UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DCD.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended SEPTEMBER 30, ~~2020~~2021

☐ 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						52-1188014
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)


~~Three Commercial Place~~650 West Peachtree Street NW		~~23510-2191~~30308-1925
~~Norfolk,~~Atlanta,	~~Virginia~~Georgia
(Address of principal executive offices)		(Zip Code)
~~(757)~~(855)		~~629-2680~~667-3655
(Registrant’s telephone number, including area code)


~~No Change~~Three Commercial Place,	Norfolk,	Virginia	23510-2191
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Norfolk Southern Corporation Common Stock (Par Value $1.00)	NSC	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒Accelerated filer ☐ Non-accelerated filer ☐ ☐

Smaller reporting company ☐Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Class	Outstanding at September 30, ~~2020~~2021
Common Stock ($1.00 par value per share)	~~253,985,338~~243,344,509	(excluding 20,320,777 shares held by the registrant’s
	consolidated subsidiaries)

TABLE OF CONTENTS

NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES


		Page
Part I.	Financial Information:
	Item 1.	Financial Statements:
		Consolidated Statements of Income Third Quarter and First Nine Months of ~~2020~~2021 and ~~2019~~2020	3
		Consolidated Statements of Comprehensive Income Third Quarter and First Nine Months of ~~2020~~2021 and ~~2019~~2020	4
		Consolidated Balance Sheets At September 30, ~~2020~~2021 and December 31, ~~2019~~2020	5
		Consolidated Statements of Cash Flows First Nine Months of ~~2020~~2021 and ~~2019~~2020	6
		Consolidated Statements of Changes in Stockholders’ Equity Third Quarter and First Nine Months of ~~2020~~2021 and ~~2019~~2020	7
		Notes to Consolidated Financial Statements	9
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
	Item 4.	Controls and Procedures	29

Part II.	Other Information:
	Item 1.	Legal Proceedings	30
	Item 1A.	Risk Factors	30
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3130
	Item 6.	Exhibits	3231

		Signatures	3332

PART I. FINANCIAL INFORMATION

Item 1. Financial ~~Statements.~~Statements

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Income

(Unaudited)

Third Quarter First Nine Months
2020 2019 2020 2019
($ in millions, except per share amounts)
Railway operating revenues $ 2,506 $ 2,841 $ 7,216 $ 8,606
Railway operating expenses:
Compensation and benefits 578 682 1,786 2,121
Purchased services and rents 486 423 1,261 1,265
Fuel 126 226 399 730
Depreciation 293 286 867 853
Materials and other 183 228 500 610
Loss on asset disposal 0 0 385 0
Total railway operating expenses 1,666 1,845 5,198 5,579
Income from railway operations 840 996 2,018 3,027
Other income – net 39 22 110 88
Interest expense on debt 155 150 465 452
Income before income taxes 724 868 1,663 2,663
Income taxes 155 211 321 607
Net income $ 569 $ 657 $ 1,342 $ 2,056
Earnings per share:
Basic $ 2.23 $ 2.50 $ 5.24 $ 7.76
Diluted 2.22 2.49 5.21 7.70


	Third Quarter				First Nine Months
	2021		2020		2021		2020
	($ in millions, except per share amounts)

Railway operating revenues	$	2,852	$	2,506	$	8,290	$	7,216

Railway operating expenses
Compensation and benefits	609		578		1,844		1,786
Purchased services and rents	432		486		1,254		1,261
Fuel	208		126		573		399
Depreciation	297		293		883		867
Materials and other	170		183		418		500
Loss on asset disposal	—		—		—		385

Total railway operating expenses	1,716		1,666		4,972		5,198

Income from railway operations	1,136		840		3,318		2,018

Other income – net	14		39		56		110
Interest expense on debt	164		155		481		465

Income before income taxes	986		724		2,893		1,663

Income taxes	233		155		648		321

Net income	$	753	$	569	$	2,245	$	1,342

Earnings per share
Basic	$	3.07	$	2.23	$	9.03	$	5.24
Diluted	3.06		2.22		8.99		5.21

See accompanying notes to consolidated financial statements.

