATE project. Technology investments of
$70 million are planned for new or upgraded systems and computers.
The Crescent Corridor consists of a program of projects for infrastructure and other facility improvements geared
toward creating a seamless, high-capacity intermodal route spanning 11 states from New Jersey to Louisiana and
offering truck-competitive service along several major interstate highway corridors, including I-81, I-85, I-20,
I-40, I-59, I-78, and I-75. Based on the public benefits that stand to be derived in the form of highway congestion
relief, we plan to implement certain elements of the Crescent Corridor through a series of public-private
partnerships. Currently, the Crescent Corridor has received or expects to receive a total of $309 million in public
capital funding commitments from the Commonwealths of Pennsylvania and Virginia, the State of Tennessee, the
federal TIGER Stimulus Program and other federal funding sources related to projects in Alabama, Pennsylvania,
Tennessee, and North Carolina. With respect to the private funding component, we currently anticipate spending
up to $315 million ($260 million of which has been spent to date) for the substantial completion of work on these
projects, which is expected in 2015. This includes planned investments for the Crescent Corridor that
approximate $42 million in 2014 and $13 million in 2015. If and when demand warrants, additional
improvements and expansions beyond these amounts may be made to the Crescent Corridor.
Cash used in financing activities was $394 million in 2013, compared with $694 million in 2012, and
$2.0 billion in 2011. The change in 2013 includes lower share repurchases and reduced proceeds from
borrowings, net of debt repayments. The change in 2012 reflected lower share repurchases, increased proceeds
from borrowings, reduced debt repayments and maturities, offset in part by higher dividends.
Share repurchases totaled $627 million in 2013, $1.3 billion in 2012, and $2.1 billion in 2011 for the purchase and
retirement of 8.3 million, 18.8 million, and 30.2 million shares, respectively. On August 1, 2012, our Board of
Directors authorized the repurchase of up to an additional 50 million shares of Common Stock through
December 31, 2017, and 38.3 million shares remain under this authority as of December 31, 2013. The timing
and volume of future share repurchases will be guided by our assessment of market conditions and other pertinent
factors. Any near-term purchases under the program are expected to be made with internally generated cash, cash
on hand, or proceeds from borrowings.
K32
During the fourth quarter of 2013, we issued $400 million of 3.85% senior notes due 2024. During the third
quarter of 2013, we issued $500 million of 4.80% senior notes due 2043. Our debt-to-total capitalization ratio
was 45.6% at December 31, 2013, compared with 47.1% at December 31, 2012.
As of December 31, 2013, we had authority from our Board of Directors to issue an additional $800 million of
debt or equity securities through public or private sale. We have on file with the SEC a Form S-3 automatic shelf
registration statement for well-known seasoned issuers under which securities may be issued pursuant to this
authority.
We also have in place and available a $750 million, five-year credit agreement expiring in 2016, which provides
for borrowings at prevailing rates and includes covenants. We had no amounts outstanding under this facility at
December 31, 2013, and are in compliance with all of its covenants. In October 2013, we renewed our
$350 million accounts receivable securitization program with a 364-day term to run until October 2014. There
was $200 million outstanding under this program at December 31, 2013, and $300 million outstanding at
December 31, 2012 (Note 8).
Upcoming annual debt maturities are relatively modest (Note 8). Overall, our goal is to maintain a capital
structure with appropriate leverage to support our business strategy and provide flexibility through business
cycles.
APPLICATION OF CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements in accordance with U.S. Generally Accepted Accounting Principles
(GAAP) requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities,
the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts
of revenue and expenses during the reporting period. These estimates and assumptions may require significant
judgment about matters that are inherently uncertain, and future events are likely to occur that may require us to
make changes to these estimates and assumptions. Accordingly, we regularly review these estimates and
assumptions based on historical experience, changes in the business environment, and other factors we believe to
be reasonable under the circumstances. We regularly discuss the development, selection, and disclosures
concerning critical accounting estimates with the Audit Committee of the Board of Directors.
Pensions and Other Postretirement Benefits
Accounting for pensions and other postretirement benefit plans requires us to make several estimates and
assumptions (Note 11). These include the expected rate of return from investment of the plans’ assets, projected
increases in medical costs, and the expected retirement age of employees as well as their projected earnings and
mortality. 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 that 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 assumptions and valuing related liabilities.
Net pension expense, which is included in “Compensation and benefits” in the Consolidated Statements of
Income, was $69 million for 2013. In recording this amount, we assumed a long-term investment rate of return of
8.25%, which was supported by the long-term total rate of return on 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
$18 million change in pension expense. Changes that are reasonably likely to occur in assumptions concerning
retirement age, projected earnings, and mortality would not be expected to have a material effect on our net
pension expense or net pension liability in the future. The net pension liability is recorded at net present value
using a discount rate that is based on the current interest rate environment in light of the timing of expected
benefit payments. We utilize analyses in which the projected annual cash flows from the pension and
postretirement benefit plans are matched with yield curves based on an appropriate universe of high-quality
K33
corporate bonds. We use the results of the yield curve analyses to select the discount rates that match the payment
streams of the benefits in these plans.
Net cost for other postretirement benefits, which is also included in “Compensation and benefits,” was
$108 million for 2013. In recording this expense and valuing the net liability for other postretirement benefits, we
estimated future increases in healthcare costs. These assumptions, along with the effect of a one-percentage point
change in them, are described in Note 11.
Properties and Depreciation
Most of our total assets are long-lived railway properties (Note 6). As disclosed in Note 1, properties are
depreciated using group depreciation. The primary depreciation method for our asset base is group life. Units of
production is the principal method of depreciation for rail in high density corridors and for depletion of natural
resources. Remaining properties are depreciated generally using the straight-line method over the lesser of
estimated service or lease lives.
Depreciation expense is based on assumptions concerning expected service lives of properties as well as the
expected net salvage that will be received upon their retirement. In developing these assumptions, we utilize
periodic depreciation studies that are performed by an independent outside firm of consulting engineers and
approved by the STB. Depreciation studies are conducted about every three years for equipment and every six
years for track assets and other roadway property. The frequency of these studies correlates with guidelines
established by the STB.
Key factors which are considered in developing average service life and salvage estimates include:
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
statistical analyses of historical retirement data and surviving asset records;
review of historical salvage received and current market rates;
review of our operations including expected changes in technology, customer demand, maintenance
practices and asset management strategies;
review of accounting policies and assumptions; and
industry review and analysis.
The units of production depreciation rate for rail in high density corridors is derived based on consideration of
annual gross ton miles as compared to the total or ultimate capacity of rail in these corridors. Our experience has
shown that traffic density is a leading factor in determination of the expected service life of rail in high density
corridors. In developing the respective depreciation rate, consideration is also given to several rail characteristics
including age, weight, condition (new or second hand) and type (curve or straight). As a result, a composite
depreciation rate is developed which is applied to the depreciable base.
We adjust our rates based on the results of these studies and implement the changes prospectively. These studies
may also indicate that the recorded amount of accumulated depreciation is deficient (or in excess) of the amount
indicated by the study. Any such deficiency (or excess) is amortized as a component of depreciation expense over
the remaining service lives of the affected class of property, as determined by the study. Depreciation expense for
2013 totaled $916 million. Our composite depreciation rates for 2013 are disclosed in Note 6; a one-tenth
percentage point increase (or decrease) in these rates would have resulted in a $35 million increase (or decrease)
to depreciation expense. For 2013, roadway depreciation rates ranged from 0.83% to 33.3% and equipment
depreciation rates ranged from 1.40% to 33.33%.
When properties other than land and nonrail assets are sold or retired in the ordinary course of business, the cost
of the assets, net of sale proceeds or salvage, is charged to accumulated depreciation, and no gain or loss is
recognized in earnings. Actual historical cost values are retired when available, such as with equipment
assets. The use of estimates in recording the retirement of certain roadway assets is necessary based on the
impracticality of tracking individual asset costs. When retiring rail, ties, and ballast, we use statistical curves that
indicate the relative distribution of the age of the assets retired. The historical cost of other roadway assets is
K34
estimated using a combination of inflation indices specific to the rail industry and those published by the U.S.
Bureau of Labor Statistics. The indices are applied to the replacement value based on the age of the retired
assets. These indices are used because they closely correlate with the costs of roadway assets. Gains and losses
on disposal of land and nonrail assets are included in “Other income – net” (Note 2) since such income is not a
product of our railroad operations.
A retirement is considered abnormal if it does not occur in the normal course of business, if it relates to
disposition of a large segment of an asset class and if the retirement varies significantly from the retirement
profile identified through our depreciation studies, which inherently consider the impact of normal retirements on
expected service lives and depreciation rates. Gains or losses from abnormal retirements would be recognized in
earnings; however, there were no such gains or losses in 2013, 2012, or 2011.
We review the carrying amount of properties whenever events or changes in circumstances indicate that such
carrying amount may not be recoverable based on future undiscounted cash flow. Assets that are deemed
impaired as a result of such review would be recorded at the lesser of carrying amount or fair value; however,
there were no such impairments in 2013, 2012, or 2011.
Personal Injury, Environmental, and Legal Liabilities
Casualties and other claims expense, included in “Materials and other,” totaled $90 million in 2013, $130 million
in 2012, and $216 million in 2011. Historically, most of this expense relates to our accrual for personal injury
liabilities; however, over the last few years our personal injury expense has decreased due to improved historical
trend rates for prior years’ claims. Environmental expenses, which are also included in this category, have
increased over the last few years as a result of unfavorable developments and more aggressive remediation
strategies.
Job-related personal injury and occupational claims are subject to 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 very different from the liability recorded. In all cases, we record a liability when the expected loss for the
claim is both probable and estimable.
To aid in valuing personal injury liability and determining the amount to accrue during each period, we utilize
studies prepared by an independent consulting actuarial firm. For employee personal injury cases, the actuarial
firm studies our historical patterns of reserving for claims and subsequent settlements, taking into account
relevant outside influences. We estimate the ultimate amount of the liability, which includes amounts for incurred
but unasserted claims, based on the results of this analysis. For occupational injury claims, the actuarial firm
studies our history of claim filings, severity, payments and other relevant facts. Additionally, our estimate of the
ultimate loss for occupational injuries includes a provision for those claims that have been incurred but not
reported by projecting our experience into the future as far as can be reasonably determined. We have recorded
this actuarially determined liability. The liability is dependent upon many individual judgments made as to the
specific case reserves, as well as our and the actuarial firm’s judgments in the periodic studies. Accordingly, there
could be significant changes in the liability, which we would recognize when such a change became known.
While the liability recorded is supported by the most recent study, it is possible that the ultimate liability could be
higher or lower.
We are subject to various jurisdictions’ environmental laws and regulations. We record a liability where such
liability or loss is probable and its amount can be estimated reasonably (Note 16). Claims, if any, against third
parties for recovery of cleanup costs we’ve incurred, are reflected as receivables (when collection is probable) in
the Consolidated Balance Sheets and are not netted against the associated liability. Environmental engineers
regularly participate in ongoing evaluations of all known sites and in determining any necessary adjustments to
liability estimates. We have an Environmental Policy Council, composed of senior managers, to oversee and
interpret our environmental policy.
K35
Operating expenses for environmental matters totaled $57 million in 2013, $40 million in 2012, and $32 million
in 2011, and property additions for environmental matters totaled $8 million in 2013, $6 million in 2012, and
$7 million in 2011. Property additions for environmental matters in 2014 are expected to be about $11 million.
Our Consolidated Balance Sheets include liabilities for environmental exposures of $58 million at December 31,
2013, and $42 million at December 31, 2012 (of which $15 million is classified as a current liability at
December 31, 2013 and $12 million at December 31, 2012). At December 31, 2013, the liability represents our
estimate of the probable cleanup and remediation costs based on available information at 142 known locations
and projects. As of that date, ten sites accounted for $30 million of the liability, and no individual site was
considered to be material. We anticipate that much of this liability will be paid out over five years; however,
some costs will be paid out over a longer period.
At 12 locations, one or more of our subsidiaries in conjunction with a number of other parties have been identified
as potentially responsible parties under the Comprehensive Environmental Response, Compensation, and Liability
Act of 1980, or comparable state statutes that impose joint and several liability for cleanup costs. We calculate
our estimated liability for these sites based on facts and legal defenses applicable to each site and not solely on the
basis of the potential for joint liability.
With respect to known environmental sites (whether identified by us or by the EPA or comparable state
authorities), estimates of our ultimate potential financial exposure for a given site or in the aggregate for all such
sites are necessarily imprecise because of the widely varying costs of currently available cleanup techniques,
unpredictable contaminant recovery and reduction rates associated with available cleanup technologies, the likely
development of new cleanup technologies, the difficulty of determining in advance the nature and full extent of
contamination and each potential participant’s share of any estimated loss (and that participant’s ability to bear it),
and evolving statutory and regulatory standards governing liability. We estimate our environmental remediation
liability on a site-by-site basis, using assumptions and judgments we deem appropriate for each site. As a result,
it is not practical to quantitatively describe the effects of changes in these many assumptions and judgments. We
have consistently applied our methodology of estimating our environmental liabilities.
Based on the assessment of facts and circumstances now known, we believe we have recorded the probable and
reasonably estimable costs for dealing with those environmental matters of which we are aware. Further, we
believe that it is unlikely that any known matters, either individually or in the aggregate, will have a material
adverse effect on our financial position, results of operations, or liquidity.
We and/or certain subsidiaries are defendants in numerous lawsuits and other claims relating principally to
railroad operations. When we conclude that it is probable that a liability has been incurred and the amount of the
liability can be reasonably estimated, it is accrued through a charge to earnings. While the ultimate amount of
liability incurred in any of these lawsuits and claims is dependent on future developments, in our opinion, the
recorded liability is adequate to cover the future payment of such liability and claims. However, the final
outcome of any of these lawsuits and claims cannot be predicted with certainty, and unfavorable or unexpected
outcomes could result in additional accruals that could be significant to results of operations in a particular year or
quarter. Any adjustments to the recorded liability will be reflected in earnings in the periods in which such
adjustments are known.
K36
Income Taxes
Our net long-term deferred tax liability totaled $8.5 billion at December 31, 2013 (Note 3). This liability is
estimated based on the expected future tax consequences of items recognized in the financial statements. After
application of the federal statutory tax rate to book income, judgment is required with respect to the timing and
deductibility of expenses in our income tax returns. For state income and other taxes, judgment is also required
with respect to the apportionment among the various jurisdictions. A valuation allowance is recorded if we expect
that it is more likely than not that deferred tax assets will not be realized. We had a $32 million valuation
allowance on $630 million of deferred tax assets as of December 31, 2013, reflecting the expectation that almost
all of these assets will be realized.
In addition, we have a recorded liability for our estimate of uncertain tax positions taken or expected to be taken
in a tax return. Judgment is required in evaluating the application of federal and state tax laws and assessing
whether it is more likely than not that a tax position will be sustained on examination and, if so, judgment is also
required as to the measurement of the amount of tax benefit that will be realized upon settlement with the taxing
authority. We believe this liability for uncertain tax positions to be adequate. Income tax expense is adjusted in
the period in which new information about a tax position becomes available or the final outcome differs from the
amounts recorded. For every one half percent change in the 2013 effective tax rate, net income would have
changed by $15 million.
OTHER MATTERS
Labor Agreements
More than 80% of our railroad employees are covered by collective bargaining agreements with various labor
unions. These agreements remain in effect until changed pursuant to the Railway Labor Act. We largely bargain
nationally in concert with other major railroads, represented by the National Carriers Conference Committee
(NCCC). Moratorium provisions in the labor agreements govern when the railroads and unions may propose
changes to the agreements.
We and the NCCC have concluded the round of bargaining that began in November 2009 and reached agreements
that extend through December 31, 2014 with all applicable labor unions. With regard to the Wheelersburg (Ohio)
Terminal workers who are represented by the Brotherhood of Maintenance of Way Employes Division
(BMWED), negotiations are ongoing and mediation under the auspices of the National Mediation Board is
expected to begin in the first quarter of 2014.
Market Risks
We manage overall exposure to fluctuations in interest rates by issuing both fixed- and floating-rate debt
instruments. At December 31, 2013, debt subject to interest rate fluctuations totaled $200 million. A one-
percentage point increase in interest rates would increase total annual interest expense related to all variable debt
by approximately $2 million. We consider it unlikely that interest rate fluctuations applicable to these instruments
will result in a material adverse effect on our financial position, results of operations, or liquidity.
Inflation
In preparing financial statements, GAAP requires the use of historical cost that disregards the effects of inflation
on the replacement cost of property. As a capital-intensive company, we have most of our capital invested in such
property. The replacement cost of these assets, as well as the related depreciation expense, would be substantially
greater than the amounts reported on the basis of historical cost.
K37
FORWARD-LOOKING STATEMENTS
This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-
looking statements that may be identified by the use of words like “believe,” “expect,” “anticipate,” “estimate,”
“plan,” “consider,” “project,” and similar references to the future. Forward-looking statements reflect our good-
faith evaluation of information currently available.
However, such statements are dependent on and, therefore, can be influenced by, a number of external variables
over which we have little or no control, including: transportation of hazardous materials as a common carrier by
rail; acts of terrorism or war; general economic conditions including, but not limited to, fluctuation and
competition within the industries of our customers; competition and consolidation within the transportation
industry; the operations of carriers with which we interchange; disruptions to our technology infrastructure,
including computer systems; labor difficulties, including strikes and work stoppages; commercial, operating,
environmental, and climate change legislative and regulatory developments; results of litigation; natural events
such as severe weather, hurricanes, and floods; unpredictable demand for rail services; fluctuation in supplies and
prices of key materials, in particular diesel fuel; and changes in securities and capital markets. For additional
discussion of significant risk factors applicable to our business, see Part II, Item 1A “Risk Factors.” Forward-
looking statements are not, and should not be relied upon as, a guarantee of future performance or results, nor will
they necessarily prove to be accurate indications of the times at or by which any such performance or results will
be achieved. As a result, actual outcomes and results may differ materially from those expressed in forward-
looking statements. We undertake no obligation to update or revise forward-looking statements.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
The information required by this item is included in Part II, Item 7, “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” under the heading “Market Risks and Hedging Activities.”
