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Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.

Economic Profit
Net Operating Profit after Taxes (NOPAT)
Cash Operating Taxes
Invested Capital
Cost of Capital
Economic Spread Ratio
Economic Profit Margin

Norfolk Southern Corp., economic profit calculation

US$ in millions

12 months ended:	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Net operating profit after taxes (NOPAT)¹	3,711)	2,658)	3,546)	3,300)	2,921)
Cost of capital²	13.82%	13.78%	13.80%	13.85%	13.44%
Invested capital³	35,469)	35,427)	35,233)	34,104)	33,382)

Economic profit⁴	(1,191)	(2,224)	(1,317)	(1,425)	(1,566)

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).

¹ NOPAT. See details »

² Cost of capital. See details »

³ Invested capital. See details »

⁴ 2021 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 3,711 – 13.82% × 35,469 = -1,191

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Item	Description	The company
Economic profit	Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital.	Norfolk Southern Corp. economic profit decreased from 2019 to 2020 but then increased from 2020 to 2021 exceeding 2019 level.

Norfolk Southern Corp., NOPAT calculation

US$ in millions

12 months ended:	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Net income	3,005)	2,013)	2,722)	2,666)	5,404)
Deferred income tax expense (benefit)¹	184)	142)	330)	173)	(2,859)
Increase (decrease) in allowance for doubtful accounts²	2)	(3)	2)	—)	3)
Increase (decrease) in equity equivalents³	186)	139)	332)	173)	(2,856)
Interest expense on debt	646)	625)	604)	557)	550)
Interest expense, operating lease liability⁴	13)	15)	19)	27)	24)
Adjusted interest expense on debt	659)	640)	623)	584)	574)
Tax benefit of interest expense on debt⁵	(138)	(134)	(131)	(123)	(201)
Adjusted interest expense on debt, after taxes⁶	520)	506)	492)	461)	373)
Net operating profit after taxes (NOPAT)	3,711)	2,658)	3,546)	3,300)	2,921)

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).

¹ Elimination of deferred tax expense. See details »

² Addition of increase (decrease) in allowance for doubtful accounts.

³ Addition of increase (decrease) in equity equivalents to net income.

⁴ 2021 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 413 × 3.04% = 13

⁵ 2021 Calculation
Tax benefit of interest expense on debt = Adjusted interest expense on debt × Statutory income tax rate
= 659 × 21.00% = 138

⁶ Addition of after taxes interest expense to net income.

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Item	Description	The company
NOPAT	Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income.	Norfolk Southern Corp. NOPAT decreased from 2019 to 2020 but then increased from 2020 to 2021 exceeding 2019 level.

Norfolk Southern Corp., cash operating taxes calculation

US$ in millions

12 months ended:	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Income taxes	873)	517)	769)	803)	(2,276)
Less: Deferred income tax expense (benefit)	184)	142)	330)	173)	(2,859)
Add: Tax savings from interest expense on debt	138)	134)	131)	123)	201)
Cash operating taxes	827)	509)	570)	753)	784)

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).

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Item	Description	The company
Cash operating taxes	Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction.	Norfolk Southern Corp. cash operating taxes decreased from 2019 to 2020 but then increased from 2020 to 2021 exceeding 2019 level.

Norfolk Southern Corp., invested capital calculation (financing approach)

US$ in millions

	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Short-term debt	—)	—)	—)	—)	100)
Current maturities of long-term debt	553)	579)	316)	585)	600)
Long-term debt, excluding current maturities	13,287)	12,102)	11,880)	10,560)	9,136)
Operating lease liability¹	413)	433)	538)	567)	500)
Total reported debt & leases	14,253)	13,114)	12,734)	11,712)	10,336)
Stockholders’ equity	13,641)	14,791)	15,184)	15,362)	16,359)
Net deferred tax (assets) liabilities²	7,165)	6,922)	6,815)	6,460)	6,324)
Allowance for doubtful accounts³	8)	6)	9)	7)	7)
Equity equivalents⁴	7,173)	6,928)	6,824)	6,467)	6,331)
Accumulated other comprehensive (income) loss, net of tax⁵	402)	594)	491)	563)	356)
Adjusted stockholders’ equity	21,216)	22,313)	22,499)	22,392)	23,046)
Invested capital	35,469)	35,427)	35,233)	34,104)	33,382)

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).

¹ Addition of capitalized operating leases.

² Elimination of deferred taxes from assets and liabilities. See details »

³ Addition of allowance for doubtful accounts receivable.

⁴ Addition of equity equivalents to stockholders’ equity.

⁵ Removal of accumulated other comprehensive income.

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Item	Description	The company
Invested capital	Capital is an approximation of the economic book value of all cash invested in going-concern business activities.	Norfolk Southern Corp. invested capital increased from 2019 to 2020 and from 2020 to 2021.