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income

(Unaudited)

Third Quarter First Nine Months
2020 2019 2020 2019
($ in millions)
Net income $ 569 $ 657 $ 1,342 $ 2,056
Other comprehensive income, before tax:
Pension and other postretirement benefits 7 5 20 15
Other comprehensive income (loss) of equity investees 0 0 6 (1)
Other comprehensive income, before tax 7 5 26 14
Income tax expense related to items of
other comprehensive income (3) (1) (6) (4)
Other comprehensive income, net of tax 4 4 20 10
Total comprehensive income $ 573 $ 661 $ 1,362 $ 2,066


	Third Quarter				First Nine Months
	2021		2020		2021		2020
	($ in millions)

Net income	$	753	$	569	$	2,245	$	1,342
Other comprehensive income, before tax:
Pension and other postretirement benefits	10		7		31		20
Other comprehensive income of equity investees	—		—		—		6

Other comprehensive income, before tax	10		7		31		26
Income tax expense related to items of other
comprehensive income	(3)		(3)		(8)		(6)

Other comprehensive income, net of tax	7		4		23		20

Total comprehensive income	$	760	$	573	$	2,268	$	1,362

See accompanying notes to consolidated financial statements.

Norfolk Southern Corporation and Subsidiaries

Consolidated Balance Sheets

(Unaudited)

September 30,
2020 December 31,
2019
($ in millions)
Assets
Current assets:
Cash and cash equivalents $ 1,359 $ 580
Accounts receivable – net 883 920
Materials and supplies 247 244
Other current assets 90 337
Total current assets 2,579 2,081
Investments 3,566 3,428
Properties less accumulated depreciation of $11,873
and $11,982, respectively 31,239 31,614
Other assets 795 800
Total assets $ 38,179 $ 37,923
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable $ 1,273 $ 1,428
Income and other taxes 257 229
Other current liabilities 386 327
Current maturities of long-term debt 89 316
Total current liabilities 2,005 2,300
Long-term debt 12,634 11,880
Other liabilities 1,701 1,744
Deferred income taxes 6,898 6,815
Total liabilities 23,238 22,739
Stockholders’ equity:
Common stock $1.00 per share par value, 1,350,000,000 shares
authorized; outstanding 253,985,338 and 257,904,956 shares,
respectively, net of treasury shares 255 259
Additional paid-in capital 2,246 2,209
Accumulated other comprehensive loss (471) (491)
Retained income 12,911 13,207
Total stockholders’ equity 14,941 15,184
Total liabilities and stockholders’ equity $ 38,179 $ 37,923


	September 30, 2021		December 31, 2020
	($ in millions)
Assets
Current assets:
Cash and cash equivalents	$	1,465	$	1,115

Accounts receivable – net	945		848
Materials and supplies	235		221
Other current assets	77		134
Total current assets	2,722		2,318

Investments	3,684		3,590
Properties less accumulated depreciation of $11,867
and $11,985, respectively	31,429		31,345
Other assets	769		709

Total assets	$	38,604	$	37,962

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	1,196	$	1,016

Income and other taxes	272		263
Other current liabilities	384		302
Current maturities of long-term debt	558		579
Total current liabilities	2,410		2,160

Long-term debt	13,274		12,102
Other liabilities	1,944		1,987
Deferred income taxes	7,089		6,922

Total liabilities	24,717		23,171

Stockholders’ equity:
Common stock $1.00 per share par value, 1,350,000,000 shares
authorized; outstanding 243,344,509 and 252,095,082 shares,
respectively, net of treasury shares	244		254
Additional paid-in capital	2,224		2,248
Accumulated other comprehensive loss	(571)		(594)
Retained income	11,990		12,883

Total stockholders’ equity	13,887		14,791

Total liabilities and stockholders’ equity	$	38,604	$	37,962

See accompanying notes to consolidated financial statements.

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

First Nine Months
2020 2019
($ in millions)
Cash flows from operating activities:
Net income $ 1,342 $ 2,056
Reconciliation of net income to net cash provided by operating activities:
Depreciation 867 854
Deferred income taxes 78 225
Gains and losses on properties (14) (4)
Loss on asset disposal 385 0
Impairment of investment 99 0
Changes in assets and liabilities affecting operations:
Accounts receivable 36 34
Materials and supplies (3) (59)
Other current assets 55 40
Current liabilities other than debt 104 (72)
Other – net (182) (77)
Net cash provided by operating activities 2,767 2,997
Cash flows from investing activities:
Property additions (1,053) (1,494)
Property sales and other transactions 291 282
Investment purchases (6) (12)
Investment sales and other transactions (50) (99)
Net cash used in investing activities (818) (1,323)
Cash flows from financing activities:
Dividends (722) (705)
Common stock transactions 53 21
Purchase and retirement of common stock (960) (1,550)
Proceeds from borrowings – net of issuance costs 784 1,404
Debt repayments (325) (750)
Net cash used in financing activities (1,170) (1,580)
Net increase in cash, cash equivalents,
and restricted cash
779 94
Cash, cash equivalents, and restricted cash:
At beginning of year 580 446
At end of period $ 1,359 $ 540
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest (net of amounts capitalized) $ 395 $ 392
Income taxes (net of refunds) 118 404