K38
Item 8. Financial Statements and Supplementary Data
INDEX TO FINANCIAL STATEMENTS
Report of Management
Reports of Independent Registered Public Accounting Firm
Consolidated Statements of Income
Years ended December 31, 2013, 2012, and 2011
Consolidated Statements of Comprehensive Income
Years ended December 31, 2013, 2012, and 2011
Consolidated Balance Sheets
At December 31, 2013 and 2012
Consolidated Statements of Cash Flows
Years ended December 31, 2013, 2012, and 2011
Consolidated Statements of Changes in Stockholders’ Equity
Years ended December 31, 2013, 2012, and 2011
Notes to Consolidated Financial Statements
The Index to Consolidated Financial Statement Schedule in Item 15
Page
K40
K41
K43
K44
K45
K46
K47
K48
K85
K39
Report of Management
February 14, 2014
To the Stockholders
Norfolk Southern Corporation
Management is responsible for establishing and maintaining adequate internal control over financial reporting. In
order to ensure that the Corporation’s internal control over financial reporting is effective, management regularly
assesses such controls and did so most recently for its financial reporting as of December 31, 2013. This
assessment was based on criteria for effective internal control over financial reporting described in Internal
Control-Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway
Commission. Based on this assessment, management has concluded that the Corporation maintained effective
internal control over financial reporting as of December 31, 2013.
KPMG LLP, independent registered public accounting firm, has audited the Corporation’s financial statements
and issued an attestation report on the Corporation’s internal control over financial reporting as of December 31,
2013.
/s/Charles W. Moorman
Charles W. Moorman
Chairman and
Chief Executive Officer
/s/Marta R. Stewart
Marta R. Stewart
Executive Vice President Finance and
Chief Financial Officer
/s/Thomas E. Hurlbut
Thomas E. Hurlbut
Vice President and
Controller
K40
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Norfolk Southern Corporation:
We have audited Norfolk Southern Corporation’s internal control over financial reporting as of December 31,
2013, based on criteria established in Internal Control – Integrated Framework (1992) issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO). Norfolk Southern Corporation’s
management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying Report
of Management. Our responsibility is to express an opinion on the Company’s internal control over financial
reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether effective internal control over financial reporting was maintained in all material respects. Our audit
included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk. Our audit also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
In our opinion, Norfolk Southern Corporation maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2013, based on criteria established in Internal Control – Integrated
Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the consolidated balance sheets of Norfolk Southern Corporation and subsidiaries as of December
31, 2013 and 2012, and the related consolidated statements of income, comprehensive income, changes in
stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2013, and
our report dated February 14, 2014 expressed an unqualified opinion on those consolidated financial statements.
/s/KPMG LLP
KPMG LLP
Norfolk, Virginia
February 14, 2014
K41
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Norfolk Southern Corporation:
We have audited the accompanying consolidated balance sheets of Norfolk Southern Corporation and subsidiaries
as of December 31, 2013 and 2012, and the related consolidated statements of income, comprehensive income,
changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31,
2013. In connection with our audits of the consolidated financial statements, we also have audited the financial
statement schedule as listed in Item 15(A)2. These consolidated financial statements and financial statement
schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on
these consolidated financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
financial position of Norfolk Southern Corporation and subsidiaries as of December 31, 2013 and 2012, and the
results of their operations and their cash flows for each of the years in the three-year period ended December 31,
2013, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related financial
statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), Norfolk Southern Corporation’s internal control over financial reporting as of December 31,
2013, based on criteria established in Internal Control – Integrated Framework (1992), issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 14, 2014
expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
/s/KPMG LLP
KPMG LLP
Norfolk, Virginia
February 14, 2014
K42
Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Income
Years ended December 31,
2011
2012
2013
($ in millions, except per share amounts)
Railway operating revenues
$
11,245
$
11,040
$
11,172
Railway operating expenses:
Compensation and benefits
Purchased services and rents
Fuel
Depreciation
Materials and other
Total railway operating expenses
3,002
1,629
1,613
916
828
7,988
2,960
1,604
1,577
916
859
7,916
Income from railway operations
3,257
3,124
2,974
1,610
1,589
862
924
7,959
3,213
160
455
2,918
1,002
1,916
233
525
129
495
2,965
2,758
1,055
1,009
$
1,910
$
1,749
$
$
6.10
6.04
$
5.42
5.37
$
5.52
5.45
Other income – net
Interest expense on debt
Income before income taxes
Provision for income taxes
Net income
Per share amounts:
Net income
Basic
Diluted
See accompanying notes to consolidated financial statements.
K43
Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Comprehensive Income
Net income
Other comprehensive income (loss), before tax:
Pension and other postretirement benefits
Other comprehensive income (loss) of equity investees
Other comprehensive income (loss), before tax
Income tax benefit (expense) related to items of
other comprehensive income (loss)
Other comprehensive income (loss), net of tax
2013
Years ended December 31,
2012
($ in millions)
2011
$
1,910
$
1,749
$
1,916
1,122
42
1,164
(436)
728
(114)
(13)
(127)
44
(83)
(325)
(21)
(346)
125
(221)
Total comprehensive income
$
2,638
$
1,666
$
1,695
See accompanying notes to consolidated financial statements.
K44
Norfolk Southern Corporation and Subsidiaries
Consolidated Balance Sheets
Assets
Current assets:
Cash and cash equivalents
Short-term investments
Accounts receivable - net
Materials and supplies
Deferred income taxes
Other current assets
Total current assets
Investments
Properties less accumulated depreciation of $10,387 and
$9,922, respectively
Other assets
Total assets
Liabilities and stockholdersʼ equity
Current liabilities:
Accounts payable
Short-term debt
Income and other taxes
Other current liabilities
Current maturities of long-term debt
Total current liabilities
Long-term debt
Other liabilities
Deferred income taxes
Total liabilities
Stockholdersʼ equity:
Common Stock $1.00 per share par value, 1,350,000,000 shares
authorized; outstanding 308,878,402 and 314,034,174 shares,
respectively, net of treasury shares
Additional paid-in capital
Accumulated other comprehensive loss
Retained income
Total stockholdersʼ equity
Total liabilities and stockholdersʼ equity
See accompanying notes to consolidated financial statements.
K45
At December 31,
2013
2012
($ in millions)
$
1,443 $
118
1,024
223
180
87
3,075
653
15
1,109
216
167
82
2,242
2,439
2,300
26,645
324
25,736
64
$
32,483 $
30,342
$
1,265 $
100
225
270
445
2,305
8,903
1,444
8,542
21,194
1,362
200
206
263
50
2,081
8,432
2,237
7,832
20,582
310
2,021
(381)
9,339
315
1,911
(1,109)
8,643
11,289
9,760
$
32,483 $
30,342
Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Cash Flows
2013
Years ended December 31,
2012
($ in millions)
2011
Cash flows from operating activities:
Net income
Reconciliation of net income to net cash
provided by operating activities:
Depreciation
Deferred income taxes
Gains and losses on properties and investments
Changes in assets and liabilities affecting operations:
Accounts receivable
Materials and supplies
Other current assets
Current liabilities other than debt
Other – net
Net cash provided by operating activities
Cash flows from investing activities:
Property additions
Property sales and other transactions
Investments, including short-term
Investment sales and other transactions
Net cash used in investing activities
Cash flows from financing activities:
Dividends
Common Stock issued – net
Purchase and retirement of Common Stock
Proceeds from borrowings – net
Debt repayments
Net cash used in financing activities
$
1,910 $
1,749 $
1,916
922
262
(104)
85
(7)
(5)
5
10
3,078
(1,971)
144
(130)
63
(1,894)
(637)
131
(627)
989
(250)
(394)
922
366
(6)
(64)
(7)
(6)
82
29
3,065
(2,241)
192
(23)
78
(1,994)
(624)
89
(1,288)
1,491
(362)
(694)
869
527
(32)
(215)
(40)
14
68
120
3,227
(2,160)
84
(135)
439
(1,772)
(576)
120
(2,051)
1,101
(600)
(2,006)
Net increase (decrease) in cash and cash equivalents
790
377
(551)
Cash and cash equivalents:
At beginning of year
At end of year
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest (net of amounts capitalized)
Income taxes (net of refunds)
653
276
$
1,443 $
653 $
827
276
$
492 $
735
473 $
618
435
289
See accompanying notes to consolidated financial statements.
K46
Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Changes in Stockholders’ Equity
Additional Accum. Other
Common
Stock
Paid-in Comprehensive Retained
Capital
Income
Loss
($ in millions, except per share amounts)
Total
Balance at December 31, 2010
$
358 $
1,892 $
(805) $
9,224 $
10,669
Comprehensive income:
Net income
Other comprehensive loss
Total comprehensive income
Dividends on Common Stock,
$1.66 per share
Share repurchases
Stock-based compensation,
including tax benefit of $45
Balance at December 31, 2011
Comprehensive income:
Net income
Other comprehensive loss
Total comprehensive income
Dividends on Common Stock,
$1.94 per share
Share repurchases
Stock-based compensation,
including tax benefit of $42
Balance at December 31, 2012
Comprehensive income:
Net income
Other comprehensive income
Total comprehensive income
Dividends on Common Stock,
$2.04 per share
Share repurchases
Stock-based compensation,
including tax benefit of $38
1,916
(221)
1,916
(221)
1,695
(30)
(159)
(576)
(1,862)
(576)
(2,051)
4
332
179
(9)
1,912
(1,026)
8,693
1,749
(83)
174
9,911
1,749
(83)
1,666
(19)
(104)
(624)
(1,165)
(624)
(1,288)
2
315
103
(10)
95
1,911
(1,109)
8,643
9,760
1,910
728
(637)
(570)
1,910
728
2,638
(637)
(627)
(7)
155
(8)
3
(49)
159
Balance at December 31, 2013
$
310 $
2,021 $
(381) $
9,339 $
11,289
See accompanying notes to consolidated financial statements.
K47
Norfolk Southern Corporation and Subsidiaries
Notes to Consolidated Financial Statements
The following Notes are an integral part of the Consolidated Financial Statements.
1. Summary of Significant Accounting Policies
Description of Business
Norfolk Southern Corporation is a Virginia-based holding company engaged principally in the rail transportation
business, operating approximately 20,000 miles of road primarily in the East and Midwest. These consolidated
financial statements include Norfolk Southern Corporation (Norfolk Southern) and its majority-owned and
controlled subsidiaries (collectively, NS, we, us, and our). Norfolk Southern’s major subsidiary is Norfolk
Southern Railway Company (NSR). All significant intercompany balances and transactions have been eliminated
in consolidation.
NSR and its railroad subsidiaries transport raw materials, intermediate products and finished goods classified in
the following commodity groups (percent of total railway operating revenues in 2013): coal (23%); intermodal
(21%); chemicals (15%); agriculture/consumer products/government (13%); metals/construction (12%);
automotive (9%); and, paper/clay/forest products (7%). Although most of our customers are domestic, ultimate
points of origination or destination for some of the products transported (particularly coal bound for export and
some intermodal containers) may be outside the U.S. More than 80% of our railroad employees are covered by
collective bargaining agreements with various labor unions.
Use of Estimates
The preparation of financial statements in accordance with U.S. Generally Accepted Accounting Principles
(GAAP) requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities,
the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. We periodically review our estimates, including those
related to the recoverability and useful lives of assets, as well as liabilities for litigation, environmental
remediation, casualty claims, income taxes and pension and other postretirement benefits. Changes in facts and
circumstances may result in revised estimates.
Revenue Recognition
Transportation revenue is recognized proportionally as a shipment moves from origin to destination, and related
expenses are recognized as incurred. Refunds (which are primarily volume-based incentives) are recorded as a
reduction to revenues on the basis of management’s best estimate of projected liability, which is based on
historical activity, current shipment counts and the expectation of future activity. We regularly monitor our
contract refund liability and, historically, the estimates have not differed significantly from the amounts ultimately
refunded. Switching, demurrage and other incidental service revenues are recognized when the services are
performed.
Cash Equivalents
“Cash equivalents” are highly liquid investments purchased three months or less from maturity.
K48
Allowance for Doubtful Accounts
Our allowance for doubtful accounts was $3 million at both December 31, 2013 and 2012. To determine our
allowance for doubtful accounts, we evaluate historical loss experience (which has not been significant), the
characteristics of current accounts, and general economic conditions and trends.
Materials and Supplies
“Materials and supplies,” consisting mainly of fuel oil and items for maintenance of property and equipment, are
stated at the lower of average cost or market. The cost of materials and supplies expected to be used in property
additions or improvements is included in “Properties.”
Investments
Debt securities classified as “held-to-maturity” are reported at amortized cost.
Investments where we have the ability to exercise significant influence over but do not control the entity are
accounted for using the equity method, whereby the investment is carried at the cost of the acquisition plus our
equity in undistributed earnings or losses since acquisition.
Properties
“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. This methodology treats each asset class as a pool of resources, not as singular items. We use
more than 60 depreciable asset classes. The primary depreciation method for our asset base is group life. Units
of production is the principal method of depreciation for rail in high density corridors and for depletion of natural
resources (Note 2). Remaining properties are depreciated generally using the straight-line method over the lesser
of estimated service or lease lives. Depreciation in the Consolidated Statements of Cash Flows includes both
depreciation and depletion.
Depreciation expense is based on our assumptions concerning expected service lives of our properties as well as
the expected net salvage that will be received upon their retirement. In developing these assumptions, we utilize
periodic depreciation studies that are performed by an independent outside firm of consulting engineers and
approved by the Surface Transportation Board (STB). Our depreciation studies are conducted about every three
years for equipment and every six years for track assets and other roadway property. The frequency of these
studies is consistent with guidelines established by the STB. Key factors which are considered in developing
average service life and salvage estimates include:
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
statistical analysis of historical retirement data and surviving asset records;
review of historical salvage received and current market rates;
review of our operations including expected changes in technology, customer demand, maintenance
practices and asset management strategies;
review of accounting policies and assumptions; and
industry review and analysis.
The units of production depreciation rate for rail in high density corridors is derived based on consideration of
annual gross ton miles as compared to the total or ultimate capacity of rail in these corridors. Our experience has
shown that traffic density is a leading factor in determination of the expected service life of rail in high density
corridors. In developing the respective depreciation rate, consideration is also given to several rail characteristics
including age, weight, condition (new or second hand) and type (curve or straight). As a result, a composite
depreciation rate is developed which is applied to the depreciable base.
K49
We adjust our rates based on the results of these studies and implement the changes prospectively. The studies
may also indicate that the recorded amount of accumulated depreciation is deficient (or in excess) of the amount
indicated by the study. Any such deficiency (or excess) is amortized as a component of depreciation expense over
the remaining service lives of the affected class of property, as determined by the study. For 2013, roadway
depreciation rates ranged from 0.83% to 33.3% and equipment depreciation rates ranged from 1.40% to 33.33%.
We capitalize interest on major projects during the period of their construction. Expenditures, including those on
leased assets, that extend an asset’s useful life or increase its utility, are capitalized. Expenditures capitalized
include those that are directly related to a capital project and may include materials, labor and equipment, in
addition to an allocable portion of indirect costs that clearly relate to a particular project. Due to the capital
intensive nature of the railroad industry, a significant portion of annual capital spending relates to the replacement
of self-constructed assets. Because removal activities occur in conjunction with replacement, removal costs are
estimated based on an average percentage of time employees replacing assets spend on removal functions. Costs
related to repairs and maintenance activities that do not extend an asset’s useful life or increase its utility are
expensed when such repairs are performed.
When properties other than land and nonrail assets are sold or retired in the ordinary course of business, the cost
of the assets, net of sale proceeds or salvage, is charged to accumulated depreciation, and no gain or loss is
recognized in earnings. Actual historical cost values are retired when available, such as with equipment
assets. The use of estimates in recording the retirement of certain roadway assets is necessary based on the
impracticality of tracking individual asset costs. When retiring rail, ties and ballast, we use statistical curves that
indicate the relative distribution of the age of the assets retired. The historical cost of other roadway assets is
estimated using a combination of inflation indices specific to the rail industry and those published by the U.S.
Bureau of Labor Statistics. The indices are applied to the replacement value based on the age of the retired
assets. These indices are used because they closely correlate with the costs of roadway assets. Gains and losses
on disposal of land and nonrail assets are included in “Other income – net” (Note 2) since such income is not a
product of our railroad operations.
A retirement is considered abnormal if it does not occur in the normal course of business, if it relates to
disposition of a large segment of an asset class and if the retirement varies significantly from the retirement
profile identified through our depreciation studies, which inherently consider the impact of normal retirements on
expected service lives and depreciation rates. Gains or losses from abnormal retirements are recognized in
earnings.
We review the carrying amount of properties whenever events or changes in circumstances indicate that such
carrying amount may not be recoverable based on future undiscounted cash flows. Assets that are deemed
impaired as a result of such review are recorded at the lower of carrying amount or fair value.
Required Accounting Changes
In the first quarter of 2013, we prospectively adopted Accounting Standards Update (ASU) No. 2013-02,
“Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other
Comprehensive Income.” This update requires the disclosure of the effects of reclassifications out of
Accumulated Other Comprehensive Loss on the respective line items in our Consolidated Statements of Income if
the amount being reclassified is required under GAAP to be reclassified in its entirety to net income. We don’t
have any such items. For other amounts that are not required to be reclassified in their entirety to net income in
the same reporting period, we are required to cross-reference other required GAAP disclosures to provide
additional detail about those amounts. We include these disclosures in our “Stockholders’ Equity” (Note 13)
footnote. This update does not change the requirement to present the components of net income and other
comprehensive income in either a single continuous statement or two separate consecutive statements, nor does it
change the items currently reported in other comprehensive income.
K50
2. Other Income – Net
Income from natural resources:
Royalties from coal
Nonoperating depletion and depreciation
Subtotal
Gains and losses from sale of properties
Rental income
Equity in earnings of Conrail Inc. (Note 5)
Corporate-owned life insurance – net
Interest income
Taxes on nonoperating property
Charitable contributions
Other interest expense – net
Other
2013
2012
($ in millions)
2011
$
50 $
(6)
44
72 $
(6)
66
101
61
42
25
8
(10)
(11)
(12)
(15)
5
54
34
13
8
(10)
(9)
(9)
(23)
86
(7)
79
32
51
31
8
9
(9)
(9)
(3)
(29)
Total
$
233 $
129 $
160
“Other income – net” includes income and costs not part of rail operations and the income generated by the
activities of our noncarrier subsidiaries as well as the costs incurred by those subsidiaries in their operations.
