Analysis of Debt
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Norfolk Southern Corp. pages available for free this week:
- Income Statement
- Statement of Comprehensive Income
- Common-Size Income Statement
- Common-Size Balance Sheet: Assets
- Analysis of Short-term (Operating) Activity Ratios
- Analysis of Long-term (Investment) Activity Ratios
- Selected Financial Data since 2005
- Debt to Equity since 2005
- Price to Earnings (P/E) since 2005
- Price to Operating Profit (P/OP) since 2005
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Total Debt (Carrying Amount)
Norfolk Southern Corp., balance sheet: debt
US$ in millions
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Short-term debt | ||||||
| Current maturities of long-term debt | ||||||
| Long-term debt, excluding current maturities | ||||||
| Total debt (carrying amount) |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
- Short-term debt
- The short-term debt is only reported for the year ending December 31, 2017, with a value of 100 million US dollars. No data is available for subsequent years, indicating either non-existence, negligible amounts, or unreported figures in the following periods.
- Current maturities of long-term debt
- This category shows fluctuations over the five-year period. Beginning at 600 million US dollars in 2017, the value slightly decreased to 585 million in 2018, followed by a significant drop to 316 million in 2019. Subsequently, the amount rose again to 579 million in 2020 and slightly decreased to 553 million in 2021. Overall, the data reflects volatility in the short-term portion of long-term debt repayments, with notable reduction in 2019 and partial recovery thereafter.
- Long-term debt, excluding current maturities
- The long-term debt exhibits a consistent upward trend during the entire period. Starting at 9,136 million US dollars in 2017, it increased steadily each year: to 10,560 million in 2018, 11,880 million in 2019, 12,102 million in 2020, and reaching 13,287 million in 2021. This reflects an overall increase of approximately 45% over five years, indicating growing reliance on long-term borrowings.
- Total debt (carrying amount)
- Total debt figures, inclusive of all maturities, also show a pattern of growth. The amount rose each year from 9,836 million US dollars in 2017 to 13,840 million in 2021. The increases are steady and align with the rise in long-term debt, with total debt growing by about 40.7% over the period. The trend confirms a general expansion in overall indebtedness.
Total Debt (Fair Value)
| Dec 31, 2021 | |
|---|---|
| Selected Financial Data (US$ in millions) | |
| Short-term debt | |
| Long-term debt, including current maturities | |
| Total debt (fair value) | |
| Financial Ratio | |
| Debt, fair value to carrying amount ratio | |
Based on: 10-K (reporting date: 2021-12-31).
Weighted-average Interest Rate on Debt
Weighted average interest rate on debt:
| Interest rate | Debt amount1 | Interest rate × Debt amount | Weighted-average interest rate2 |
|---|---|---|---|
| Total | |||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in millions
2 Weighted-average interest rate = 100 × ÷ =
Interest Costs Incurred
Norfolk Southern Corp., interest costs incurred
US$ in millions
| 12 months ended: | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Interest expense on debt | |||||||||||
| Interest capitalized | |||||||||||
| Interest cost incurred on debt |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
The data on annual interest costs demonstrates a consistent upward trend across the observed periods from December 31, 2017, through December 31, 2021. Each financial item shows specific movements worth noting.
- Interest expense on debt
- Interest expense on debt has steadily increased from $550 million in 2017 to $646 million in 2021. This represents an overall growth of approximately 17.5% over the five-year period. The increases between consecutive years are relatively moderate and fairly consistent, indicating a sustained rise in the cost of servicing debt.
- Interest capitalized
- Interest capitalized has gradually decreased from $20 million in 2017 to $11 million in 2021. This downward trend suggests a reduction in the amount of interest being added to the cost basis of capital projects or assets. The decline appears steady, with the capitalized interest almost halving over the period.
- Interest cost incurred on debt
- The total interest cost incurred on debt, which is the sum of the interest expense on debt and interest capitalized, shows a moderate but consistent increase. It rose from $570 million in 2017 to $657 million in 2021, an increase of roughly 15.3%. This growth aligns primarily with the increases observed in the interest expense, somewhat offset by the decline in capitalized interest.
Overall, the data reveals that while the company’s interest expenses have increased steadily, the decrease in capitalized interest offsets a portion of this growth, resulting in a more modest rise in total interest cost incurred. This pattern may reflect changes in financing strategies, investment activities, or shifts in project capitalization practices over the analyzed timeframe.
Adjusted Interest Coverage Ratio
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
2021 Calculations
1 Interest coverage ratio (without capitalized interest) = EBIT ÷ Interest expense on debt
= ÷ =
2 Adjusted interest coverage ratio (with capitalized interest) = EBIT ÷ Interest cost incurred on debt
= ÷ =
- Interest Coverage Ratio (without capitalized interest)
- The interest coverage ratio exhibited fluctuations over the five-year period. It increased from 6.69 in 2017 to a peak of 7.23 in 2018, indicating an improved ability to cover interest expenses during that year. Subsequently, it declined to 6.78 in 2019 and further dropped to its lowest point of 5.05 in 2020, suggesting a weakening capacity to meet interest obligations. In 2021, the ratio recovered strongly to 7.0, surpassing the initial 2017 level and indicating renewed financial strength in managing interest expenses.
- Adjusted Interest Coverage Ratio (with capitalized interest)
- A similar pattern is observed in the adjusted interest coverage ratio, which includes capitalized interest. This ratio started at 6.45 in 2017 and rose to 7.01 in 2018, aligning closely with the unadjusted metric. It then experienced a decrease over the next two years, reaching a minimum of 4.94 in 2020. This downturn suggests that capitalized interest also impacted the company's interest coverage negatively during that period. In 2021, the adjusted ratio rebounded to 6.89, indicating an improved financial position, though still slightly below the peak level seen in 2018.
- Overall Trends and Insights
- The data reflects overall volatility in the company's ability to cover interest expenses over the observed timeframe. Both ratios reflect a decline in financial cushion around 2019 and 2020, which could be linked to broader economic or company-specific challenges during those years. The recovery seen in 2021 suggests effective measures were likely implemented to restore financial stability. The close alignment between adjusted and unadjusted ratios throughout the period implies that capitalized interest did not significantly distort the core measurement of interest coverage.