		First Nine Months
		2021		2020
		($ in millions)
Cash flows from operating activities
	Net income	$	2,245	$	1,342
	Reconciliation of net income to net cash provided by operating activities:
	Depreciation	883		867
	Deferred income taxes	158		78
	Gains and losses on properties	(80)		(14)
	Loss on asset disposal	—		385
	Impairment of investment	—		99
	Changes in assets and liabilities affecting operations:
	Accounts receivable	(102)		36
	Materials and supplies	(14)		(3)
	Other current assets	57		55
	Current liabilities other than debt	294		104
	Other – net	(128)		(182)

	Net cash provided by operating activities	3,313		2,767

Cash flows from investing activities
	Property additions	(1,025)		(1,053)
	Property sales and other transactions	135		291
	Investment purchases	(5)		(6)
	Investment sales and other transactions	48		(50)

	Net cash used in investing activities	(847)		(818)

Cash flows from financing activities
	Dividends	(764)		(722)
	Common stock transactions	8		53
	Purchase and retirement of common stock	(2,460)		(960)
	Proceeds from borrowings	1,676		784
	Debt repayments	(576)		(325)

	Net cash used in financing activities	(2,116)		(1,170)

	Net increase in cash and cash equivalents	350		779

Cash and cash equivalents
	At beginning of year	1,115		580

	At end of period	$	1,465	$	1,359

Supplemental disclosures of cash flow information
	Cash paid during the period for:
	Interest (net of amounts capitalized)	$	391	$	395
	Income taxes (net of refunds)	468		118

See accompanying notes to consolidated financial statements.

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity

(Unaudited)

Common
Stock Additional
Paid-in
Capital Accum. Other
Comprehensive
Loss Retained
Income Total
($ in millions, except per share amounts)
Balance at December 31, 2019 $ 259 $ 2,209 $ (491) $ 13,207 $ 15,184
Comprehensive income:
Net income 381 381
Other comprehensive income 10 10
Total comprehensive income 391
Dividends on common stock,
$0.94 per share (242) (242)
Share repurchases (2) (21) (443) (466)
Stock-based compensation 1 17 (1) 17
Balance at March 31, 2020 258 2,205 (481) 12,902 14,884
Comprehensive income:
Net income 392 392
Other comprehensive income 6 6
Total comprehensive income 398
Dividends on common stock,
$0.94 per share (240) (240)
Share repurchases (2) (10) (191) (203)
Stock-based compensation 22 22
Balance at June 30, 2020 256 2,217 (475) 12,863 14,861
Comprehensive income:
Net income 569 569
Other comprehensive income 4 4
Total comprehensive income 573
Dividends on common stock,
$0.94 per share (240) (240)
Share repurchases (1) (11) (279) (291)
Stock-based compensation 40 (2) 38
Balance at September 30, 2020 $ 255 $ 2,246 $ (471) $ 12,911 $ 14,941


	Common Stock		Additional Paid-in Capital		Accum. Other Comprehensive Loss		Retained Income		Total
	($ in millions, except per share amounts)

Balance at December 31, 2020	$	254	$	2,248	$	(594)	$	12,883	$	14,791

Comprehensive income:
Net income							673		673
Other comprehensive income					8				8
Total comprehensive income									681
Dividends on common stock,
$0.99 per share							(249)		(249)
Share repurchases	(3)		(19)				(569)		(591)
Stock-based compensation			12				(1)		11

Balance at March 31, 2021	251		2,241		(586)		12,737		14,643

Comprehensive income:
Net income							819		819
Other comprehensive income					8				8
Total comprehensive income									827
Dividends on common stock,
$0.99 per share							(247)		(247)
Share repurchases	(3)		(28)				(903)		(934)
Stock-based compensation			27				1		28

Balance at June 30, 2021	248		2,240		(578)		12,407		14,317

Comprehensive income:
Net income							753		753
Other comprehensive income					7				7
Total comprehensive income									760
Dividends on common stock,
$1.09 per share							(268)		(268)
Share repurchases	(4)		(31)				(900)		(935)
Stock-based compensation			15				(2)		13

Balance at September 30, 2021	$	244	$	2,224	$	(571)	$	11,990	$	13,887

See accompanying notes to consolidated financial statements.