3. Income Taxes
Provisions for Income Taxes
Current:
Federal
State
Total current taxes
Deferred:
Federal
State
Total deferred taxes
2013
2012
($ in millions)
2011
$
695 $
98
793
569 $
74
643
270
(8)
262
339
27
366
432
43
475
506
21
527
Provision for income taxes
$
1,055 $
1,009 $
1,002
K51
Reconciliation of Statutory Rate to Effective Rate
The “Provision for income taxes” in the Consolidated Statements of Income differs from the amounts computed
by applying the statutory federal corporate tax rate as follows:
2013
Amount %
2012
2011
Amount %
($ in millions)
Amount %
Federal income tax at statutory rate
State income taxes, net of federal tax effect
Internal Revenue Service (IRS) audit, settlement
State tax law changes, net of federal tax effect
Other, net
$
1,038
69
-
(11)
(41)
35 $
2
-
-
(1)
965
69
(6)
(3)
(16)
35 $
3
-
-
(1)
1,021
69
(40)
(28)
(20)
35
2
(1)
(1)
(1)
Provision for income taxes
$
1,055
36 $
1,009
37 $
1,002
34
Deferred Tax Assets and Liabilities
Certain items are reported in different periods for financial reporting and income tax purposes. Deferred tax
assets and liabilities are recorded in recognition of these differences. The tax effects of temporary differences that
give rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows:
Deferred tax assets:
Compensation and benefits, including postretirement
Accruals, including casualty and other claims
Other
Total gross deferred tax assets
Less valuation allowance
Net deferred tax asset
Deferred tax liabilities:
Property
Other
Total gross deferred tax liabilities
Net deferred tax liability
Net current deferred tax asset
Net long-term deferred tax liability
December 31,
2013
2012
($ in millions)
$
462 $
114
54
630
(32)
598
(8,494)
(466)
(8,960)
(8,362)
180
834
139
41
1,014
(19)
995
(8,188)
(472)
(8,660)
(7,665)
167
$
(8,542) $
(7,832)
Except for amounts for which a valuation allowance has been provided, we believe that it is more likely than not
that the results of future operations will generate sufficient taxable income to realize the deferred tax assets. The
valuation allowance at the end of each year primarily relates to subsidiary state income tax net operating losses
that may not be utilized prior to their expiration. The valuation allowance for 2013 also includes state investment
tax credits that may not be utilized prior to their expiration. The total valuation allowance increased by
$13 million in 2013 and remained unchanged in 2012.
K52
Uncertain Tax Positions
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
December 31,
2013
2012
($ in millions)
Balance at beginning of year
$
63 $
105
Additions based on tax positions related to the current year
Additions for tax positions of prior years
Reductions for tax positions of prior years
Settlements with taxing authorities
Lapse of statutes of limitations
3
4
(1)
(2)
(2)
Balance at end of year
$
65 $
6
-
(20)
(23)
(5)
63
Included in the balance of unrecognized tax benefits at December 31, 2013, are potential benefits of $25 million
that would affect the effective tax rate if recognized. Unrecognized tax benefits are adjusted in the period in
which new information about a tax position becomes available or the final outcome differs from the amount
recorded.
IRS examinations have been completed for all years prior to 2011. We expect the IRS to begin auditing our 2011
and 2012 consolidated income tax returns in early 2014. State income tax returns generally are subject to
examination for a period of three to four years after filing of the return. In addition, we are generally obligated to
report changes in taxable income arising from federal income tax examinations to the states within a period of up
to two years from the date the federal examination is final. We have various state income tax returns either under
examination, administrative appeals, or litigation. We expect that the total amount of unrecognized tax benefits at
December 31, 2013, will decrease by approximately $8 million in 2014 due to tax positions for which there was
an uncertainty about the timing of deductibility in earlier years, but deductibility may become certain by the close
of 2014. We do not expect that the aforementioned potential change in unrecognized tax benefits will have a
material effect on our financial position, results of operations, or liquidity.
Interest related to unrecognized tax benefits, which is included in “Other income – net,” totaled $1 million of
expense in 2013, $1 million of income in 2012, and $10 million of income in 2011. There were no penalties
related to tax matters in 2013, 2012, and 2011. We have recorded a liability of $4 million at December 31, 2013,
and $3 million at December 31, 2012, for the payment of interest on unrecognized tax benefits. We have no
liability recorded at December 31, 2013 and 2012, for the payment of penalties on unrecognized tax benefits.
K53
4. Fair Value
Fair Value Measurements
ASC 820-10, “Fair Value Measurements,” established a framework for measuring fair value and a fair value
hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels, as
follows:
Level 1
Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities
in active markets that we have the ability to access.
Level 2
Inputs to the valuation methodology include:
(cid:120) quoted prices for similar assets or liabilities in active markets;
(cid:120) quoted prices for identical or similar assets or liabilities in inactive markets;
(cid:120)
inputs other than quoted prices that are observable for the asset or liability;
(cid:120)
inputs that are derived principally from or corroborated by observable market data by
correlation or other means.
If the asset or liability has a specified (contractual) term, the Level 2 input must be observable
for substantially the full term of the asset or liability.
Level 3
Inputs to the valuation methodology are unobservable and significant to the fair value
measurement.
The asset’s or liability’s fair value measurement level within the hierarchy is based on the lowest level of any
input that is significant to the fair value measurement. Other than those assets and liabilities described below that
approximate fair value, there were no assets or liabilities measured at fair value on a recurring basis at
December 31, 2013 or 2012.
Fair Values of Financial Instruments
We have evaluated the fair values of financial instruments and methods used to determine those fair values. The
fair values of “Cash and cash equivalents,” “Short-term investments,” “Accounts receivable,” “Accounts
payable,” and “Short-term debt” approximate carrying values because of the short maturity of these financial
instruments. The carrying value of corporate-owned life insurance is recorded at cash surrender value and,
accordingly, approximates fair value. The carrying amounts and estimated fair values for the remaining financial
instruments, excluding investments accounted for under the equity method, consisted of the following at
December 31:
2013
Carrying
Amount
Fair
Value
Carrying
Amount
($ in millions)
2012
Fair
Value
Long-term investments
Long-term debt, including current maturities
$
148 $
177 $
139 $
(9,348)
(10,673)
(8,482)
174
(10,734)
Underlying net assets were used to estimate the fair value of investments with the exception of notes receivable,
which are based on future discounted cash flows. The fair values of long-term debt were estimated based on
quoted market prices or discounted cash flows using current interest rates for debt with similar terms, company
rating, and remaining maturity.
K54
The following tables set forth the fair value of long-term investment and long-term debt balances disclosed above
by valuation technique level, within the fair value hierarchy (there were no level 3 valued assets or liabilities).
Long-term investments
Long-term debt, including current maturities
$
47 $
(10,449)
130 $
(224)
177
(10,673)
Level 1
December 31, 2013
Level 2
($ in millions)
Total
Level 1
December 31, 2012
Level 2
($ in millions)
Total
Long-term investments
Long-term debt, including current maturities
$
41
$
(10,450)
133 $
(284)
174
(10,734)
Sales of available-for-sale securities were zero for years ended December 31, 2013 and 2012, and $81 million for
the year ended December 31, 2011.
5. Investments
December 31,
2013
2012
($ in millions)
$
98 $
20
$
118 $
-
15
15
$
1,075 $
404
278
155
90
2,002
289
148
996
383
281
155
82
1,897
264
139
$
2,439 $
2,300
Short-term investments:
Commercial paper, 2 months
Federal government bonds, held-to-maturity, with average
maturities of 3 and 5 months, respectively
Total short-term investments
Long-term investments:
Equity method investments:
Conrail Inc.
TTX Company
Meridian Speedway LLC
Pan Am Southern LLC
Other
Total equity method investments
Company-owned life insurance at net cash surrender value
Other investments
Total long-term investments
K55
Investment in Conrail
Through a limited liability company, we and CSX Corporation (CSX) jointly own Conrail Inc. (Conrail), whose
primary subsidiary is Consolidated Rail Corporation (CRC). We have a 58% economic and 50% voting interest
in the jointly owned entity, and CSX has the remainder of the economic and voting interests. We are amortizing
the excess of the purchase price over Conrail’s net equity using the principles of purchase accounting, based
primarily on the estimated useful lives of Conrail’s depreciable property and equipment, including the related
deferred tax effect of the differences in book and tax accounting bases for such assets, as all of the purchase price
at acquisition was allocable to Conrail’s tangible assets and liabilities.
At December 31, 2013, based on the funded status of Conrail’s pension plans, we increased our proportional
investment in Conrail by $37 million. This resulted in income of $34 million recorded to “Other comprehensive
loss” and a combined federal and state deferred tax liability of $3 million.
At December 31, 2012, based on the funded status of Conrail’s pension plans, we decreased our proportional
investment in Conrail by $7 million. This resulted in a loss of $6 million recorded to “Other comprehensive loss”
and a combined federal and state deferred tax asset of $1 million.
At December 31, 2013, the difference between our investment in Conrail and our share of Conrail’s underlying
net equity was $535 million. Our equity in the earnings of Conrail, net of amortization, included in “Other
income – net” was $42 million, $34 million, and $31 million in 2013, 2012, and 2011, respectively.
CRC owns and operates certain properties (the Shared Assets Areas) for the joint and exclusive benefit of NSR
and CSX Transportation, Inc. (CSXT). The costs of operating the Shared Assets Areas are borne by NSR and
CSXT based on usage. In addition, NSR and CSXT pay CRC a fee for access to the Shared Assets Areas.
“Purchased services and rents” and “Fuel” include expenses for amounts due to CRC for operation of the Shared
Assets Areas totaling $146 million in 2013, $147 million in 2012, and $131 million in 2011. Future minimum
lease payments due to CRC under the Shared Assets Areas agreements are as follows: $35 million in each of
2014 through 2018 and $185 million thereafter. We provide certain general and administrative support functions
to Conrail, the fees for which are billed in accordance with several service-provider arrangements and
approximate $8 million annually.
“Accounts payable” includes $187 million at December 31, 2013, and $178 million at December 31, 2012, due to
Conrail for the operation of the Shared Assets Areas. In addition, “Other liabilities” includes $133 million at both
December 31, 2013 and 2012, for long-term advances from Conrail, maturing 2035, that bear interest at an
average rate of 4.4%.
K56
6. Properties
At December 31, 2013
Land
Roadway:
Rail and other track material
Ties
Ballast
Construction in process
Other roadway
Total roadway
Equipment:
Locomotives
Freight cars
Computers and software
Construction in process
Other equipment
Total equipment
Cost
Accumulated
Depreciation
Net Book
Value
Depreciation
Rate
(1)
($ in millions)
$
2,253 $
- $
2,253
-
5,934
4,464
2,244
405
11,704
24,751
4,814
3,225
513
139
862
9,553
(1,782)
(1,100)
(468)
-
(2,814)
(6,164)
(1,918)
(1,429)
(292)
-
(316)
(3,955)
4,152
3,364
1,776
405
8,890
18,587
2,896
1,796
221
139
546
5,598
2.46%
3.24%
2.65%
-
2.55%
3.42%
2.78%
11.07%
-
6.15%
Other property
475
(268)
207
1.15%
Total properties
$
37,032 $
(10,387) $
26,645
K57
At December 31, 2012
Land
Roadway:
Rail and other track material
Ties
Ballast
Construction in process
Other roadway
Total roadway
Equipment:
Locomotives
Freight cars
Computers and software
Construction in process
Other equipment
Total equipment
Cost
Accumulated
Depreciation
Net Book
Value
Depreciation
Rate
(1)
($ in millions)
$
2,240 $
- $
2,240
-
5,699
4,255
2,128
378
11,223
23,683
4,576
3,214
480
177
817
9,264
(1,707)
(1,027)
(437)
-
(2,636)
(5,807)
(1,798)
(1,502)
(270)
-
(282)
(3,852)
3,992
3,228
1,691
378
8,587
17,876
2,778
1,712
210
177
535
5,412
2.48%
3.28%
2.61%
-
2.57%
3.54%
2.95%
13.29%
-
5.99%
Other property
471
(263)
208
1.31%
Total properties
$
35,658 $
(9,922) $
25,736
(1) Composite annual depreciation rate for the underlying assets, excluding the effects of the amortization of any
deficiency (or excess) that resulted from our depreciation studies.
Roadway and equipment property includes $8 million at December 31, 2013, and $9 million at December 31,
2012, of assets recorded pursuant to capital leases with accumulated amortization of $3 million at both December
31, 2013 and 2012. Other property includes the costs of obtaining rights to natural resources of $336 million at
both December 31, 2013 and 2012, with accumulated depletion of $195 million and $192 million, respectively.
Capitalized Interest
Total interest cost incurred on debt was $543 million in 2013, $515 million in 2012, and $474 million in 2011, of
which $18 million, $20 million, and $19 million, respectively, was capitalized.
K58
7. Current Liabilities
Accounts payable:
Accounts and wages payable
Due to Conrail (Note 5)
Casualty and other claims (Note 16)
Vacation liability
Other
Total
Other current liabilities:
Interest payable
Postretirement and pension benefit obligations (Note 11)
Other
Total
8. Debt
December 31,
2013
2012
($ in millions)
$
685 $
187
166
130
97
777
178
183
129
95
$
1,265 $
1,362
$
$
121 $
64
85
270 $
112
70
81
263
Debt with weighted average interest rates and maturities is presented below:
Notes and debentures:
6.16% maturing to 2018
6.16% maturing 2019 to 2021
3.22% maturing 2022 to 2024
6.93% maturing 2025 to 2037
4.81% maturing 2041 to 2043
6.39% maturing 2097 to 2111
Securitization borrowings, 1.23%
Other debt, 7.94% maturing 2024
Discounts and premiums, net
Total debt
Less current maturities and short-term debt
$
December 31,
2013
2012
($ in millions)
2,082 $
1,397
1,600
1,402
1,833
1,328
200
101
(495)
9,448
(545)
2,082
1,397
1,200
1,403
1,333
1,328
300
151
(512)
8,682
(250)
Long-term debt excluding current maturities and short-term debt
$
8,903 $
8,432
Long-term debt maturities subsequent to 2014 are as follows:
2015
2016
2017
2018
2019 and subsequent years
Total
$
1
500
550
600
7,252
$
8,903
During the third quarter of 2012, we issued $600 million of senior notes at 2.90% due 2023 and paid $115 million
of premium in exchange for $521 million of our previously issued notes ($156 million at 7.25% due 2031,
K59
$140 million at 5.64% due 2029, $115 million at 5.59% due 2025, $72 million at 7.80% due 2027, and $38
million at 7.05% due 2037). The premium is reflected as a reduction of debt in the Consolidated Balance Sheets,
is included within “Debt repayments” in the 2012 Statement of Cash Flows, and is being amortized as additional
interest expense over the term of the new debt. No gain or loss was recognized as a result of the debt exchange.
We have in place a $350 million receivables securitization facility under which NSR sells substantially all of its
eligible third-party receivables to a subsidiary, which in turn may transfer beneficial interests in the receivables to
various commercial paper vehicles. Amounts received under the facility are accounted for as borrowings. Under
this facility, we received $100 million and repaid $200 million in 2013.
At December 31, 2013 and 2012, respectively, the amounts outstanding under the receivables securitization
facility were $200 million at an average variable interest rate of 1.23% and $300 million at an average variable
interest rate of 1.28%. Our intent is to refinance $100 million of these borrowings on a long-term basis, which is
supported by our $750 million credit agreement (see below). Accordingly, these amounts outstanding are
included in the line item “Long-term debt” and the remaining $100 million outstanding at December 31, 2013 and
$200 million outstanding at December 31, 2012, are included in the line item “Short-term debt” in the
Consolidated Balance Sheets. The facility has a 364-day term which was renewed and amended in October 2013
to run until October 2014. At December 31, 2013 and 2012, the receivables included in “Accounts receivable –
net” serving as collateral for these borrowings totaled $747 million and $751 million, respectively.
Issuance of Debt or Equity Securities
We have authority from our Board of Directors to issue an additional $800 million of debt or equity securities
through public or private sale.
Credit Agreement, Debt Covenants, and Commercial Paper
We have in place and available a $750 million, five-year credit agreement expiring in 2016, which provides for
borrowings at prevailing rates and includes covenants. We had no amounts outstanding under this facility at
December 31, 2013 and 2012, and we are in compliance with all of its covenants.
We have the ability to issue commercial paper supported by the $750 million credit agreement. At December 31,
2013 and 2012, we had no outstanding commercial paper.
K60
9. Lease Commitments
We are committed under long-term lease agreements, which expire on various dates through 2067, for equipment,
lines of road and other property. The following amounts do not include payments to CRC under the Shared
Assets Areas agreements (Note 5). Future minimum lease payments and operating lease expense are as follows:
Future Minimum Lease Payments
Operating
Leases
Capital
Leases
($ in millions)
2014
2015
2016
2017
2018
2019 and subsequent years
Total
$
80 $
74
62
54
50
418
$
738
Less imputed interest on capital leases at an average rate of 5.50%
Present value of minimum lease payments included in debt
$
2
1
-
-
-
2
5
(1)
4
Operating Lease Expense
Minimum rents
Contingent rents
Total
2013
2012
($ in millions)
2011
$
$
121 $
82
129 $
73
203 $
202 $
150
77
227
Contingent rents are primarily comprised of usage-based rent paid to other railroads for joint facility operations.
10. Other Liabilities
December 31,
2013
2012
($ in millions)
$
566 $
218
214
133
120
193
1,049
482
258
133
118
197
$
1,444 $
2,237
Net postretirement benefit obligations (Note 11)
Net pension benefit obligations (Note 11)
Casualty and other claims (Note 16)
Long-term advances from Conrail (Note 5)
Deferred compensation
Other
Total
K61
11. Pensions and Other Postretirement Benefits
We have both funded and unfunded defined benefit pension plans covering principally salaried employees. We
also provide specified health care and death benefits to eligible retired employees and their dependents; these
plans can be amended or terminated at our option. Under our health care plans, a defined percentage of health
care expenses is covered, reduced by any deductibles, co-payments, Medicare payments and, in some cases,
coverage provided under other group insurance policies.
Pension and Other Postretirement Benefit Obligations and Plan Assets
Change in benefit obligations:
Benefit obligation at beginning of year
Service cost
Interest cost
Actuarial (gains) losses
Benefits paid
Benefit obligation at end of year
Change in plan assets:
Fair value of plan assets at beginning of year
Actual return on plan assets
Employer contribution
Benefits paid
Fair value of plan assets at end of year
Other Postretirement
Pension Benefits
2012
2013
Benefits
2013
2012
($ in millions)
$
2,285 $
41
81
(196)
(120)
2,091
2,027 $
34
89
253
(118)
2,285
1,311 $
16
50
(471)
(51)
855
1,206
15
54
82
(46)
1,311
1,791
432
12
(120)
2,115
1,670
227
12
(118)
1,791
205
34
51
(51)
239
186
19
46
(46)
205
Funded status at end of year
$
24 $
(494) $
(616) $
(1,106)
Amounts recognized in the Consolidated
Balance Sheets:
Noncurrent assets
Current liabilities
Noncurrent liabilities
Net amount recognized
Amounts recognized in other comprehensive
income (before tax):
Net (gain) loss
Prior service cost
256 $
(14)
(218)
1 $
- $
(13)
(482)
(50)
(566)
-
(57)
(1,049)
24 $
(494) $
(616) $
(1,106)
585 $
4
1,160 $
4
(88) $
-
459
-
$
$
$
K62
Our accumulated benefit obligation for our defined benefit pension plans is $1.9 billion and $2.1 billion at
December 31, 2013 and 2012, respectively. Our unfunded pension plans, included above, which in all cases have
no assets and therefore have an accumulated benefit obligation in excess of plan assets, had projected benefit
obligations of $231 million at December 31, 2013, and $239 million at December 31, 2012, and had accumulated
benefit obligations of $206 million at December 31, 2013, and $215 million at December 31, 2012.