Norfolk Southern Corp., cost of capital calculations

Dec 31, 2021

	Capital (fair value)¹	Weights					Cost of capital
Equity²	64,841)	64,841)	÷	82,287)	=	0.79	0.79	×	16.68%	=	13.14%
Debt³	17,033)	17,033)	÷	82,287)	=	0.21	0.21	×	4.06% × (1 – 21.00%)	=	0.66%
Operating lease liability⁴	413)	413)	÷	82,287)	=	0.01	0.01	×	3.04% × (1 – 21.00%)	=	0.01%
Total:	82,287)					1.00					13.82%

Based on: 10-K (reporting date: 2021-12-31).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2020

	Capital (fair value)¹	Weights					Cost of capital
Equity²	61,862)	61,862)	÷	78,959)	=	0.78	0.78	×	16.68%	=	13.07%
Debt³	16,664)	16,664)	÷	78,959)	=	0.21	0.21	×	4.17% × (1 – 21.00%)	=	0.70%
Operating lease liability⁴	433)	433)	÷	78,959)	=	0.01	0.01	×	3.50% × (1 – 21.00%)	=	0.02%
Total:	78,959)					1.00					13.78%

Based on: 10-K (reporting date: 2020-12-31).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2019

	Capital (fair value)¹	Weights					Cost of capital
Equity²	54,838)	54,838)	÷	70,182)	=	0.78	0.78	×	16.68%	=	13.03%
Debt³	14,806)	14,806)	÷	70,182)	=	0.21	0.21	×	4.49% × (1 – 21.00%)	=	0.75%
Operating lease liability⁴	538)	538)	÷	70,182)	=	0.01	0.01	×	3.52% × (1 – 21.00%)	=	0.02%
Total:	70,182)					1.00					13.80%

Based on: 10-K (reporting date: 2019-12-31).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2018

	Capital (fair value)¹	Weights					Cost of capital
Equity²	45,858)	45,858)	÷	58,628)	=	0.78	0.78	×	16.68%	=	13.05%
Debt³	12,203)	12,203)	÷	58,628)	=	0.21	0.21	×	4.69% × (1 – 21.00%)	=	0.77%
Operating lease liability⁴	567)	567)	÷	58,628)	=	0.01	0.01	×	4.69% × (1 – 21.00%)	=	0.04%
Total:	58,628)					1.00					13.85%

Based on: 10-K (reporting date: 2018-12-31).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2017

	Capital (fair value)¹	Weights					Cost of capital
Equity²	39,365)	39,365)	÷	51,736)	=	0.76	0.76	×	16.68%	=	12.69%
Debt³	11,871)	11,871)	÷	51,736)	=	0.23	0.23	×	4.82% × (1 – 35.00%)	=	0.72%
Operating lease liability⁴	500)	500)	÷	51,736)	=	0.01	0.01	×	4.82% × (1 – 35.00%)	=	0.03%
Total:	51,736)					1.00					13.44%

Based on: 10-K (reporting date: 2017-12-31).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Norfolk Southern Corp., economic spread ratio calculation, comparison to benchmarks

	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Selected Financial Data (US$ in millions)
Economic profit¹	(1,191)	(2,224)	(1,317)	(1,425)	(1,566)
Invested capital²	35,469)	35,427)	35,233)	34,104)	33,382)
Performance Ratio
Economic spread ratio³	-3.36%	-6.28%	-3.74%	-4.18%	-4.69%
Benchmarks
Economic Spread Ratio, Competitors⁴
FedEx Corp.	-0.60%	-5.60%	-8.23%	-1.86%	—
Uber Technologies Inc.	-19.81%	-46.92%	-55.44%	—	—
Union Pacific Corp.	0.40%	-1.18%	0.22%	—	—
United Parcel Service Inc.	21.59%	-8.52%	2.91%	—	—

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).

¹ Economic profit. See details »

² Invested capital. See details »

³ 2021 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -1,191 ÷ 35,469 = -3.36%

⁴ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic spread ratio	The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital.	Norfolk Southern Corp. economic spread ratio deteriorated from 2019 to 2020 but then improved from 2020 to 2021 exceeding 2019 level.

Norfolk Southern Corp., economic profit margin calculation, comparison to benchmarks

	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Selected Financial Data (US$ in millions)
Economic profit¹	(1,191)	(2,224)	(1,317)	(1,425)	(1,566)
Railway operating revenues	11,142)	9,789)	11,296)	11,458)	10,551)
Performance Ratio
Economic profit margin²	-10.69%	-22.72%	-11.66%	-12.44%	-14.84%
Benchmarks
Economic Profit Margin, Competitors³
FedEx Corp.	-0.46%	-4.66%	-6.27%	-1.52%	—
Uber Technologies Inc.	-18.24%	-88.61%	-80.21%	—	—
Union Pacific Corp.	1.08%	-3.54%	0.57%	—	—
United Parcel Service Inc.	9.85%	-3.34%	1.43%	—	—

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).

¹ Economic profit. See details »

² 2021 Calculation
Economic profit margin = 100 × Economic profit ÷ Railway operating revenues
= 100 × -1,191 ÷ 11,142 = -10.69%

³ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic profit margin	The ratio of economic profit to sales. It is the company profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin.	Norfolk Southern Corp. economic profit margin deteriorated from 2019 to 2020 but then improved from 2020 to 2021 exceeding 2019 level.

Norfolk Southern Corp. (NYSE:NSC)

Economic Value Added (EVA)

Economic Profit

Net Operating Profit after Taxes (NOPAT)

Cash Operating Taxes

Invested Capital

Cost of Capital

Economic Spread Ratio

Economic Profit Margin