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity

(Unaudited)

Common
Stock Additional
Paid-in
Capital Accum. Other
Comprehensive
Loss Retained
Income Total
($ in millions, except per share amounts)
Balance at December 31, 2018 $ 269 $ 2,216 $ (563) $ 13,440 $ 15,362
Comprehensive income:
Net income 677 677
Other comprehensive income 3 3
Total comprehensive income 680
Dividends on common stock,
$0.86 per share (230) (230)
Share repurchases (3) (22) (475) (500)
Stock-based compensation 1 19 (1) 19
Balance at March 31, 2019 267 2,213 (560) 13,411 15,331
Comprehensive income:
Net income 722 722
Other comprehensive income 3 3
Total comprehensive income 725
Dividends on common stock,
$0.86 per share (228) (228)
Share repurchases (2) (22) (526) (550)
Stock-based compensation 35 (2) 33
Balance at June 30, 2019 265 2,226 (557) 13,377 15,311
Comprehensive income:
Net income 657 657
Other comprehensive income 4 4
Total comprehensive income 661
Dividends on common stock,
$0.94 per share (247) (247)
Share repurchases (3) (21) (476) (500)
Stock-based compensation 14 (1) 13
Balance at September 30, 2019 $ 262 $ 2,219 $ (553) $ 13,310 $ 15,238


	Common Stock		Additional Paid-in Capital		Accum. Other Comprehensive Loss		Retained Income		Total
	($ in millions, except per share amounts)

Balance at December 31, 2019	$	259	$	2,209	$	(491)	$	13,207	$	15,184

Comprehensive income:
Net income							381		381
Other comprehensive income					10				10
Total comprehensive income									391
Dividends on common stock,
$0.94 per share							(242)		(242)
Share repurchases	(2)		(21)				(443)		(466)
Stock-based compensation	1		17				(1)		17

Balance at March 31, 2020	258		2,205		(481)		12,902		14,884

Comprehensive income:
Net income							392		392
Other comprehensive income					6				6
Total comprehensive income									398
Dividends on common stock,
$0.94 per share							(240)		(240)
Share repurchases	(2)		(10)				(191)		(203)
Stock-based compensation			22				0		22

Balance at June 30, 2020	256		2,217		(475)		12,863		14,861

Comprehensive income:
Net income							569		569
Other comprehensive income					4				4
Total comprehensive income									573
Dividends on common stock,
$0.94 per share							(240)		(240)
Share repurchases	(1)		(11)				(279)		(291)
Stock-based compensation	0		40				(2)		38

Balance at September 30, 2020	$	255	$	2,246	$	(471)	$	12,911	$	14,941

See accompanying notes to consolidated financial statements.

Norfolk Southern Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

In the opinion of management, the accompanying unaudited interim consolidated financial statements contain all adjustments (consisting of normal recurring accruals) necessary to present fairly Norfolk Southern Corporation (Norfolk Southern) and subsidiaries’ (collectively, NS, we, us, and our) financial position at September 30, ~~2020,~~2021, and December 31, ~~2019,~~2020, our results of operations, comprehensive income and changes in stockholders’ equity for the third quarters and first nine monthsof ~~2020~~2021 and ~~2019,~~2020, and our cash flows for the first nine months of ~~2020~~2021 and ~~2019~~2020 in conformity with U.S. generally accepted accounting principles (GAAP).

These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in our latest Annual Report on Form 10-K.

1. Railway Operating Revenues

The following table disaggregates our revenues by major commodity group:

Third Quarter First Nine Months
2020 2019 2020 2019
($ in millions)
Merchandise:
Agriculture, forest and consumer products $ 521 $ 572 $ 1,570 $ 1,707
Chemicals 428 535 1,371 1,586
Metals and construction 337 377 997 1,131
Automotive 270 247 597 749
Merchandise 1,556 1,731 4,535 5,173
Intermodal 700 707 1,924 2,127
Coal 250 403 757 1,306
Total $ 2,506 $ 2,841 $ 7,216 $ 8,606

At the beginning of 2020, we combined the agriculture products and forest and consumer commodity groups. In addition, we also made changes in the categorization of certain other commodity groups within Merchandise. Specifically, certain commodities were shifted between agriculture, forest, and consumer products; chemicals; and, metals and construction. These changes were made as a result of organizational initiatives to better align with how we manage these commodities. Prior period railway operating revenues have been reclassified to conform to the current presentation.