Pension and Other Postretirement Benefit Cost Components
Pension benefits:
Service cost
Interest cost
Expected return on plan assets
Amortization of net losses
Amortization of prior service cost
Net cost
Other postretirement benefits:
Service cost
Interest cost
Expected return on plan assets
Amortization of net losses
Net cost
2013
2012
($ in millions)
2011
$
$
$
41 $
81
(142)
89
-
34 $
89
(138)
75
-
69 $
60 $
16 $
50
(16)
58
15 $
54
(15)
53
28
92
(140)
67
3
50
14
58
(15)
44
$
108 $
107 $
101
Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income
Net gain arising during the year
Amortization of net losses
Total recognized in other comprehensive income
Total recognized in net periodic cost
and other comprehensive income
2013
Other
Postretirement
Benefits
Pension
Benefits
($ in millions)
$
$
$
$
486
89
575
$
506
$
489
58
547
439
Net actuarial gains arising during the year to our pension benefits were due primarily to a higher than expected
return on plan assets and an increase in our discount rate. Net actuarial gains arising during the year related to our
other postretirement benefits were due to changes in our estimate of the allocation of medical claims costs
between our Medicare eligible and non-Medicare eligible populations, lower estimates of prescription drug costs
and an increase in our discount rate.
The estimated net losses for the pension benefit plans that will be amortized from accumulated other
comprehensive loss into net periodic cost over the next year are $54 million. There is no expected amortization
for the other postretirement benefit plans over the next year.
K63
Pension and Other Postretirement Benefits Assumptions
Costs for pension and other postretirement benefits are determined based on actuarial valuations that reflect
appropriate assumptions as of the measurement date, ordinarily the beginning of each year. The funded status of
the plans is determined using appropriate assumptions as of each year end. A summary of the major assumptions
follows:
Pension funded status:
Discount rate
Future salary increases
Other postretirement benefits funded status:
Discount rate
Pension cost:
Discount rate
Return on assets in plans
Future salary increases
Other postretirement benefits cost:
Discount rate
Return on assets in plans
Health care trend rate
2013
2012
2011
4.60%
4.50%
3.65%
4.50%
4.50%
4.50%
4.65%
3.80%
4.55%
3.65%
8.25%
4.50%
3.80%
8.00%
7.33%
4.50%
8.25%
4.50%
4.55%
8.00%
7.70%
5.25%
8.75%
4.50%
5.40%
8.50%
8.10%
To determine the discount rates, we utilize analyses in which the projected annual cash flows from the pension
and other postretirement benefit plans were matched with yield curves based on an appropriate universe of high-
quality corporate bonds. We use the results of the yield curve analyses to select the discount rates that match the
payment streams of the benefits in these plans.
Health Care Cost Trend Assumptions
For measurement purposes at December 31, 2013, increases in the per capita cost of covered health care benefits
were assumed to be 6.94% for 2014. It is assumed the rate will decrease gradually to an ultimate rate of 5.0% for
2019 and remain at that level thereafter.
Assumed health care cost trend rates have a significant effect on the amounts reported in the consolidated
financial statements. To illustrate, a one-percentage point change in the assumed health care cost trend would
have the following effects:
One-percentage point
Decrease
Increase
($ in millions)
Increase (decrease) in:
Total service and interest cost components $
Postretirement benefit obligation
11 $
100
(9)
(84)
K64
Asset Management
Nine investment firms manage our defined benefit pension plans’ assets under investment guidelines approved by
our Benefits Investment Committee that is comprised of members of our management. Investments are restricted
to domestic and international equity securities, domestic and international fixed income securities, and
unleveraged exchange-traded options and financial futures. Limitations restrict investment concentration and use
of certain derivative investments. The target asset allocation for equity is 75% of the pension plans’ assets. The
fixed income portfolio is invested in the Barclays Government/Credit Bond Index Fund, except that the Canadian
earmarked portion of the portfolio is maintained in U.S. Treasury Bonds. Equity investments must be in liquid
securities listed on national exchanges. No investment is permitted in our securities (except through commingled
pension trust funds). Investment managers’ returns are expected to meet or exceed selected market indices by
prescribed margins.
Our pension plans’ weighted-average asset allocations, by asset category, were as follows:
Domestic equity securities
International equity securities
Debt securities
Cash and cash equivalents
Total
Percentage of plan
assets at December 31,
2013
2012
54%
22%
20%
4%
52%
22%
24%
2%
100%
100%
The other postretirement benefit plan assets consist primarily of trust-owned variable life insurance policies with
an asset allocation at December 31, 2013, of 65% in equity securities and 35% in debt securities compared with
58% in equity securities and 42% in debt securities at December 31, 2012. The target asset allocation for equity
is between 50% and 75% of the plan’s assets.
The plans’ assumed future returns are based principally on the asset allocations and historic returns for the plans’
asset classes determined from both actual plan returns and, over longer time periods, market returns for those
asset classes. The expected long-term rate of return on plan assets is applied to a calculated value of plan assets
that recognizes changes in fair value over a three-year period. We assumed a rate of return on pension plan assets
of 8.25% for both 2013 and 2012 and 8.75% for 2011. A one-percentage point change to the rate of return
assumption would result in an $18 million change to the net pension cost and, as a result, an equal change in
“Compensation and benefits” expense. For 2014, we assume an 8.25% return on pension plan assets.
K65
Fair Value of Plan Assets
Following is a description of the valuation methodologies used for pension plan assets measured at fair value.
Common stock: Shares held by the plan at year end are valued at the official closing price as defined by
the exchange or at the most recent trade price of a security at the close of the active market.
Common collective trusts: Valued at the net asset value (NAV) of shares held by the plan at year end,
based on the quoted market prices of the underlying assets of the trusts. The investments are valued using
NAV as a practical expedient for fair value. The common collective trusts hold equity securities, fixed
income securities and cash and cash equivalents.
Corporate bonds and other fixed income instruments: When available, valued at an estimated price at
which a dealer would pay for a similar security at year end using observable market inputs. Otherwise,
valued at an estimated price at which a dealer would pay for a similar security at year end using
unobservable market inputs.
Municipal bonds: Valued at an estimated price at which a dealer would pay for a security at year end
using observable market-based inputs.
Commingled funds: Valued at the NAV of shares held by the plan at year end, based on the quoted
market prices of the underlying assets of the funds. The investments are valued using NAV as a practical
expedient for fair value. The commingled funds hold equity securities.
Interest bearing cash: Short-term bills or notes are valued at an estimated price at which a dealer would
pay for the security at year end using observable market-based inputs; money market funds are valued at
the closing price reported on the active market on which the funds are traded.
United States Government and agencies securities: Valued at an estimated price at which a dealer would
pay for a security at year end using observable as well as unobservable market-based inputs. Inflation
adjusted instruments utilize the appropriate index factor.
Preferred stock: Shares held by the plan at year end are valued at the most recent trade price of a security
at the close of the active market or at an estimated price at which a dealer would pay for a similar security
at year end using primarily observable as well as unobservable market-based inputs.
The following table sets forth the pension plans’ assets by valuation technique level, within the fair value
hierarchy (there were no level 3 valued assets).
Common stock
Common collective trusts:
Debt securities
International equity securities
Commingled funds
Interest bearing cash
U.S. government and agencies securities
Level 1
December 31, 2013
Level 2
($ in millions)
Total
$
1,245 $
- $
1,245
-
-
-
83
-
423
265
95
-
4
423
265
95
83
4
Total investments
$
1,328 $
787 $
2,115
K66
Common stock
Common collective trusts:
Debt securities
International equity securities
Commingled funds
Interest bearing cash
U.S. government and agencies securities
Preferred stock
Level 1
December 31, 2012
Level 2
($ in millions)
Total
$
1,028 $
- $
1,028
-
-
-
31
-
-
433
211
84
-
3
1
433
211
84
31
3
1
Total investments
$
1,059 $
732 $
1,791
Following is a description of the valuation methodologies used for other postretirement benefit plan assets
measured at fair value.
Trust-owned life insurance: Valued at our share of the net assets of trust-owned life insurance issued by a
major insurance company. The underlying investments of that trust consist of a U.S. stock account and a
U.S. bond account, valued based upon the aggregate market values of the underlying investments. The
loan asset account is valued at cash surrender value at the time of the loan, plus accrued interest.
The other postretirement benefit plan assets consisted of trust-owned life insurance with fair values of
$239 million and $205 million at December 31, 2013 and 2012, respectively, and are valued under level 2 of the
fair value hierarchy. There were no level 1 or level 3 related assets.
The methods used to value pension and other postretirement benefit plan assets may produce a fair value
calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore,
while we believe our valuation methods are appropriate and consistent with other market participants, the use of
different methodologies or assumptions to determine the fair value of certain financial instruments could result in
a different fair value measurement at the reporting date.
Contributions and Estimated Future Benefit Payments
In 2014, we expect to contribute approximately $14 million to our unfunded pension plans for payments to
pensioners and approximately $50 million to our other postretirement benefit plans for retiree health and death
benefits. We do not expect to contribute to our funded pension plan in 2014.
Benefit payments, which reflect expected future service, as appropriate, are expected to be paid as follows:
2014
2015
2016
2017
2018
Years 2019 – 2023
Pension
Benefits
Other
Postretirement
Benefits
($ in millions)
$
127 $
130
133
135
137
693
50
51
52
53
54
272
K67
The other postretirement benefits payments include an estimated average annual reduction due to the Medicare
Part D subsidy of approximately $6 million.
Other Postretirement Coverage
Under collective bargaining agreements, Norfolk Southern and certain subsidiaries participate in a multi-employer
benefit plan, which provides certain postretirement health care and life insurance benefits to eligible union
employees. Premiums under this plan are expensed as incurred and totaled $41 million in 2013, $47 million in
2012, and $48 million in 2011.
Section 401(k) Plans
Norfolk Southern and certain subsidiaries provide Section 401(k) savings plans for employees. Under the plans,
we match a portion of employee contributions, subject to applicable limitations. Our matching contributions,
recorded as an expense, under these plans were $19 million in 2013, $18 million in 2012, and $17 million in
2011.
12. Stock-Based Compensation
Under the stockholder-approved Long-Term Incentive Plan (LTIP), the Compensation Committee (Committee),
made up of nonemployee members of the Board of Directors or the Chief Executive Officer (if delegated such
authority by the Committee), may grant stock options, stock appreciation rights (SARs), restricted stock units
(RSUs), restricted shares, performance share units (PSUs), and performance shares, up to a maximum of
96,125,000 shares of our common stock (Common Stock). Of these shares, 5,000,000 were approved by the
Board for issuance to non-officer participants; as a broad-based issuance, stockholder approval was not required.
The number of shares remaining for issuance under LTIP is reduced (i) by 1 for each award granted as a stock
option or stock-settled SAR, or (ii) by 1.61 for an award made in the form other than a stock option or stock-
settled SAR. Under the Board-approved Thoroughbred Stock Option Plan (TSOP), the Committee may grant
stock options up to a maximum of 6,000,000 shares of Common Stock; as a broad-based stock option plan,
stockholder approval of TSOP was not required. We use newly issued shares to satisfy any exercises and awards
under LTIP and TSOP. Shares available for future grants are shown in the table below.
LTIP also permits the payment – on a current or a deferred basis and in cash or in stock – of dividend equivalents
on shares of Common Stock covered by stock options, RSUs, or PSUs in an amount commensurate with regular
quarterly dividends paid on Common Stock. With respect to stock options, if employment of the participant is
terminated for any reason, including retirement, disability, or death, we have no further obligation to make any
dividend equivalent payments. Regarding RSUs, if employment of the participant is terminated for any reason
other than retirement, disability, or death, we have no further obligation to make any dividend equivalent
payments. Should an employee terminate employment, they are not required to forfeit dividend equivalent
payments already received. Outstanding PSUs do not currently receive dividend equivalent payments.
During the first quarter of 2013, the Committee granted stock options, RSUs and PSUs pursuant to LTIP and
granted stock options pursuant to TSOP. Receipt of an award under LTIP was made contingent upon the
awardee’s execution of a non-compete agreement, and all awards under LTIP were made subject to forfeiture in
the event the awardee “engages in competing employment” for a period of time following retirement.
K68
Accounting Method
We account for our grants of stock options, RSUs, PSUs, and dividend equivalent payments in accordance with
ASC 718 “Compensation-Stock Compensation.” Accordingly, all awards result in charges to net income while
dividend equivalent payments, which are all related to equity classified awards, are charged to retained income.
Related compensation costs were $54 million in 2013, $45 million in 2012, and $61 million in 2011. The total tax
effects recognized in income in relation to stock-based compensation were benefits of $18 million in 2013,
$14 million in 2012, and $20 million in 2011.
“Common stock issued – net” in the Consolidated Statements of Cash Flows for the years ended December 31,
2013, 2012, and 2011 includes tax benefits generated from tax deductions in excess of compensation costs
recognized (excess tax benefits) for share-based awards of $38 million, $42 million, and $45 million, respectively.
Stock Options
Option exercise prices may not be less than the average of the high and low prices at which Common Stock is
traded on the grant date and, effective for LTIP options granted after May 13, 2010, will be at least the higher of
(i) the average of the high and low prices at which Common Stock is traded on the grant date, or (ii) the closing
price of Common Stock on the grant date. All options are subject to a vesting period of at least one year, and the
term of the option will not exceed ten years.
In the first quarter of 2013, 748,200 options were granted under LTIP and 268,500 options were granted under
TSOP. In each case, the grant price was $69.83. In the first quarter of 2012, 567,300 options were granted under
LTIP and 210,300 options were granted under TSOP, each with a grant price of $75.14. In the first quarter of
2011, 627,700 options were granted under LTIP and 257,000 options were granted under TSOP, each with a grant
price of $62.75. For all years, options granted under LTIP and TSOP may not be exercised prior to the fourth
and third anniversaries of the date of grant, respectively, or if the optionee retires or dies before that anniversary
date, may not be exercised before the later of one year after the grant date or the date of the optionee’s retirement
or death.
Holders of the options granted under LTIP who remain actively employed receive cash dividend equivalent
payments for four years in an amount equal to the regular quarterly dividends paid on Common Stock. Dividend
equivalent payments are not made on TSOP options.
K69
The fair value of each option awarded in 2013, 2012, and 2011 was measured on the date of grant using a lattice-
based option valuation model. Expected volatilities are based on implied volatilities from traded options on, and
historical volatility of, Common Stock. Historical data is used to estimate option exercises and employee
terminations within the valuation model. The average expected option life is derived from the output of the
valuation model and represents the period of time that all options granted are expected to be outstanding,
including branches of the model that result in options expiring unexercised. The average risk-free interest rate is
based on the U.S. Treasury yield curve in effect at the time of grant. For options granted that include dividend
equivalent payments, a dividend yield of zero was used. For 2013, 2012, and 2011, a dividend yield of 2.86%,
2.30%, and 2.55%, respectively, was used for LTIP options for periods where no dividend equivalent payments
are made, as well as for TSOP options, which do not receive dividend equivalents. The assumptions for the LTIP
and TSOP grants for the last three years are shown in the following table:
2013
2012
2011
Expected volatility range
Average expected volatility
Average risk-free interest rate
Average expected option term LTIP
Per-share grant-date fair value LTIP
Average expected option term TSOP
Per-share grant-date fair value TSOP
Options granted (LTIP and TSOP)
24% – 30% 27% – 29% 28% – 32%
28%
3.42%
8.5 years
$22.26
8.5 years
$18.10
884,700
26%
1.88%
9.0 years
$20.40
8.9 years
$15.84
1,016,700
27%
1.96%
8.9 years
$23.84
8.8 years
$19.55
777,600
A summary of the status of changes in stock options is presented below:
Stock
Options
Weighted Avg.
Exercise Price
Outstanding at December 31, 2012
Granted
Exercised
Forfeited
8,718,566 $
1,016,700
(2,570,088)
(13,000)
Outstanding at December 31, 2013
7,152,178
47.61
69.83
37.08
67.42
54.52
The aggregate intrinsic value of options outstanding at December 31, 2013, was $274 million with a weighted
average remaining contractual term of 5.5 years. Of these options outstanding, 4,105,878 were exercisable and
had an aggregate intrinsic value of $188 million with a weighted average exercise price of $46.97 and a weighted
average remaining contractual term of 3.7 years.
The following table provides information related to options exercised for the last three years:
2013
2012
($ in millions)
2011
Options exercised
Total intrinsic value
Cash received upon exercise
Related excess tax benefits realized
$
2,570,088
1,809,770
106 $
93
31
80 $
47
28
2,845,677
127
75
42
At December 31, 2013, total unrecognized compensation related to options granted under LTIP and TSOP was
$10 million, and is expected to be recognized over a weighted-average period of approximately 2.3 years.
K70
Restricted Stock Units
RSU grants and grant-date fair values were 162,000 and $69.83 in 2013; 140,000 and $75.14 in 2012; and
177,400 and $62.75 in 2011. RSUs granted in all three years have a five-year restriction period and will be settled
through issuance of shares of Common Stock. The RSU grants include cash dividend equivalent payments during
the restriction period commensurate with regular quarterly dividends paid on Common Stock. During 2013,
298,400 of the RSUs granted in 2008 vested, with 178,991 shares of Common Stock issued net of withholding
taxes. A summary of the status of and changes in RSUs is presented below:
Nonvested at December 31, 2012
Granted
Vested
Forfeited
Nonvested at December 31, 2013
Weighted-
Average
Grant-Date
Fair Value
RSUs
1,102,450 $
162,000
(298,400)
(2,050)
964,000
51.75
69.83
50.47
61.33
55.17
At December 31, 2013, total unrecognized compensation related to RSUs granted under LTIP was $8 million, and
is expected to be recognized over a weighted-average period of approximately 3.2 years. The total related excess
tax amounts realized in 2013, 2012, and 2011 were benefits of $2 million, $3 million, and $1 million,
respectively.