	Third Quarter				First Nine Months
	2021		2020		2021		2020
	($ in millions)
Merchandise:
Agriculture, forest and consumer products	$	564	$	521	$	1,681	$	1,570
Chemicals	504		428		1,457		1,371
Metals and construction	424		337		1,196		997
Automotive	218		270		664		597
Merchandise	1,710		1,556		4,998		4,535
Intermodal	812		700		2,332		1,924
Coal	330		250		960		757

Total	$	2,852	$	2,506	$	8,290	$	7,216

We recognize the amount of ~~revenue~~revenues to which we expect to be entitled to for the transfer of promised goods or services to customers. A performance obligation is created when a customer under a transportation contract or public tariff submits a bill of lading to NSus for the transport of goods. These performance obligations are satisfied as the shipments move from origin to destination. As such, transportation ~~revenue is~~revenues are recognized proportionally as a shipment moves, and related expenses are recognized as incurred. These performance obligations are generally short-term in nature with transit days averaging approximately one week or less for each commodity group. The customer has an unconditional obligation to pay for the service once the service has been completed. Estimated ~~revenue~~revenues associated with in-process shipments at period-end isare recorded based on the estimated percentage of service completed. We had no material remaining performance obligations ~~as of~~at September 30, ~~2020 or~~2021 and December 31, ~~2019.~~2020.

~~Revenue~~We may provide customers ancillary services, such as switching, demurrage and other incidental activities, under their transportation contracts. These are distinct performance obligations that are recognized at a point in time when the services are performed or as contractual obligations are met. These revenues are included within each of the commodity groups and represent a percentage of total “Railway operating revenues” on the Consolidated Statements of Income as follows: 7% for the third quarter of 2021, 6% for the first nine months of 2021, and 5% for both the third quarter and first nine months of 2020.

Revenues related to interline transportation services that involve another railroad isare reported on a net basis. Therefore, the portion of the amount that relates to another party is not reflected in ~~revenue.~~revenues.

Under the typical ~~payment~~ terms of our freight contracts, payment for services is due within fifteen days of billing the customer, thus there are no significant financing components. “Accounts receivable – net” on the Consolidated Balance Sheets includes both customer and non-customer receivables as follows:

September 30,
2020 December 31, 2019
($ in millions)
Customer $ 664 $ 682
Non-customer 219 238
Accounts receivable – net $ 883 $ 920


	September 30, 2021		December 31, 2020
	($ in millions)

Customer	$	740	$	629
Non-customer	205		219

Accounts receivable – net	$	945	$	848

Non-customer receivables include non-revenue-related amounts due from other railroads, governmental entities, and others. “Other assets” on the Consolidated Balance Sheets includes non-current customer receivables of $23 million at both September 30, ~~2020~~2021 and December 31, ~~2019.~~2020. We do 0tnot have any material contract assets or liabilities at September 30, ~~2020 or~~2021 and December 31, ~~2019.~~

We may provide customers ancillary services, such as switching, demurrage and other incidental services, under their transportation contracts. These are distinct performance obligations that are recognized at a point in time when the services are performed or as contractual obligations are met. This revenue is included within each of the commodity groups and represents 5% of total “Railway operating revenues” on the Consolidated Statements of Income for the third quarters and first nine months of 2020 and 2019.2020.

2. Stock-Based Compensation

Third Quarter First Nine Months
2020 2019 2020 2019
($ in millions)
Stock-based compensation expense $ 13 $ 10 $ 25 $ 46
Total tax benefit 10 3 39 34


	Third Quarter				First Nine Months
	2021		2020		2021		2020
	($ in millions)

Stock-based compensation expense	$	14	$	13	$	46	$	25
Total tax benefit	3		10		28		39

During ~~2020, a committee of nonemployee members of our Board of Directors (and the Chief Executive Officer when delegated authority by such committee)~~2021, we granted stock options, restricted stock units (RSUs) and performance share units (PSUs) pursuant to the Long-Term Incentive Plan (LTIP), as follows:


		Third Quarter			First Nine Months				Third Quarter			First Nine Months
		Granted	Weighted-Average Grant-Date Fair Value		Granted	Weighted-Average Grant-Date Fair Value			Granted	Weighted-Average Grant-Date Fair Value		Granted	Weighted-Average Grant-Date Fair Value

Stock options	Stock options	0	$	0	43,770	$	52.05	Stock options	—	$	—	42,770	$	62.49
RSUs	RSUs	10,230	211.90		177,770	210.13		RSUs	2,490	258.14		179,345	239.01
PSUs	PSUs	0	0		78,720	212.67		PSUs	—	—		50,060	240.69

Stock Options

Third Quarter First Nine Months
2020 2019 2020 2019
($ in millions)
Stock options exercised 313,358 55,155 998,996 677,072
Cash received upon exercise $ 27 $ 3 $ 82 $ 47
Related tax benefit realized 8 1 24 16


	Third Quarter				First Nine Months
	2021		2020		2021		2020
	($ in millions)

Options exercised	22,502		313,358		363,982		998,996
Cash received upon exercise	$	2	$	27	$	33	$	82
Related tax benefit realized	1		8		13		24

Restricted Stock Units

RSUs granted primarily have a four-year ratable restriction period and will be settled through the issuance of shares of Norfolk Southern common stock (Common Stock). Certain RSU grants include cash dividend equivalent payments during the restriction period in an amount equal to the regular quarterly dividends paid on Common Stock.

Third Quarter First Nine Months
2020 2019 2020 2019
($ in millions)
RSUs vested 1,635 142 203,934 166,197
Common Stock issued net of tax withholding 1,630 102 145,342 119,346
Related tax benefit realized $ 0 $ 0 $ 4 $ 2


	Third Quarter				First Nine Months
	2021		2020		2021		2020
	($ in millions)

RSUs vested	1,100		1,635		260,227		203,934
Common Stock issued net of tax withholding	761		1,630		184,272		145,342
Related tax benefit realized	$	—	$	—	$	7	$	4

Performance Share Units

PSUs provide for awards based on the achievement of certain predetermined corporate performance goals at the end of a three-year cycle and are settled through the issuance of shares of Common Stock. All PSUs will earn out based on the achievement of performance conditions and some will also earn out based on a market condition. The market condition fair value was measured on the date of grant using a Monte Carlo simulation model. No PSUs were earned or paid out during the third quarters of ~~2020~~2021 or ~~2019.~~2020.


		First Nine Months					First Nine Months
		2020		2019			2021		2020
		($ in millions)					($ in millions)

PSUs earned	PSUs earned	235,935		331,099		PSUs earned	78,727		235,935
Common Stock issued net of tax withholding	Common Stock issued net of tax withholding	156,450		221,241		Common Stock issued net of tax withholding	49,967		156,450
Related tax benefit realized	Related tax benefit realized	$	7	$	9	Related tax benefit realized	$	1	$	7

3. Loss on Asset Disposal

In ~~the first quarter of~~ 2020, ~~in connection with our initiatives to increase operational fluidity and asset utilization and improve labor and fuel efficiency,~~ we ~~committed to a plan to dispose of certain~~sold 703 locomotives deemed excess and no longer needed for railroad operations. When depreciable operating road and equipment 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. A retirement is considered abnormal if it does not occur in the ordinary 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. We evaluated ~~the~~

~~planned~~these locomotive retirements and concluded they were abnormal. Accordingly, we recorded a $385 million loss ~~was recorded~~ to adjust their carrying amount to their estimated fair value, which resulted in a $97 million tax benefit. During the first nine months, we sold 574 of 703 locomotives under the plan. The carrying amount of the remaining assets held for sale of $20 million is classified as “Other current assets” in the Consolidated Balance Sheet at September 30, 2020.

4. Earnings Per Share

The following table sets forth the calculation of basic and diluted earnings per share:


		Basic				Diluted					Basic				Diluted
		Third Quarter									Third Quarter
		2020		2019		2020		2019			2021		2020		2021		2020
		($ in millions, except per share amounts, shares in millions)									($ in millions, except per share amounts, shares in millions)

Net income	Net income	$	569	$	657	$	569	$	657	Net income	$	753	$	569	$	753	$	569
Dividend equivalent payments	Dividend equivalent payments	(2)		(1)		(1)		0		Dividend equivalent payments	(1)		(2)		—		(1)

Income available to common stockholders	Income available to common stockholders	$	567	$	656	$	568	$	657	Income available to common stockholders	$	752	$	567	$	753	$	568