Performance Share Units
PSUs provide for awards based on achievement of certain predetermined corporate performance goals (total
shareholder return, return on average invested capital and operating ratio) at the end of a three-year cycle. PSU
grants and grant-date fair values were 550,800 and $69.83 in 2013; 468,850 and $75.14 in 2012; and 580,900 and
$62.75 in 2011. PSUs granted in 2013, 2012, and 2011 will be paid in the form of shares of Common Stock.
During 2013, 577,585 of the PSUs granted in 2010 were earned, with 348,189 shares of Common Stock issued
net of withholding taxes. A summary of the status of and changes in PSUs is presented below:
Balance at December 31, 2012
Granted
Earned
Unearned
Forfeited
Balance at December 31, 2013
Weighted-
Average
Grant-Date
Fair Value
PSUs
1,870,200 $
550,800
(577,585)
(244,015)
(3,600)
1,595,800
59.27
69.83
47.76
47.76
69.09
68.81
At December 31, 2013, total unrecognized compensation related to PSUs granted under LTIP was $7 million, and
is expected to be recognized over a weighted-average period of approximately 1.7 years. The total fair value of
PSUs earned and paid in cash during 2011 totaled $27 million. The total related excess tax amounts realized in
2013, 2012, and 2011 were benefits of $5 million, $11 million, and $2 million, respectively.
K71
Shares Available and Issued
Shares of Common Stock available for future grants and issued in connection with all features of LTIP and TSOP
at December 31, were as follows:
Available for future grants:
LTIP
TSOP
Issued:
LTIP
TSOP
13. Stockholders’ Equity
Common Stock
2013
2012
2011
5,945,033
1,172,256
7,638,688
1,434,356
8,803,298
1,640,456
2,765,986
331,282
2,337,179
153,423
3,077,739
193,060
Common Stock is reported net of shares held by our consolidated subsidiaries (Treasury Shares). Treasury Shares
at December 31, 2013 and 2012, amounted to 20,320,777, with a cost of $19 million for both 2013 and 2012.
Accumulated Other Comprehensive Loss
“Accumulated other comprehensive loss” reported in the Consolidated Statements of Changes in Stockholders’
Equity consisted of the following:
Balance
at Beginning
of Year
Net
Gain (Loss)
Reclassification
Adjustments
($ in millions)
Balance
at End
of Year
$
(999) $
600 $
89 (1) $
(310)
Year ended December 31, 2013
Pensions and other postretirement liabilities
Other comprehensive gain (loss)
of equity investees
Accumulated other comprehensive loss
$
(1,109) $
639 $
89
$
(110)
39
-
(71)
(381)
Year ended December 31, 2012
Pensions and other postretirement liabilities
$
Other comprehensive loss of equity investees
(928) $
(98)
Accumulated other comprehensive loss
$
(1,026) $
(149) $
(12)
(161) $
78 (1) $
-
78
$
(999)
(110)
(1,109)
(1)These items are included in the computation of net periodic pension and postretirement benefit costs. See
Note 11, “Pensions and Other Postretirement Benefits,” for additional information.
K72
Other Comprehensive Income (Loss)
“Other comprehensive income (loss)” reported in the Consolidated Statements of Changes in Stockholders’
Equity consisted of the following:
Other comprehensive income
$
1,164
$
(436) $
Year ended December 31, 2013
Net gain (loss) arising during the year:
Pensions and other postretirement benefits
Reclassification adjustments for costs
included in net income
Subtotal
Other comprehensive income of equity investees
Year ended December 31, 2012
Net gain (loss) arising during the year:
Pensions and other postretirement benefits
Reclassification adjustments for costs
included in net income
Subtotal
Other comprehensive loss of equity investees
Year ended December 31, 2011
Net gain (loss) arising during the year:
Pensions and other postretirement benefits
Reclassification adjustments for costs
included in net income
Subtotal
Other comprehensive loss of equity investees
Pretax
Amount
Tax
(Expense)
Benefit
($ in millions)
Net-of-Tax
Amount
$
975
$
(375) $
600
147
1,122
42
(58)
(433)
(3)
$
(242) $
93 $
(149)
128
(114)
(13)
(50)
43
1
$
(439) $
169 $
(270)
114
(325)
(21)
(46)
123
2
89
689
39
728
78
(71)
(12)
(83)
68
(202)
(19)
(221)
Other comprehensive loss
$
(127) $
44 $
Other comprehensive loss
$
(346) $
125 $
14. Stock Repurchase Program
We repurchased and retired 8.3 million, 18.8 million, and 30.2 million shares under our share repurchase program
in 2013, 2012, and 2011, respectively, at a cost of $627 million, $1.3 billion, and $2.1 billion. On August 1,
2012, our Board of Directors authorized the repurchase of up to an additional 50 million shares of Common Stock
through December 31, 2017. The timing and volume of purchases is guided by our assessment of market
conditions and other pertinent factors. Any near-term share repurchases are expected to be made with internally
generated cash, cash on hand, or proceeds from borrowings. Since the beginning of 2006, we have repurchased
and retired 136.7 million shares of Common Stock at a total cost of $8.1 billion.
K73
15. Earnings Per Share
The following table sets forth the calculation of basic and diluted earnings per share:
2013
Basic
2012
2011
2013
Diluted
2012
2011
($ in millions except per share amounts, shares in millions)
Net income
Dividend equivalent payments
$ 1,910 $ 1,749 $ 1,916 $ 1,910 $ 1,749 $ 1,916
(2)
(9)
(4)
(7)
(9)
(4)
Income available to common stockholders
1,903
1,740
1,907
1,906
1,745
1,914
Weighted-average shares outstanding
Dilutive effect of outstanding options
and share-settled awards
Adjusted weighted-average shares outstanding
311.9
320.9
345.5
311.9
320.9
345.5
3.6
315.5
4.3
325.2
5.8
351.3
Earnings per share
$
6.10 $
5.42 $
5.52 $
6.04 $
5.37 $
5.45
In each year, dividend equivalent payments were made to holders of stock options and RSUs. For purposes of
computing basic earnings per share, dividend equivalent payments made to holders of stock options and RSUs
were deducted from net income to determine income available to common stockholders. For purposes of
computing diluted earnings per share, we evaluate on a grant-by-grant basis those stock options and RSUs
receiving dividend equivalent payments under the two-class and treasury stock methods to determine which
method is the more dilutive for each grant. For those grants for which the two-class method was more dilutive,
net income was reduced by dividend equivalent payments to determine income available to common
stockholders. The diluted calculations exclude options having exercise prices exceeding the average market price
of Common Stock as follows: none in 2013, 2 million in 2012, and none in 2011.
16. Commitments and Contingencies
Lawsuits
We and/or certain subsidiaries are defendants in numerous lawsuits and other claims relating principally to
railroad operations. When we conclude that it is probable that a liability has been incurred and the amount of the
liability can be reasonably estimated, it is accrued through a charge to earnings. While the ultimate amount of
liability incurred in any of these lawsuits and claims is dependent on future developments, in our opinion, the
recorded liability is adequate to cover the future payment of such liability and claims. However, the final
outcome of any of these lawsuits and claims cannot be predicted with certainty, and unfavorable or unexpected
outcomes could result in additional accruals that could be significant to results of operations in a particular year or
quarter. Any adjustments to the recorded liability will be reflected in earnings in the periods in which such
adjustments become known.
Two of our customers, DuPont and Sunbelt Chlor Alkai Partnership (“Sunbelt”), have rate reasonableness
complaints pending before the STB alleging that our tariff rates for transportation of regulated movements are
unreasonable. We dispute these allegations. Since June 1, 2009, in the case of DuPont, and since April 1, 2011,
in the case of Sunbelt, we have been billing and collecting amounts based on the challenged tariff rates. We
presently expect resolution of these cases to occur in 2014 and believe the estimate of reasonably possible loss
will not have a material effect on our financial position, results of operations, or liquidity. With regard to rate
cases, we record adjustments to revenues in the periods, if and when, such adjustments are probable and
estimable.
K74
On November 6, 2007, various antitrust class actions filed against us and other Class I railroads in various Federal
district courts regarding fuel surcharges were consolidated in the District of Columbia by the Judicial Panel on
Multidistrict Litigation. The defendant railroads appealed this certification, and on August 9, 2013, the Court of
Appeals for the District of Columbia vacated the District Court’s decision and remanded the case for further
consideration. We believe the allegations in the complaints are without merit and intend to vigorously defend the
cases. We do not believe that the outcome of these proceedings will have a material effect on our financial
position, results of operations, or liquidity. A lawsuit filed on March 25, 2008, in the U.S. District Court for the
District of Minnesota containing similar allegations against us and four other major railroads was voluntarily
dismissed by the plaintiff subject to a tolling agreement entered into in August 2008.
Casualty Claims
Casualty claims include employee personal injury and occupational claims as well as third-party claims, all
exclusive of legal costs. To aid in valuing our personal injury liability and determining the amount to accrue with
respect to such claims during the year, we utilize studies prepared by an independent consulting actuarial
firm. Job-related accidental injury and occupational claims are subject to the Federal Employers’ Liability Act
(FELA), which is applicable only to railroads. FELA’s fault-based system produces results that are unpredictable
and inconsistent as compared with a no-fault workers’ compensation system. The variability inherent in this
system could result in actual costs being different from the liability recorded. While the ultimate amount of
claims incurred is dependent on future developments, in our opinion, the recorded liability is adequate to cover
the future payments of claims and is supported by the most recent actuarial study. In all cases, we record a
liability when the expected loss for the claim is both probable and estimable.
The Consolidated Balance Sheets reflect long-term receivables for estimated recoveries from our insurance
carriers for claims associated with the January 6, 2005, derailment in Graniteville, S.C. In the first quarter of
2011, we received an unfavorable ruling for an arbitration claim with an insurance carrier, and were denied
recovery of the contested portion of the claim. As a result, we recorded a $43 million charge for the receivables
associated with the contested portion of the claim and a $15 million charge for other receivables affected by the
ruling for which recovery is no longer probable.
Employee personal injury claims – The largest component of casualties and other claims expense is employee
personal injury costs. The independent actuarial firm engaged by us provides quarterly studies to aid in valuing
our employee personal injury liability and estimating personal injury expense. The actuarial firm studies our
historical patterns of reserving for claims and subsequent settlements, taking into account relevant outside
influences. The actuarial firm uses the results of these analyses to estimate the ultimate amount of liability, which
includes amounts for incurred but unasserted claims. We adjust the liability quarterly based upon our assessment
and the results of the study. Our estimate of loss liabilities is subject to inherent limitation given the difficulty of
predicting future events such as jury decisions, court interpretations, or legislative changes and as such the actual
loss may vary from the estimated liability recorded.
Occupational claims – Occupational claims (including asbestosis and other respiratory diseases, as well as
conditions allegedly related to repetitive motion) are often not caused by a specific accident or event but rather
allegedly result from a claimed exposure over time. Many such claims are being asserted by former or retired
employees, some of whom have not been employed in the rail industry for decades. The independent actuarial
firm provides an estimate of the occupational claims liability based upon our history of claim filings, severity,
payments, and other pertinent facts. The liability is dependent upon judgments we make as to the specific case
reserves as well as judgments of the actuarial firm in the quarterly studies. The actuarial firm’s estimate of
ultimate loss includes a provision for those claims that have been incurred but not reported. This provision is
derived by analyzing industry data and projecting our experience into the future as far as can be reasonably
determined. We adjust the liability quarterly based upon our assessment and the results of the study. However, it
is possible that the recorded liability may not be adequate to cover the future payment of claims. Adjustments to
the recorded liability are reflected in operating expenses in the periods in which such adjustments become known.
K75
Third-party claims – We record a liability for third-party claims including those for highway crossing accidents,
trespasser and other injuries, automobile liability, property damage, and lading damage. The actuarial firm assists
us with the calculation of potential liability for third-party claims, except lading damage, based upon our
experience including the number and timing of incidents, amount of payments, settlement rates, number of open
claims, and legal defenses. The actuarial estimate includes a provision for claims that have been incurred but not
reported. We adjust the liability quarterly based upon our assessment and the results of the study. Given the
inherent uncertainty in regard to the ultimate outcome of third-party claims, it is possible that the actual loss may
differ from the estimated liability recorded.
Environmental Matters
We are subject to various jurisdictions’ environmental laws and regulations. We record a liability where such
liability or loss is probable and its amount can be estimated reasonably. Claims, if any, against third parties, for
recovery of cleanup costs we have incurred are reflected as receivables (when collection is probable) in the
Consolidated Balance Sheets and are not netted against the associated liability. Environmental engineers
regularly participate in ongoing evaluations of all known sites and in determining any necessary adjustments to
liability estimates. We have an Environmental Policy Council, composed of senior managers, to oversee and
interpret our environmental policy.
Our Consolidated Balance Sheets include liabilities for environmental exposures of $58 million at December 31,
2013, and $42 million at December 31, 2012 (of which $15 million is classified as a current liability at
December 31, 2013 and $12 million at December 31, 2012). At December 31, 2013, the liability represents our
estimate of the probable cleanup and remediation costs based on available information at 142 known locations
and projects compared with 146 locations and projects at December 31, 2012. At December 31, 2013, ten sites
accounted for $30 million of the liability, and no individual site was considered to be material. We anticipate that
much of this liability will be paid out over five years; however, some costs will be paid out over a longer period.
At 12 locations, one or more of our subsidiaries in conjunction with a number of other parties have been identified
as potentially responsible parties under the Comprehensive Environmental Response, Compensation and Liability
Act of 1980 or comparable state statutes that impose joint and several liability for cleanup costs. We calculate our
estimated liability for these sites based on facts and legal defenses applicable to each site and not solely on the
basis of the potential for joint liability.
With respect to known environmental sites (whether identified by us or by the EPA or comparable state
authorities), estimates of our ultimate potential financial exposure for a given site or in the aggregate for all such
sites are necessarily imprecise because of the widely varying costs of currently available cleanup techniques,
unpredictable contaminant recovery and reduction rates associated with available cleanup technologies, the likely
development of new cleanup technologies, the difficulty of determining in advance the nature and full extent of
contamination and each potential participant’s share of any estimated loss (and that participant’s ability to bear it),
and evolving statutory and regulatory standards governing liability.
The risk of incurring environmental liability – for acts and omissions, past, present, and future – is inherent in the
railroad business. Some of the commodities in our traffic mix, particularly those classified as hazardous
materials, pose special risks that we work diligently to minimize. In addition, several of our subsidiaries own, or
have owned, land used as operating property, or which is leased and operated by others, or held for sale. Because
environmental problems that are latent or undisclosed may exist on these properties, there can be no assurance
that we will not incur environmental liabilities or costs with respect to one or more of them, the amount and
materiality of which cannot be estimated reliably at this time. Moreover, lawsuits and claims involving these and
potentially other unidentified environmental sites and matters are likely to arise from time to time. The resulting
liabilities could have a significant effect on financial position, results of operations, or liquidity in a particular
year or quarter.
K76
Based on our assessment of the facts and circumstances now known, we believe we have recorded the probable
and reasonably estimable costs for dealing with those environmental matters of which we are aware. Further, we
believe that it is unlikely that any known matters, either individually or in the aggregate, will have a material
adverse effect on our financial position, results of operations, or liquidity.
Insurance
We obtain on behalf of ourself and our subsidiaries insurance for potential losses for third-party liability and first-
party property damages. We are currently self-insured up to $50 million and above $1.0 billion per occurrence
and/or policy year for bodily injury and property damage to third parties and up to $25 million and above
$175 million per occurrence and/or policy year for property owned by us or in our care, custody, or control.
Purchase Commitments
At December 31, 2013, we had outstanding purchase commitments totaling approximately $353 million for long-
term service contracts through 2019 as well as locomotives, track material, and freight cars, in connection with
our capital programs through 2018.
Change-In-Control Arrangements
We have compensation agreements with certain officers and key employees that become operative only upon a
change in control of Norfolk Southern, as defined in those agreements. The agreements provide generally for
payments based on compensation at the time of a covered individual’s involuntary or other specified termination
and for certain other benefits.
Guarantees
In a number of instances, we have agreed to indemnify lenders for additional costs they may bear as a result of
certain changes in laws or regulations applicable to their loans. Such changes may include impositions or
modifications with respect to taxes, duties, reserves, liquidity, capital adequacy, special deposits, and similar
requirements relating to extensions of credit by, deposits with, or the assets or liabilities of such lenders. The
nature and timing of changes in laws or regulations applicable to our financings are inherently unpredictable, and
therefore our exposure in connection with the foregoing indemnifications cannot be quantified. No liability has
been recorded related to these indemnifications.
We have agreed to indemnify parties in a number of transactions for U.S. income tax withholding imposed as a
result of changes in U.S. tax law. In all cases, we have the right to unwind the related transaction if the
withholding cannot be avoided in the future. Because these indemnities would be triggered and are dependent
upon a change in the tax law, the maximum exposure is not quantifiable. We do not believe it is likely that we
will be required to make any payments under these indemnities.
At December 31, 2013, certain Norfolk Southern subsidiaries are contingently liable as guarantors with respect to
$7 million of indebtedness, due in 2019, of an entity in which they have an ownership interest, the Terminal
Railroad Association of St. Louis. Four other railroads are also jointly and severally liable as guarantors for this
indebtedness. No liability has been recorded related to this guaranty.
K77
NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES
QUARTERLY FINANCIAL DATA
(Unaudited)
2013
Railway operating revenues
Income from railway operations
Net income
Earnings per share:
Basic
Diluted
2012
Railway operating revenues
Income from railway operations
Net income
Earnings per share:
Basic
Diluted
Three Months Ended
March 31
June 30
September 30
December 31
($ in millions, except per share amounts)
$
$
2,738 $
691
450
1.43
1.41
2,789 $
745
410
1.24
1.23
2,802 $
836
465
1.47
1.46
2,874 $
934
524
1.62
1.60
2,824 $
849
482
1.55
1.53
2,693 $
731
402
1.26
1.24
2,881
881
513
1.66
1.64
2,684
714
413
1.31
1.30
K78
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our Chief Executive Officer and Chief Financial Officer, with the assistance of management, evaluated the
effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934, as amended (Exchange Act)) at December 31, 2013. Based on such
evaluation, our officers have concluded that, at December 31, 2013, our disclosure controls and procedures were
effective to ensure that information required to be disclosed in our reports under the Exchange Act is recorded,
processed, summarized, and reported, within the time period specified in the SEC’s rules and forms, and that such
information is accumulated and communicated to management, including the Chief Executive Officer and the
Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Internal Control Over Financial Reporting
We are responsible for establishing and maintaining adequate internal control over financial reporting. Our
internal control over financial reporting includes those policies and procedures that pertain to our ability to record,
process, summarize, and report reliable financial data. We recognize that there are inherent limitations in the
effectiveness of any internal control over financial reporting, including the possibility of human error and the
circumvention or overriding of internal control. Accordingly, even effective internal control over financial
reporting can provide only reasonable assurance with respect to financial statement preparation. Further, because
of changes in conditions, the effectiveness of internal control over financial reporting may vary over time.
In order to ensure that our internal control over financial reporting is effective, we regularly assess such controls
and did so most recently for our financial reporting at December 31, 2013. This assessment was based on criteria
for effective internal control over financial reporting set forth by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO) in Internal Control-Integrated Framework (1992). Based on our assessment,
we have concluded that we maintained effective internal control over financial reporting at December 31, 2013.
Our Board of Directors, acting through its Audit Committee, is responsible for the oversight of our accounting
policies, financial reporting, and internal control. The Audit Committee of our Board of Directors is comprised
entirely of outside directors who are independent of management. The independent registered public accounting
firm and our internal auditors have full and unlimited access to the Audit Committee, with or without
management, to discuss the adequacy of internal control over financial reporting, and any other matters which
they believe should be brought to the attention of the Audit Committee.
We have issued a report of our assessment of internal control over financial reporting, and our independent
registered public accounting firm has issued an attestation report on our internal control over financial reporting at
December 31, 2013. These reports appear in Part II, Item 8 of this report on Form 10-K.
During the fourth quarter of 2013, we have not identified any changes in internal control over financial reporting
that have materially affected, or are reasonably likely to materially effect, our internal control over financial
reporting.
Item 9B. Other Information
None.
K79
PART III
NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES
Item 10. Directors, Executive Officers, and Corporate Governance
In accordance with General Instruction G(3), information called for by Part III, Item 10, is incorporated herein by
reference from the information appearing under the caption “Election of Directors,” under the caption “Section
16(a) Beneficial Ownership Reporting Compliance,” under the caption “Corporate Governance,” and under the
caption “Committees” in our definitive Proxy Statement for the Annual Meeting of Stockholders to be held on
May 8, 2014, which definitive Proxy Statement will be filed electronically with the SEC pursuant to Regulation
14A. The information regarding executive officers called for by Item 401 of Regulation S-K is included in Part I
hereof beginning under “Executive Officers of the Registrant.”
Item 11. Executive Compensation
In accordance with General Instruction G(3), information called for by Part III, Item 11, is incorporated herein by
reference from the information:
(cid:120)
(cid:120)
(cid:120)
appearing under the subcaption “Compensation” under the caption “Board of Directors” for directors,
including the “2013 Non-Employee Director Compensation Table” and the “Narrative to Non-Employee
Director Compensation Table;”
appearing under the caption “Executive Compensation” for executives, including the “Compensation
Discussion and Analysis,” the information appearing in the “Summary Compensation Table” and the
“2013 Grants of Plan-Based Awards” table, including the narrative to such tables, the “Outstanding
Equity Awards at Fiscal Year-End 2013” and “Option Exercises and Stock Vested in 2013” tables, and
the tabular and narrative information appearing under the subcaptions “Retirement Benefits,” “Deferred
Compensation,” and “Potential Payments Upon a Change in Control or Other Termination of
Employment;” and
appearing under the captions “Compensation Committee Interlocks and Insider Participation,”
“Compensation Policy Risk Assessment,” and “Compensation Committee Report,”
in each case included in our definitive Proxy Statement for the Annual Meeting of Stockholders to be held on
May 8, 2014, which definitive Proxy Statement will be filed electronically with the SEC pursuant to Regulation
14A.
K80
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
In accordance with General Instruction G(3), information on security ownership of certain beneficial owners and
management called for by Item 403 of Regulation S-K, Part III, Item 12, is incorporated herein by reference from
the information appearing under the caption “Beneficial Ownership of Stock” in our definitive Proxy Statement
for the Annual Meeting of Stockholders to be held on May 8, 2014, which definitive Proxy Statement will be filed
electronically with the SEC pursuant to Regulation 14A.
Equity Compensation Plan Information (at December 31, 2013)
Plan
Category
Equity compensation plans
approved by securities holders(2)
Equity compensation plans
not approved by securities holders(3)
Total
Number of
securities
to be issued upon
exercise of
Weighted-
average
exercise price
of outstanding
outstanding options, options, warrants
warrants and rights
(a)
and rights
(b)
Number of securities
remaining available
for future issuance
under equity
compensation plans (1)
(c)
8,899,753 (4)
$
53.32 (5)
5,945,033
1,163,586
10,063,339
60.69
1,184,256 (6)
7,129,289
(1) Excludes securities reflected in column (a)
(2) LTIP, excluding five million shares for broad-based issuance to non-officers.
(3) LTIP’s five million shares for broad-based issuance to non-officers, TSOP and the Director’s Restricted Stock Plan.
(4) Includes options, RSUs and PSUs granted under LTIP that may be settled in shares of stock.
(5) Calculated without regard to 2,911,661, outstanding RSUs and PSUs at December 31, 2013.
(6) Of the shares remaining available for grant under plans not approved by stockholders, 12,000 are available for grant
as restricted stock under the Directors’ Restricted Stock Plan.
K81
Norfolk Southern Corporation Long-Term Incentive Plan (LTIP)
Established on June 28, 1983, and approved by our stockholders at their Annual Meeting held on May 10, 1984,
LTIP was adopted to promote the success of our company by providing an opportunity for non-employee
Directors, officers, and other key employees to acquire a proprietary interest in the Corporation. On January 23,
2001, our Board of Directors further amended LTIP and approved the issuance of an additional 5,000,000 shares
of authorized but unissued Common Stock to participants who are not officers of our company. The issuance of
these shares was broadly-based, and stockholder approval of these shares was not required. Accordingly, this
portion of LTIP is included in the number of securities available for future issuance for plans not approved by
stockholders. Also on January 23, 2001, our Board of Directors amended LTIP, which amendment was approved
by shareholders on May 10, 2001, that included the reservation for issuance of an additional 30,000,000 shares of
authorized but unissued Common Stock.
In May 2010, our shareholders approved an amended LTIP that adopted a fungible share reserve ratio so that, for
awards granted after May 13, 2010, the number of shares remaining for issuance under the amended LTIP will be
reduced (i) by 1 for each award granted as an option or stock-settled stock appreciation right, or (ii) by 1.61 for an
award made in the form other than an option or stock-settled stock appreciation right. Any shares of Common
Stock subject to options, PSUs, restricted shares, or RSUs which are not issued as Common Stock will again be
available for award under LTIP after the expiration or forfeiture of an award.
Non-employee Directors, officers, and other key employees residing in the United States or Canada are eligible
for selection to receive LTIP awards. Under LTIP, the Compensation Committee (Committee), or the
Corporation’s chief executive officer to the Committee delegates award-making authority pursuant to LTIP, may
grant incentive stock options, nonqualified stock options, stock appreciation rights, RSUs, restricted shares, PSUs,
and performance shares. In addition, dividend equivalent payments may be awarded for options, RSUs, and
PSUs. Awards under LTIP may be made subject to forfeiture under certain circumstances and may establish such
other terms and conditions for the awards as provided in LTIP.
For options granted after May 13, 2010, the option price will be at least the higher of (i) the average of the high
and low prices at which Common Stock is traded on the date of grant, or (ii) the closing price of Common Stock
on the date of the grant. All options are subject to a vesting period of at least one year, and the term of the option
will not exceed ten years. LTIP specifically prohibits option repricing without stockholder approval, except that
adjustments may be made in the event of changes in our capital structure or Common Stock.
PSUs entitle a recipient to receive performance-based compensation at the end of a three-year cycle based on our
performance during that period. For the 2013 PSU awards, corporate performance will be measured using three
equally weighted standards established by the Committee: (1) three-year average return on average capital
invested, (2) three-year average operating ratio, and (3) total return to stockholders measured at the end of the
three-year period. For the 2013 PSU awards, PSUs will be settled in shares of Common Stock.
RSUs are payable in cash or in shares of Common Stock at the end of a restriction period of not less than 36
months and not more than 60 months. During the restriction period, the holder of the RSUs has no beneficial
ownership interest in the Common Stock represented by the RSUs and has no right to vote the shares represented
by the units or to receive dividends (except for dividend equivalent payment rights that may be awarded with
respect to the RSUs). The Committee at its discretion may waive the restriction period, but settlement of any
RSUs will occur on the same settlement date as would have applied absent a waiver of restrictions, if no
performance goals were imposed.
K82
Norfolk Southern Corporation Thoroughbred Stock Option Plan (TSOP)
Our Board of Directors adopted TSOP on January 26, 1999, to promote the success of our company by providing
an opportunity for nonagreement employees to acquire a proprietary interest in our company and thereby to
provide an additional incentive to nonagreement employees to devote their maximum efforts and skills to the
advancement, betterment, and prosperity of our company and our stockholders. Under TSOP there were
6,000,000 shares of authorized but unissued Common Stock reserved for issuance. TSOP has not been and is not
required to have been approved by our stockholders.
Active full-time nonagreement employees residing in the United States or Canada are eligible for selection to
receive TSOP awards. Under TSOP, the Committee, or the Corporation’s chief executive officer to the extent the
Committee delegates award-making authority pursuant to TSOP, may grant nonqualified stock options subject to
such terms and conditions as provided in TSOP.
The option price may not be less than the average of the high and low prices at which Common Stock is traded on
the date of the grant. All options are subject to a vesting period of at least one year, and the term of the option
will not exceed ten years. TSOP specifically prohibits repricing without stockholder approval, except for capital
adjustments.
Norfolk Southern Corporation Directors’ Restricted Stock Plan (Plan)
The Plan was adopted on January 1, 1994, and is designed to increase ownership of Common Stock by our non-
employee Directors so as to further align their ownership interest in our company with that of our stockholders.
The Plan has not been and is not required to have been approved by our stockholders. Currently, a maximum of
66,000 shares of Common Stock may be granted under the Plan. To make grants eligible to Directors, we
purchase, through one or more subsidiary companies, the number of shares required in open-market transactions
at prevailing market prices, or make such grants from Common Stock already owned by one or more of our
subsidiary companies.
Only non-employee Directors who are not and never have been employees of our company are eligible to
participate in the Plan. Upon becoming a Director, each eligible Director receives a one-time grant of 3,000
restricted shares of Common Stock. No individual member of the Board exercises discretion concerning the
eligibility of any Director or the number of shares granted.
The restriction period applicable to restricted shares granted under the Plan begins on the date of the grant and
ends on the earlier of the recipient’s death or the day after the recipient ceases to be a Director by reason of
disability or retirement. During the restriction period, shares may not be sold, pledged, or otherwise
encumbered. Directors will forfeit the restricted shares if they cease to serve as a Director of our company for
reasons other than their disability, retirement, or death.
K83
Item 13. Certain Relationships and Related Transactions, and Director Independence
In accordance with General Instruction G(3), information called for by Part III, Item 13, is incorporated herein by
reference from the information appearing under the caption “Transactions with Related Persons” and under the
caption “Director Independence” in our definitive Proxy Statement for the Annual Meeting of Stockholders to be
held on May 8, 2014, which definitive Proxy Statement will be filed electronically with the SEC pursuant to
Regulation 14A.
Item 14. Principal Accountant Fees and Services
In accordance with General Instruction G(3), information called for by Part III, Item 14, is incorporated herein by
reference from the information appearing under the caption “Ratification of Appointment of Independent
Registered Public Accounting Firm” in our definitive Proxy Statement for the Annual Meeting of Stockholders to
be held on May 8, 2014, which definitive Proxy Statement will be filed electronically with the SEC pursuant to
Regulation 14A.
K84
Page
K40
K41
K43
PART IV
NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES
Item 15. Exhibits and Financial Statement Schedules
(A)
The following documents are filed as part of this report:
1. Index to Consolidated Financial Statements
Report of Management
Reports of Independent Registered Public Accounting Firm
Consolidated Statements of Income, Years ended December 31, 2013, 2012, and 2011
Consolidated Statements of Comprehensive Income, Years ended December 31, 2013,
2012, and 2011
K44
K45
Consolidated Balance Sheets at December 31, 2013 and 2012
Consolidated Statements of Cash Flows, Years ended December 31, 2013, 2012, and 2011 K46
Consolidated Statements of Changes in Stockholders’ Equity, Years ended
December 31, 2013, 2012, and 2011
Notes to Consolidated Financial Statements
K47
K48
2. Financial Statement Schedule:
The following consolidated financial statement schedule should be read in connection with
the consolidated financial statements:
Index to Consolidated Financial Statement Schedule
Schedule II – Valuation and Qualifying Accounts
K99
Schedules other than the one listed above are omitted either because they are not required
or are inapplicable, or because the information is included in the consolidated financial
statements or related notes.
Exhibit
Number
3
3(i)
3. Exhibits
Description
Articles of Incorporation and Bylaws –
The Restated Articles of Incorporation of Norfolk Southern Corporation are incorporated
by reference to Exhibit 3(i) to Norfolk Southern Corporation’s 10-K filed on March 5,
2001.
K85
3(ii)
3(iii)
An amendment to the Articles of Incorporation of Norfolk Southern Corporation is
incorporated by reference to Exhibit 3(i) to Norfolk Southern Corporation’s Form 8-K filed
on May 18, 2010.
The Bylaws of Norfolk Southern Corporation, as amended January 21, 2014, are
incorporated by reference to Exhibit 3(ii) to Norfolk Southern Corporation’s Form 8-K
filed on January 21, 2014.
4
Instruments Defining the Rights of Security Holders, Including Indentures:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
Indenture, dated as of January 15, 1991, from Norfolk Southern Corporation to First Trust of New
York, National Association, as Trustee, is incorporated by reference to Exhibit 4.1 to Norfolk
Southern Corporation’s Registration Statement on Form S-3 (No. 33-38595).
First Supplemental Indenture, dated May 19, 1997, between Norfolk Southern Corporation and
First Trust of New York, National Association, as Trustee, related to the issuance of notes in the
principal amount of $4.3 billion, is incorporated herein by reference to Exhibit 1.1(d) to Norfolk
Southern Corporation’s Form 8-K filed on May 21, 1997.
Second Supplemental Indenture, dated April 26, 1999, between Norfolk Southern Corporation and
U.S. Bank Trust National Association, as Trustee, is incorporated herein by reference to Exhibit
1.1(c) to Norfolk Southern Corporation’s Form 8-K filed on April 30, 1999.
Fourth Supplemental Indenture, dated as of February 6, 2001, between Norfolk Southern
Corporation and U.S. Bank Trust National Association, as Trustee, related to the issuance of notes
in the principal amount of $1 billion, is incorporated herein by reference to Exhibit 4.1 to Norfolk
Southern Corporation’s Form 8-K filed on February 7, 2001.
Eighth Supplemental Indenture, dated as of September 17, 2004, between Norfolk Southern
Corporation and U.S. Bank Trust National Association, as Trustee, related to the issuance of
5.257% Notes due 2014 (Securities) in the aggregate principal amount of $441.5 million in
connection with Norfolk Southern Corporation’s offer to exchange the Securities and cash for up to
$400 million of its outstanding 7.350% Notes due 2007, is incorporated herein by reference to
Exhibit 4.1 to Norfolk Southern Corporation’s Form 8-K filed on September 23, 2004.
Indenture, dated August 27, 2004, among PRR Newco, Inc., as Issuer, and Norfolk Southern
Railway Company, as Guarantor, and The Bank of New York, as Trustee, is incorporated herein by
reference to Exhibit 4(1) to Norfolk Southern Corporation’s Form 10-Q filed on October 28, 2004.
First Supplemental Indenture, dated August 27, 2004, among PRR Newco, Inc., as Issuer, and
Norfolk Southern Railway Company, as Guarantor, and The Bank of New York, as Trustee, related
to the issuance of notes in the principal amount of approximately $451.8 million, is incorporated
herein by reference to Exhibit 4(m) to Norfolk Southern Corporation’s Form 10-Q filed on October
28, 2004.
Ninth Supplemental Indenture, dated as of March 11, 2005, between Norfolk Southern Corporation
and U.S. Bank Trust National Association, as Trustee, related to the issuance of notes in the
principal amount of $300 million, is incorporated herein by reference to Exhibit 4.1 to Norfolk
Southern Corporation’s Form 8-K filed on March 15, 2005.
K86
(i)
(j)
(k)
(l)
(m)
(n)
(o)
(p)
(q)
(r)
Tenth Supplemental Indenture, dated as of May 17, 2005, between Norfolk Southern Corporation
and U.S. Bank Trust National Association, as Trustee, related to the issuance of notes in the
principal amount of $366.6 million, is incorporated herein by reference to Exhibit 99.1 to Norfolk
Southern Corporation’s Form 8-K filed on May 18, 2005.
Eleventh Supplemental Indenture, dated as of May 17, 2005, between Norfolk Southern
Corporation and U.S. Bank Trust National Association, as Trustee, related to the issuance of notes
in the principal amount of $350 million, is incorporated herein by reference to Exhibit 99.2 to
Norfolk Southern Corporation’s Form 8-K filed on May 18, 2005.
Twelfth Supplemental Indenture, dated as of August 26, 2010, between Norfolk Southern
Corporation and U.S. Bank Trust National Association, as Trustee, related to the issuance of notes
in the principal amount of $250 million, is incorporated herein by reference to Exhibit 4.2 to
Norfolk Southern Corporation’s Form 8-K filed on August 26, 2010.
Indenture, dated as of April 4, 2008, between Norfolk Southern Corporation and U.S. Bank Trust
National Association, as Trustee, related to the issuance of notes in the principal amount of $600
million, is incorporated herein by reference to Exhibit 4.1 to Norfolk Southern Corporation’s
Form 8-K filed on April 9, 2008.
Indenture, dated as of January 15, 2009, between Norfolk Southern Corporation and U.S. Bank
Trust National Association, as Trustee, related to the issuance of notes in the principal amount of
$500 million, is incorporated herein by reference to Exhibit 4.1 to Norfolk Southern Corporation’s
Form 8-K filed on January 20, 2009.
Indenture, dated as of June 1, 2009, between Norfolk Southern Corporation and U.S. Bank Trust
National Association, as Trustee, is incorporated herein by reference to Exhibit 4.1 to Norfolk
Southern Corporation’s Form 8-K filed on June 1, 2009.
First Supplemental Indenture, dated as of June 1, 2009, between Norfolk Southern Corporation and
U.S. Bank Trust National Association, as Trustee, related to the issuance of notes in the principal
amount of $500 million, is incorporated herein by reference to Exhibit 4.2 to Norfolk Southern
Corporation’s Form 8-K filed on June 1, 2009.