Weighted-average shares outstanding	Weighted-average shares outstanding	254.6		262.1		254.6		262.1		Weighted-average shares outstanding	245.3		254.6		245.3		254.6

Dilutive effect of outstanding options and share-settled awards	Dilutive effect of outstanding options and share-settled awards					1.5		2.2		Dilutive effect of outstanding options and share-settled awards					1.1		1.5

Adjusted weighted-average shares outstanding	Adjusted weighted-average shares outstanding					256.1		264.3		Adjusted weighted-average shares outstanding					246.4		256.1

Earnings per share	Earnings per share	$	2.23	$	2.50	$	2.22	$	2.49	Earnings per share	$	3.07	$	2.23	$	3.06	$	2.22

		Basic				Diluted					Basic				Diluted
		First Nine Months									First Nine Months
		2020		2019		2020		2019			2021		2020		2021		2020
		($ in millions, except per share amounts, shares in millions)									($ in millions, except per share amounts, shares in millions)

Net income	Net income	$	1,342	$	2,056	$	1,342	$	2,056	Net income	$	2,245	$	1,342	$	2,245	$	1,342
Dividend equivalent payments	Dividend equivalent payments	(3)		(4)		(2)		0		Dividend equivalent payments	(2)		(3)		—		(2)

Income available to common stockholders	Income available to common stockholders	$	1,339	$	2,052	$	1,340	$	2,056	Income available to common stockholders	$	2,243	$	1,339	$	2,245	$	1,340

Weighted-average shares outstanding	Weighted-average shares outstanding	255.7		264.6		255.7		264.6		Weighted-average shares outstanding	248.5		255.7		248.5		255.7

Dilutive effect of outstanding options and share-settled awards	Dilutive effect of outstanding options and share-settled awards					1.5		2.3		Dilutive effect of outstanding options and share-settled awards					1.2		1.5

Adjusted weighted-average shares outstanding	Adjusted weighted-average shares outstanding					257.2		266.9		Adjusted weighted-average shares outstanding					249.7		257.2

Earnings per share	Earnings per share	$	5.24	$	7.76	$	5.21	$	7.70	Earnings per share	$	9.03	$	5.24	$	8.99	$	5.21

During the third quarters and first nine months of ~~2020~~2021 and ~~2019, we made~~2020, dividend equivalent payments were made to ~~certain~~ 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 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. There are 0 ~~awards outstanding that were antidilutive~~options excluded from the dilution calculations due to exercise prices exceeding the average market price of Common Stock for the third quarters and first nine months ended September 30, ~~2020~~2021 and ~~2019.~~2020.

5. Accumulated Other Comprehensive Loss

The changes in the cumulative balances of “Accumulated other comprehensive loss” reported in the Consolidated Balance Sheets consisted of the following:

Balance at
Beginning
of Year Net Income
(Loss) Reclassification
Adjustments Balance at
End of Period
($ in millions)
Nine Months Ended September 30, 2020
Pensions and other postretirement liabilities $ (421) $ 0 $ 14 $ (407)
Other comprehensive income (loss) of equity
investees (70) 6 0 (64)
Accumulated other comprehensive loss $ (491) $ 6 $ 14 $ (471)
Nine Months Ended September 30, 2019
Pensions and other postretirement liabilities $ (497) $ 0 $ 11 $ (486)
Other comprehensive loss of equity investees (66) (1) 0 (67)
Accumulated other comprehensive loss $ (563) $ (1) $ 11 $ (553)


	Balance at Beginning of Year		Net Income		Reclassification Adjustments		Balance at End of Period
	($ in millions)
Nine months ended September 30, 2021
Pensions and other postretirement liabilities	$	(526)	$	—	$	23	$	(503)
Other comprehensive loss of equity investees	(68)		—		—		(68)

Accumulated other comprehensive loss	$	(594)	$	—	$	23	$	(571)

Nine months ended September 30, 2020
Pensions and other postretirement liabilities	$	(421)	$	—	$	14	$	(407)
Other comprehensive income (loss) of equity investees	(70)		6		—		(64)

Accumulated other comprehensive loss	$	(491)	$	6	$	14	$	(471)

6. Stock Repurchase Program

We repurchased and retired ~~5.3~~9.4 million and ~~8.4~~5.3 million shares of Common Stock under our stock repurchase program during the first nine months of ~~2020~~2021 and ~~2019,~~2020, respectively, at a cost of $2.5 billion and $960 million, ~~and $1.6 billion,~~ respectively.