Second Supplemental Indenture, dated as of May 23, 2011, between the Registrant and U.S. Bank
Trust National Association, as Trustee, related to the issuance of notes in the principal amount of
$400 million, is incorporated by reference to Exhibit 4.1 to Norfolk Southern Corporation’s Form
8-K filed on May 23, 2011.
Indenture, dated as of September 14, 2011, between the Registrant and U.S. Bank Trust National
Association, as Trustee, related to the issuance of notes in the principal amount of $595,504,000, is
incorporated by reference to Exhibit 4.1 to Norfolk Southern Corporation’s Form 8-K filed on
September 15, 2011.
Third Supplemental Indenture, dated as of September 14, 2011, between the Registrant and U.S.
Bank Trust National Association, as Trustee, related to the issuance of notes in the principal
amount of $4,492,000, is incorporated by reference to Exhibit 4.2 to Norfolk Southern
Corporation’s Form 8-K filed on September 15, 2011.
K87
(s)
(t)
(u)
(v)
(w)
(x)
(y)
Fourth Supplemental Indenture, dated as of November 17, 2011, between the Registrant and U.S.
Bank Trust National Association, as Trustee, related to the issuance of two series of notes, one in
the principal amount of $500 million and one in the principal amount of $100 million, is
incorporated herein by reference to Exhibit 4.1 to Norfolk Southern Corporation’s Form 8-K filed
on November 17, 2011.
Indenture, dated as of March 15, 2012, between the Registrant and U.S. Bank Trust National
Association, as Trustee, is incorporated herein by reference to Exhibit 4.1 to Norfolk Southern
Corporation’s Form 8-K filed on March 15, 2012.
First Supplemental Indenture, dated as of March 15, 2012, between the Registrant and U.S. Bank
Trust National Association, as Trustee, is incorporated herein by reference to Exhibit 4.2 to Norfolk
Southern Corporation’s Form 8-K filed on March 15, 2012.
Indenture, dated as of August 20, 2012, between the Registrant and U.S. Bank Trust National
Association, as Trustee, is incorporated herein by reference to Exhibit 4.1 to the Registrant’s Form
8-K filed on August 21, 2012.
Second Supplemental Indenture, dated as of September 7, 2012, between the Registrant and U.S.
Bank Trust National Association, as Trustee, is incorporated herein by reference to Exhibit 4.1 to
Norfolk Southern Corporation’s Form 8-K filed on September 7, 2012.
Third Supplemental Indenture, dated as of August 13, 2013, between the Registrant and U.S. Bank
Trust National Association, as Trustee, related to the issuance of notes in the principal amount of
$500,000,000, is incorporated herein by reference to Exhibit 4.1 to Norfolk Southern Corporation’s
Form 8-K filed on August 13, 2013.
Fourth Supplemental Indenture, dated as of November 21, 2013, between the Registrant and U.S.
Bank Trust National Association, as Trustee, related to the issuance of notes in the principal amount
of $400,000,000, is incorporated herein by reference to Exhibit 4.1 to Norfolk Southern
Corporation’s Form 8-K filed on November 21, 2013.
In accordance with Item 601(b)(4)(iii) of Regulation S-K, copies of other instruments of Norfolk
Southern Corporation and its subsidiaries with respect to the rights of holders of long-term debt are
not filed herewith, or incorporated by reference, but will be furnished to the Commission upon
request.
10
Material Contracts -
(a)
The Transaction Agreement, dated as of June 10, 1997, by and among CSX and CSX
Transportation, Inc., Registrant, Norfolk Southern Railway Company, Conrail Inc., Consolidated
Rail Corporation, and CRR Holdings LLC, with certain schedules thereto, previously filed, is
incorporated herein by reference to Exhibit 10(a) to Norfolk Southern Corporation’s Form 10-K
filed on February 24, 2003.
K88
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
Amendment No. 1 dated as of August 22, 1998, to the Transaction Agreement, dated as of June 10,
1997, by and among CSX Corporation, CSX Transportation, Inc., Norfolk Southern Corporation,
Norfolk Southern Railway Company, Conrail, Inc., Consolidated Rail Corporation, and CRR
Holdings LLC, is incorporated herein by reference from Exhibit 10.1 to Norfolk Southern
Corporation’s Form 10-Q filed on August 11, 1999.
Amendment No. 2 dated as of June 1, 1999, to the Transaction Agreement, dated June 10, 1997, by
and among CSX Corporation, CSX Transportation, Inc., Norfolk Southern Corporation, Norfolk
Southern Railway Company, Conrail, Inc., Consolidated Rail Corporation, and CRR Holdings LLC,
is incorporated herein by reference from Exhibit 10.2 to Norfolk Southern Corporation’s Form 10-Q
filed on August 11, 1999.
Amendment No. 3 dated as of June 1, 1999, and executed in April 2004, to the Transaction
Agreement, dated June 10, 1997, by and among CSX Corporation, CSX Transportation, Inc.,
Norfolk Southern Corporation, Norfolk Southern Railway Company, Conrail, Inc., Consolidated
Rail Corporation, and CRR Holdings LLC, is incorporated herein by reference from Exhibit 10(dd)
to Norfolk Southern Corporation’s Form 10-Q filed on July 30, 2004.
Amendment No. 5 to the Transaction Agreement, dated as of August 27, 2004, by and among CSX
Corporation, CSX Transportation, Inc., Norfolk Southern Corporation, Norfolk Southern Railway
Company, Conrail, Inc., Consolidated Rail Corporation, and CRR Holdings LLC, is incorporated
herein by reference to Exhibit 10.1 to Norfolk Southern Corporation’s Form 8-K filed on September
2, 2004.
Amendment No. 6 dated as of April 1, 2007, to the Transaction Agreement, dated June 10, 1997, by
and among CSX Corporation, CSX Transportation, Inc., Norfolk Southern Railway Company,
Conrail, Inc., Consolidated Rail Corporation, and CRR Holdings LLC, is incorporated herein by
reference to Exhibit 10.5 to Norfolk Southern Corporation’s Form 10-Q filed on July 27, 2007.
Shared Assets Area Operating Agreement for North Jersey, dated as of June 1, 1999, by and among
Consolidated Rail Corporation, CSX Transportation, Inc., and Norfolk Southern Railway Company,
with exhibit thereto, is incorporated herein by reference from Exhibit 10.4 to Norfolk Southern
Corporation’s Form 10-Q filed on August 11, 1999.
Shared Assets Area Operating Agreement for Detroit, dated as of June 1, 1999, by and among
Consolidated Rail Corporation, CSX Transportation, Inc., and Norfolk Southern Railway Company,
with exhibit thereto, is incorporated herein by reference from Exhibit 10.6 to Norfolk Southern
Corporation’s Form 10-Q filed on August 11, 1999.
Shared Assets Area Operating Agreement for South Jersey/Philadelphia, dated as of June 1, 1999,
by and among Consolidated Rail Corporation, CSX Transportation, Inc., and Norfolk Southern
Railway Company, with exhibit thereto, is incorporated herein by reference from Exhibit 10.5 to
Norfolk Southern Corporation’s Form 10-Q filed on August 11, 1999.
Amendment No. 1, dated as of June 1, 2000, to the Shared Assets Area Operating Agreements for
North Jersey, South Jersey/Philadelphia, and Detroit, dated as of June 1, 1999, by and among
Consolidated Rail Corporation, CSX Transportation, Inc., and Norfolk Southern Railway Company,
with exhibits thereto, is incorporated herein by reference to Exhibit 10(h) to Norfolk Southern
Corporation’s Form 10-K filed on March 5, 2001.
K89
(k)
(l)
(m)
(n)
(o)
(p)
(q)
(r)
Amendment No. 2, dated as of January 1, 2001, to the Shared Assets Area Operating Agreements
for North Jersey, South Jersey/Philadelphia, and Detroit, dated as of June 1, 1999, by and among
Consolidated Rail Corporation, CSX Transportation, Inc., and Norfolk Southern Railway Company,
with exhibits thereto, is incorporated herein by reference to Exhibit 10(j) to Norfolk Southern
Corporation’s Form 10-K filed on February 21, 2002.
Amendment No. 3, dated as of June 1, 2001, and executed in May of 2002, to the Shared Assets
Area Operating Agreements for North Jersey, South Jersey/Philadelphia, and Detroit, dated as of
June 1, 1999, by and among Consolidated Rail Corporation, CSX Transportation, Inc., and Norfolk
Southern Railway Company, with exhibits thereto, is incorporated herein by reference to Exhibit
10(k) to Norfolk Southern Corporation’s Form 10-K filed on February 24, 2003.
Amendment No. 4, dated as of June 1, 2005, and executed in late June 2005, to the Shared Assets
Area Operating Agreements for North Jersey, South Jersey/Philadelphia, and Detroit, dated as of
June 1, 1999, by and among Consolidated Rail Corporation, CSX Transportation, Inc., and Norfolk
Southern Railway Company, with exhibits thereto, is incorporated herein by reference to Exhibit 99
to Norfolk Southern Corporation’s Form 8-K filed on July 1, 2005.
Monongahela Usage Agreement, dated as of June 1, 1999, by and among CSX Transportation, Inc.,
Norfolk Southern Railway Company, Pennsylvania Lines LLC, and New York Central Lines LLC,
with exhibit thereto, is incorporated herein by reference from -Exhibit 10.7 to Norfolk Southern
Corporation’s Form 10-Q filed on August 11, 1999.
The Agreement, entered into as of July 27, 1999, between North Carolina Railroad Company and
Norfolk Southern Railway Company, is incorporated herein by reference from Exhibit 10(i) to
Norfolk Southern Corporation’s Form 10-K filed on March 6, 2000.
First Amendment, dated March 19, 2007, to the Master Agreement dated July 27, 1999, by and
between North Carolina Railroad Company and Norfolk Southern Railway Company, is
incorporated herein by reference to Exhibit 10.3 to Norfolk Southern Corporation’s Form 10-Q filed
on July 27, 2007.
Second Amendment, dated December 28, 2009, to the Master Agreement dated July 27, 1999, by
and between North Carolina Railroad Company and Norfolk Southern Railway Company, is
incorporated herein by reference to Exhibit 10(q) to Norfolk Southern Corporation’s Form 10-K
filed on February 17, 2010 (Exhibits, annexes and schedules omitted. The Registrant will furnish
supplementary copies of such materials to the SEC upon request).
The Supplementary Agreement, entered into as of January 1, 1987, between the Trustees of the
Cincinnati Southern Railway and The Cincinnati, New Orleans and Texas Pacific Railway
Company (the latter a wholly owned subsidiary of Norfolk Southern Railway Company) –
extending and amending a Lease, dated as of October 11, 1881 – is incorporated by reference to
Exhibit 10(k) to Norfolk Southern Corporation’s Form 10-K filed on March 5, 2001.
(s)*,**
Norfolk Southern Corporation Executive Management Incentive Plan, as approved by shareholders
May 13, 2010 and as amended September 27, 2011, April 26, 2012, and November 26, 2013.
K90
(t)*
(u)*
(v)*
(w)*
(x)*
(y)
(z)*
(aa)
(bb)
(cc)*
The Norfolk Southern Corporation Officers’ Deferred Compensation Plan, as amended effective
September 26, 2000, is incorporated herein by reference to Exhibit 10(n) to Norfolk Southern
Corporation’s Form 10-K filed on March 5, 2001.
The Norfolk Southern Corporation Directors’ Restricted Stock Plan, adopted January 1, 1994, and
amended and restated effective as of August 1, 2012, is incorporated herein by reference to Exhibit
10.1 to Norfolk Southern Corporation’s Form 10-Q filed on October 25, 2012.
Supplemental Benefit Plan of Norfolk Southern Corporation and Participating Subsidiary
Companies, as amended effective January 1, 2009, is incorporated herein by reference to Exhibit
10.06 to Norfolk Southern Corporation’s Form 8-K filed on July 24, 2008.
Amendment to the Supplemental Benefit Plan of Norfolk Southern Corporation and Participating
Subsidiary Companies, effective as of January 1, 2009, is incorporated herein by reference to
Exhibit 10(x) to Norfolk Southern Corporation’s Form 10-K filed on February 18, 2009.
The Norfolk Southern Corporation Directors’ Charitable Award Program, as amended effective July
2007, is incorporated herein by reference to Exhibit 10.6 to Norfolk Southern Corporation’s Form
10-Q filed on July 27, 2007.
The Norfolk Southern Corporation Thoroughbred Stock Option Plan, as amended effective
July 22, 2013, is incorporated herein by reference to Exhibit 10.2 to Norfolk Southern
Corporation’s Form 10-Q filed on July 24, 2013.
The Norfolk Southern Corporation Executive Life Insurance Plan, as amended and restated
effective November 1, 2009, is incorporated herein by reference to Exhibit 10(cc) to Norfolk
Southern Corporation’s Form 10-K filed on February 17, 2010.
Distribution Agreement, dated as of July 26, 2004, by and among CSX Corporation, CSX
Transportation, Inc., CSX Rail Holding Corporation, CSX Northeast Holdings Corporation, Norfolk
Southern Corporation, Norfolk Southern Railway Company, CRR Holdings LLC, Green
Acquisition Corp., Conrail Inc., Consolidated Rail Corporation, New York Central Lines LLC,
Pennsylvania Lines LLC, NYC Newco, Inc., and PRR Newco, Inc., is incorporated herein by
reference to Exhibit 2.1 to Norfolk Southern Corporation’s Form 8-K filed on September 2, 2004.
Tax Agreement, dated as of August 27, 2004, by and among Green Acquisition Corp., Conrail Inc.,
Consolidated Rail Corporation, New York Central Lines LLC, and Pennsylvania Lines LLC, is
incorporated herein by reference to Exhibit 10.2 to Norfolk Southern Corporation’s Form 8-K filed
on September 2, 2004.
The description of Norfolk Southern Corporation’s executive physical reimbursement for non-
employee directors and certain executives is incorporated herein by reference to Norfolk Southern
Corporation’s Form 8-K filed on July 28, 2005.
(dd)*,**
The Norfolk Southern Corporation Long-Term Incentive Plan, as amended effective May 13, 2010,
and as amended July 23, 2013, and November 26, 2013.
K91
(ee)
(ff)
(gg)
(hh)
(ii)*
(jj)
(kk)
(ll)
(mm)
(nn)
(oo)
The Transaction Agreement, dated as of December 1, 2005, by and among Norfolk Southern
Corporation, The Alabama Great Southern Railroad Company, Kansas City Southern, and The
Kansas City Southern Railway Company, is incorporated herein by reference to Exhibit 10(II) to
Norfolk Southern Corporation’s Form 10-K filed on February 23, 2006 (Exhibits, annexes, and
schedules omitted. The Registrant will furnish supplementary copies of such materials to the SEC
upon request).
Amendment No. 1, dated as of January 17, 2006, by and among Norfolk Southern Corporation, The
Alabama Great Southern Railroad Company, Kansas City Southern, and The Kansas City Southern
Railroad , is incorporated herein by reference to Exhibit 10(mm) to Norfolk Southern Corporation’s
Form 10-K filed on February 23, 2006.
Amendment No. 2, dated as of May 1, 2006, to the Transaction Agreement, dated as of
December 1, 2005, by and among Norfolk Southern Corporation, The Alabama Great Southern
Railroad Company, Kansas City Southern, and The Kansas City Southern Railway Company is
incorporated herein by reference to Exhibit 10.1 to Norfolk Southern Corporation’s Form 8-K filed
on May 4, 2006.
Limited Liability Agreement of Meridian Speedway, LLC, dated as of May 1, 2006, by and among
the Alabama Great Southern Railroad Company and Kansas City Southern, is incorporated herein
by reference to Exhibit 10.2 to Norfolk Southern Corporation’s Form 8-K filed on May 4, 2006.
Retirement Plan of Norfolk Southern Corporation and Participating Subsidiary Companies effective
June 1, 1982, amended effective January 1, 2010, is incorporated herein by reference to Exhibit
10(rr) to Norfolk Southern Corporation’s Form 10-K filed on February 17, 2010.
Transfer and Administration Agreement dated as of November 8, 2007, is incorporated herein by
reference to Exhibit 99 to Norfolk Southern Corporation’s Form 8-K filed on November 14, 2007.
Amendment No. 2, dated as of May 19, 2009, to Transfer and Administration Agreement dated as
of November 8, 2007, is incorporated herein by reference to Exhibit 10.1 to Norfolk Southern
Corporation’s Form 10-Q filed on July 31, 2009.
Amendment No. 3, dated as of August 21, 2009, to Transfer and Administration Agreement dated
as of November 8, 2007, is incorporated herein by reference to Exhibit 10.1 to Norfolk Southern
Corporation’s Form 10-Q filed on October 30, 2009.
Amendment No. 4, dated as of October 22, 2009, to Transfer and Administration Agreement dated
as of November 8, 2007, is incorporated herein by reference to Exhibit 99 to Norfolk Southern
Corporation’s Form 8-K filed on October 22, 2009.
Amendment No. 5, dated as of December 23, 2009, to Transfer and Administration Agreement
dated as of November 8, 2007, is incorporated herein by reference to Exhibit 10(xx) to Norfolk
Southern Corporation’s Form 10-K filed on February 17, 2010.
Amendment No. 6, dated as of August 30, 2010, to Transfer and Administration Agreement dated
as of November 8, 2007, is incorporated herein by reference to Exhibit 10.1 to Norfolk Southern
Corporation’s Form 10-Q filed on October 29, 2010.
K92
(pp)
(qq)
(rr)
(ss)
(tt)
(uu)
(vv)
(ww)
(xx)
(yy)*
(zz)*
Amendment No. 7, dated as of October 21, 2010, to Transfer and Administration Agreement dated
as of November 8, 2007, is incorporated herein by reference to Exhibit 99 to Norfolk Southern
Corporation’s Form 8-K filed on October 22, 2010.
Amendment No. 8, dated as of October 20, 2011, to Transfer and Administration Agreement dated
as of November 8, 2007, is incorporated herein by reference to Exhibit 99 to Norfolk Southern
Corporation’s Form 8-K filed on October 20, 2011.
Amendment No. 9, dated as of October 18, 2012, to Transfer and Administration Agreement dated
as of November 8, 2007, is incorporated herein by reference to Exhibit 99 to Norfolk Southern
Corporation’s Form 8-K filed on October 22, 2012.
Amendment No. 10, dated as of October 17, 2013, to Transfer and Administration Agreement dated
as of November 8, 2007, is incorporated herein by reference to Exhibit 10.1 to Norfolk Southern
Corporation’s Form 8-K filed on October 18, 2013.
Dealer Agreement dated as of January 23, 2008, between the Registrant and J. P. Morgan Securities
Inc. is incorporated herein by reference to Exhibit 10.1 to Norfolk Southern Corporation’s
Form 8-K filed on January 25, 2008.
Dealer Agreement dated as of January 23, 2008, between the Registrant and Goldman, Sachs & Co.
is incorporated herein by reference to Exhibit 10.2 to Norfolk Southern Corporation’s Form 8-K
filed on January 25, 2008.
Omnibus Amendment, dated as of March 18, 2008, to the Transfer and Administration Agreement
dated as of November 8, 2007, is incorporated herein by reference to Exhibit 10.1 to Norfolk
Southern Corporation’s Form 10-Q filed on April 23, 2008.
Transaction Agreement (Pan Am Transaction Agreement), dated May 15, 2008, by and among
Norfolk Southern Railway Company, Pan Am Railways, Inc., Boston and Maine Corporation, and
Springfield Terminal Railway Company, is incorporated herein by reference to Exhibit 10.1 to
Norfolk Southern Corporation’s Form 10-Q filed on July 24, 2008 (Exhibits, annexes and schedules
omitted. The Registrant will furnish supplementary copies of such materials to the SEC upon
request).
Letter Agreement, dated October 21, 2008, by and among Norfolk Southern Railway Company, Pan
Am Railways, Inc., Boston and Maine Corporation, and Springfield Terminal Railway Company
amending certain terms of the Pan Am Transaction Agreement, is incorporated herein by reference
to Exhibit 10(rrr) to Norfolk Southern Corporation’s Form 10-K filed on February 18, 2009.
Directors’ Deferred Fee Plan of Norfolk Southern Corporation, as amended effective
January 1, 2009, is incorporated herein by reference to Exhibit 10.01 to Norfolk Southern
Corporation’s Form 8-K filed on July 24, 2008.
Norfolk Southern Corporation Executives’ Deferred Compensation Plan, as amended effective June
26, 2013, is incorporated herein by reference to Exhibit 10.1 to Norfolk Southern Corporation’s
Form 10-Q filed on July 24, 2013.
K93
(aaa)*
(bbb)*
(ccc)
(ddd)*
(eee)*
(fff)
Amendment to Norfolk Southern Corporation Officers’ Deferred Compensation Plan, effective
January 1, 2008, is incorporated herein by reference to Exhibit 10.03 to Norfolk Southern
Corporation’s Form 8-K filed on July 24, 2008.
Norfolk Southern Corporation Restricted Stock Unit Plan, as amended effective January 1, 2009, is
incorporated herein by reference to Exhibit 10.05 to Norfolk Southern Corporation’s Form 8-K filed
on July 24, 2008.
Amendment No. 1 to Transfer and Administration Agreement dated as of October 22, 2008, and
effective as of October 23, 2008, is incorporated herein by reference to Exhibit 99 to Norfolk
Southern Corporation’s Form 8-K filed on October 23, 2006.
Stock Unit Plan of Norfolk Southern Corporation dated as of July 24, 2001, as amended on
August 21, 2008, with an effective date of January 1, 2009, is incorporated herein by reference to
Exhibit 10.1 to Norfolk Southern Corporation’s Form 10-Q filed on October 24, 2008.
Form of Amended and Restated Change in Control Agreement between Norfolk Southern
Corporation and certain executive officers (including those defined as “named executive officers”
and identified in the Corporation’s Proxy Statement for the 2008 annual Meetings of Stockholders),
is incorporated herein by reference to Exhibit 10(aaaa) to Norfolk Southern Corporation’s Form 10-
K filed on February 18, 2009.
Limited Liability Company Agreement of Pan Am Southern LLC, dated as of April 9, 2009, is
incorporated herein by reference to Exhibit 10.1 to Norfolk Southern Corporation’s Form 8-K filed
on April 9, 2009 (exhibits, annexes, and schedules omitted – the Registrant will furnish
supplementary copies of such materials to the SEC upon request).
(ggg)
Credit Agreement dated as of December 14, 2011, is incorporated herein by reference to Exhibit 99
to Norfolk Southern Corporation’s Form 8-K filed on December 15, 2011.
(hhh)*
Consulting Services Agreement between Norfolk Southern Corporation and John P. Rathbone,
entered into on September 20, 2013, is incorporated herein by reference to Exhibit 10.1 to Norfolk
Southern Corporation’s Form 8-K/A filed on September 24, 2013.
(iii)*,**
(jjj)*,**
Form of Norfolk Southern Corporation Long-Term Incentive Plan, Award Agreement for Outside
Directors approved by the Compensation Committee on November 25, 2013.
Form of Norfolk Southern Corporation Long-Term Incentive Plan, Award Agreement for incentive
stock options approved by the Compensation Committee on November 25, 2013.
(kkk)*,** Form of Norfolk Southern Corporation Long-Term Incentive Plan, Award Agreement for
performance share units approved by the Compensation Committee on November 25, 2013.
(lll)*,**
Form of Norfolk Southern Corporation Long-Term Incentive Plan, Award Agreement for
non-qualified stock options approved by the Compensation Committee on November 25, 2013.
(mmm)*,** Form of Norfolk Southern Corporation Long-Term Incentive Plan, Award Agreement for restricted
stock units approved by the Compensation Committee on November 25, 2013.
K94
(nnn)*,** Form of Norfolk Southern Corporation Long-Term Incentive Plan, Non-Compete Agreement
Associated with Award Agreement, approved by the Compensation Committee on
November 25, 2013.
(ooo)
(ppp)
(qqq)*
Performance Criteria for bonuses payable in 2015 for the 2014 incentive year. On January 20,
2014, the Compensation Committee of the Norfolk Southern Corporation Board of Directors
adopted the following performance criteria for determining bonuses payable in 2015 for the 2014
incentive year under the Norfolk Southern Corporation Executive Management Incentive
Plan: 50% based on operating income; 35% based on operating ratio; and 15% based on a
composite of three transportation service measures, consisting of adherence to operating plan,
connection performance, and train performance.
Omnibus Amendment, dated as of January 17, 2011, to Pan Am Transaction Agreement dated as of
May 15, 2008, and Limited Liability Company Agreement of Pan Am Southern LLC dated as of
April 9, 2009, is incorporated herein by reference to Exhibit 10.1 to Norfolk Southern Corporation’s
Form 10-Q filed on April 27, 2012.
Form of Amendment to Amended and Restated Change in Control Agreements between Norfolk
Southern Corporation and the Corporation’s Chairman, President and Chief Executive Officer, and
each of the Corporation’s Executive Vice Presidents, to eliminate the excise tax gross-up provision
in the Agreements, is incorporated herein by reference to Exhibit 10.1 to Norfolk Southern
Corporation’s Form 8-K filed on January 23, 2013.
12**
21**
23**
Statement re: Computation of Ratio of Earnings to Fixed Charges.
Subsidiaries of the Registrant.
Consent of Independent Registered Public Accounting Firm.
31-A**
Rule 13a-14(a)/15d-014(a) CEO Certifications.
31-B**
Rule 13a-14(a)/15d-014(a) CFO Certifications.
32**
99**
Section 1350 Certifications.
Annual CEO Certification pursuant to NYSE Rule 303A.12(a).
K95
101**
The following financial information from Norfolk Southern Corporation’s Annual Report on Form
10-K for the year ended December 31, 2013, formatted in Extensible Business Reporting Language
(XBRL) includes: (i) the Consolidated Statements of Income of each of the years ended
December 31, 2013, 2012, and 2011; (ii) the Consolidated Statements of Comprehensive Income
for each of the years ended December 31, 2012, 2011, and 2010; (iii) the Consolidated Balance
Sheets at December 31, 2013 and 2012; (iv) the Consolidated Statements of Cash Flows for the
years ended December 31, 2013, 2012, and 2011; (v) the Consolidated Statements of Changes in
Stockholders’ Equity for each of the three years ended December 31, 2013, 2012, and 2011; and
(vi) the Notes to Consolidated Financial Statements.
* Management contract or compensatory arrangement.
** Filed herewith.
(B)
Exhibits.
The Exhibits required by Item 601 of Regulation S-K as listed in Item 15(A)3 are filed herewith or
incorporated herein by reference.
(C)
Financial Statement Schedules.
Financial statement schedules and separate financial statements specified by this Item are included
in Item 15(A)2 or are otherwise not required or are not applicable.
Exhibits 23, 31, 32, and 99 are included in copies assembled for public dissemination. All exhibits
are included in the 2013 Form 10-K posted on our website at www.nscorp.com under “Investors”
and “SEC Filings” or you may request copies by writing to:
Office of Corporate Secretary
Norfolk Southern Corporation
Three Commercial Place
Norfolk, Virginia 23510-9219
K96
POWER OF ATTORNEY
Each person whose signature appears on the next page under SIGNATURES hereby authorizes James A. Hixon
and Marta R. Stewart, or any one of them, to execute in the name of each such person, and to file, any
amendments to this report, and hereby appoints James A. Hixon and Marta R. Stewart, or any one of them, as
attorneys-in-fact to sign on his or her behalf, individually and in each capacity stated below, and to file, any and
all amendments to this report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Norfolk Southern
Corporation has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized,
on this 14th day of February, 2014.
/s/Charles W. Moorman
By: Charles W. Moorman
(Chairman and Chief Executive Officer)
K97
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on this
14th day of February, 2014, by the following persons on behalf of Norfolk Southern Corporation and in the
capacities indicated.
Signature
Title
/s/Charles W. Moorman
(Charles W. Moorman)
Chairman and Chief Executive Officer and Director
(Principal Executive Officer)
/s/Marta R. Stewart
(Marta R. Stewart)
/s/Thomas E. Hurlbut
(Thomas E. Hurlbut)
/s/Thomas D. Bell, Jr.
(Thomas D. Bell, Jr.)
/s/Erskine B. Bowles
(Erskine B. Bowles)
/s/Robert A. Bradway
(Robert A. Bradway)
/s/Wesley G. Bush
(Wesley G. Bush)
/s/Daniel A. Carp
(Daniel A. Carp)
/s/Karen N. Horn
(Karen N. Horn)
/s/Burton M. Joyce
(Burton M. Joyce)
/s/Steven F. Leer
(Steven F. Leer)
/s/Michael D. Lockhart
(Michael D. Lockhart)
/s/Amy E. Miles
(Amy E. Miles)
/s/Martin H. Nesbitt
(Martin H. Nesbitt)
/s/James A. Squires
(James A. Squires)
/s/John R. Thompson
(John R. Thompson)
Executive Vice President Finance and Chief Financial Officer
(Principal Financial Officer)
Vice President and Controller
(Principal Accounting Officer)
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
K98
Norfolk Southern Corporation and Subsidiaries
Valuation and Qualifying Accounts
Years ended December 31, 2011, 2012, and 2013
($ in millions)
Schedule II
Additions charged to:
Beginning
Balance
Expenses
Other
Accounts
Deductions
Ending
Balance
$
21 $
- $
- $
2 $
19
261
102 (1)
1
89 (3)
275
254
16
133 (2)
202 (4)
201
$
19 $
- $
- $
- $
19
275
76 (1)
-
93 (3)
258
201
18
157 (2)
193 (4)
183
$
19 $
13 $
- $
- $
32
258
33 (1)
-
77 (3)
214
183
15
101 (2)
133 (4)
166
Year ended December 31, 2011
Valuation allowance (included net in
deferred tax liability) for deferred
tax assets
Casualty and other claims
included in other liabilities
Current portion of casualty and
other claims included in
accounts payable
Year ended December 31, 2012
Valuation allowance (included net in
deferred tax liability) for deferred
tax assets
Casualty and other claims
included in other liabilities
Current portion of casualty and
other claims included in
accounts payable
Year ended December 31, 2013
Valuation allowance (included net in
deferred tax liability) for deferred
tax assets
Casualty and other claims
included in other liabilities
Current portion of casualty and
other claims included in
accounts payable
(1)Includes adjustments for changes in estimates for prior years’ claims.
(2)Includes revenue refunds and overcharges provided through deductions from operating revenues and transfers
from other accounts.
(3)Payments and reclassifications to/from accounts payable.
(4)Payments and reclassifications to/from other liabilities.
K99
Intentionally Left Blank
K100
finAnciAl highlights
noRfolk southeRn coRpoRAtion & suBsidiARies
foR the yeAR
(numbers in millions, except per-share amounts)
Railway operating revenues
Income from railway operations
Net income
Per share – basic
Per share – diluted
Dividends per share
Dividend pay-out ratio
Cash provided by operating activities
Property additions
Free cash flow2
At yeAR end
Total assets
Total debt
Stockholders’ equity
Shares outstanding
Stockholders’ equity per share
finAnciAl RAtios
Operating ratio
Debt-to-total-capitalization ratio
Total Stockholder Returns1
(dollars)
$ 350
$ 300
$ 250
$ 200
$ 150
$ 100
$ 50
$
0
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
2013
11,245
3,257
1,910
6.10
6.04
2.04
33%
3,078
1,971
1,107
32,483
9,448
11,289
308.9
36.55
71.0%
45.6%
2012
11,040
$
$
$
$
$
$
$
$
$
$
$
$
$
3,124
1,749
5.42
5.37
1.94
36%
3,065
2,241
824
30,342
8,682
9,760
314.0
31.08
71.7%
47.1%
2011
11,172
3,213
1,916
5.52
5.45
1.66
30%
3,227
2,160
1,067
28,538
7,540
9,911
330.4
30.00
71.2%
43.2%
Railway
Operating
Revenues
(in millions)
$11,172
$11,245
$11,040
Income from
Railway
Operations
(in millions)
$3,213$3,124
$3,257
Free Cash
Flow2
(in millions)
$1,067
$1,107
$824
12/08
12/09
12/10
12/11
12/12
12/13
Norfolk Southern Corp. Common Stock
S&P Railroad Stock Price Index
S&P Composite-500 Stock Price Index
11
12
13
11
12
13
11
12
13
1 This graph provides an indicator of cumulative total stockholder returns for Norfolk Southern Corporation as compared to the other identified indices. Assumes that the value of the investment in Norfolk Southern
Corporation common stock and each index was $100 on Dec. 31, 2008, and that all dividends were reinvested. Data furnished by Bloomberg Financial Markets.
2 Free cash flow as used here is defined as cash provided by operating activities minus property additions and is a measure of cash available for other investing activities and financing activities, including
dividends and repurchases of common stock.
descRiption of Business
Norfolk Southern Corporation (NYSE: NSC) is one of the nation’s premier transportation companies. Our Norfolk Southern Railway Company subsidiary
operates approximately 20,000 route miles in 22 states and the District of Columbia, serves every major container port in the eastern United States,
and provides efficient connections to other rail carriers. We operate the most extensive intermodal network in the East and are a major transporter of
coal, automotive, and industrial products.
stockholdeR infoRmAtion
common stock
Ticker symbol: NSC
Our common stock is listed and traded
on the New York Stock Exchange.
puBlicAtions
The following reports and publications are
available on our website at www.nscorp.com
and, upon written request, will be furnished in
printed form to stockholders free of charge:
- Annual Reports on Form 10-K
- Quarterly Reports on Form 10-Q
- Corporate Governance Guidelines
- Board Committee Charters
- Thoroughbred Code of Ethics
- Code of Ethical Conduct
for Senior Financial Officers
- Categorical Independence Standards
for Directors
Stockholders desiring a printed copy of one
or more of these reports and publications
should send their request to the corporate
secretary:
Denise W. Hutson
Corporate Secretary
Norfolk Southern Corporation
Three Commercial Place
Norfolk, Va. 23510
757.823.5567
A notice and proxy statement for the annual
meeting of stockholders are furnished to
stockholders in advance of the meeting.
Amendments to or waivers of the
Thoroughbred Code of Ethics and/or the
Code of Ethical Conduct for Senior Financial
Officers that are required to be disclosed
pursuant to Item 5.05 of the current report on
Form 8-K will be disclosed on our website.
ethics & compliAnce hotline
High ethical standards always have been
key to our success. Anyone who may be
aware of a violation of our corporation’s
Thoroughbred Code of Ethics is encouraged
to contact our Ethics & Compliance Hotline
at 800.732.9279.
diVidends
At its January 2014 meeting, our board of
directors declared a quarterly dividend of
54 cents per share on its common stock,
payable on March 10, 2014, to stockholders
of record on Feb. 7, 2014.
We usually pay quarterly dividends on our
common stock on or about March 10,
June 10, Sept. 10, and Dec. 10, when and
if declared by our board of directors to
stockholders of record. We have paid 126
consecutive quarterly dividends since our
inception in 1982.
Account AssistAnce
For assistance with lost stock certificates,
transfer requirements, the INVESTORS
CHOICE Plan, address changes, dividend
checks, and direct deposit of dividends,
contact:
American Stock Transfer
& Trust Company, LLC
6201 15th Avenue
Brooklyn, N.Y. 11219
877.864.4750
inVestoRs choice
We and our transfer agent, American Stock
Transfer & Trust Company LLC (AST), offer
the INVESTORS CHOICE Plan for investors
wishing to purchase or sell Norfolk Southern
Corporation Common Stock. This plan is
available to both present stockholders of
record and individual investors wishing to
make an initial purchase of Norfolk Southern
Corporation Common Stock. Once enrolled in
the plan, you can invest cash dividends when
paid and make optional cash investments
simply and conveniently.
To take advantage of the INVESTORS
CHOICE Plan, contact AST at 877.864.4750
or visit www.amstock.com. Once you are
on this page, you may go to Invest Online to
access information about the NS INVESTORS
CHOICE Plan.
finAnciAl inquiRies
Marta R. Stewart
Executive Vice
President Finance and
Chief Financial Officer
Norfolk Southern Corp.
Three Commercial Place
Norfolk, Va. 23510
757.629.2770
inVestoR inquiRies
Michael Hostutler
Director Investor Relations
Norfolk Southern Corp.
Three Commercial Place
Norfolk, Va. 23510
757.629.2861
coRpoRAte offices
Executive Offices
Norfolk Southern Corp.
Three Commercial Place
Norfolk, Va. 23510
757.629.2600
RegionAl offices
1200 Peachtree St. N.E.
Atlanta, Ga. 30309
110 Franklin Road S.E.
Roanoke, Va. 24042
AnnuAl RepoRt
Requests & Information
800.531.6757
AnnuAl meeting
May 8, 2014
8:30 a.m. EDT
Williamsburg Lodge
Conference Center
310 South England St.
Williamsburg, Va. 23185
ouR Vision
Be the sAfest, most customeR-focused, And successful
tRAnspoRtAtion compAny in the woRld
Three Commercial Place | Norfolk, Virginia 23510 | www.nscorp.com
© 2014 Norfolk Southern Corporation - All Rights Reserved 10.0114.6657.105k
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