7. Investments

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 ~~Conrail,~~the jointly-owned entity, and CSX has the remainder of the economic and voting interests. Our investment in Conrail was $1.5 billion and $1.4 billion at ~~both~~ September 30, ~~2020~~2021 and December 31, ~~2019.~~2020, respectively.

CRC owns and operates certain properties (the Shared Assets Areas) for the joint and exclusive benefit of Norfolk Southern Railway Company (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 ~~amounts~~expenses payable to CRC for ~~the~~ operation of the Shared Assets Areas totaling ~~$32~~$37 million and ~~$37~~$32 million for the third quarters of 2021 and 2020, respectively, and ~~2019,~~$108 million and $97 million for the first nine months of 2021 and 2020, respectively. Our equity in Conrail’s earnings, net of amortization, was $14 million and $17 million for the third quarters of 2021 and 2020, respectively, and $42 million and $39 million for the first nine months of 2021 and 2020, respectively. These amounts offset the costs of operating the Shared Assets Areas and are included in “Purchased services and rents.”

“Other liabilities” includes $534 million at both September��30, 2021, and December 31, 2020 for long-term advances from Conrail, maturing in 2050 that bear interest at an average rate of 1.31%.

respectively, and $97 million and $112 million for the first nine months of 2020 and 2019, respectively. Our equity in the earnings of Conrail, net of amortization, included in “Purchased services and rents,” which offsets the costs of operating the Shared Assets Areas, was $17 million and $13 million for the third quarters of 2020 and 2019, respectively, and $39 million and $36 million for the first nine months of 2020 and 2019, respectively.

~~“Other liabilities” includes $280 million at both September 30, 2020 and December 31, 2019, for long-term advances from Conrail, maturing 2044, that bear interest at an average rate of 2.9%.~~

Investment in TTX

NSWe and 8 other North American railroads ~~jointly~~collectively own TTX Company (TTX)~~. NS has a 19.65% ownership interest in TTX,~~, a railcar pooling company that provides its owner-railroads with standardized fleets of intermodal, automotive, and general use railcars at stated rates. We have a 19.65% ownership interest in TTX.

~~Amounts paid to TTX~~Expenses incurred for use of TTX equipment are included in “Purchased services and ~~rents” and~~rents.” This amounted to ~~$67~~$59 million and ~~$61~~$67 million ~~of expense~~ for the third quarters of ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~$185~~$183 million and ~~$183~~$185 million for the first nine months of ~~2020~~2021 and ~~2019,~~2020, respectively. Our equity in ~~the~~TTX’s earnings ~~of TTX, which~~ offsets ~~the~~these costs and ~~are also included in “Purchased services and rents,”~~ totaled ~~$21~~$12 million and ~~$19~~$21 million for the third quarters of ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~$35~~$43 million and ~~$44~~$35 million for the first nine months of ~~2020~~2021 and ~~2019,~~2020, respectively.

Impairment of Investment

During ~~the third quarter of~~ 2020, we recorded an other-than-temporary impairment of $99 million related to the carrying value of an equity method investment. This non-cash impairment charge is recorded in “Purchased services and rents” on the ~~2020~~ Consolidated Statements of Income and had a $74 million impact on net income for the third quarter and first nine months of 2020.

8. Debt

In ~~May 2020,~~August 2021, we issued ~~$800~~$600 million of ~~3.05%~~2.90% senior notes due ~~2050, resulting in $790 million in net proceeds.~~2051.

In May ~~2020,~~2021, we ~~also~~ issued ~~$800~~$500 million of ~~3.155%~~2.30% senior notes due ~~2055 in exchange for $554~~2031 and $600 million of ~~previously issued~~4.10% senior notes ~~($450 million at 5.1%~~ due 2118, $42 million at 6% due 2111, $29 million at 7.9% due 2097, $26 million at 6% due 2105, and $7 million at 7.05% due 2037). As part of the debt exchange, a $4 million loss on extinguishment was recognized in “Other income – net.”2121.

In May ~~2020,~~2021, we renewed, amended and ~~amended~~restated our accounts receivable securitization program with a maximum borrowing capacity of $400 million and a term ~~expiring~~that expires in May ~~2021.~~2022. We had 0no amounts outstanding ~~at both September 30, 2020, and December 31, 2019,~~under this program and our available borrowing capacity was $400 million ~~and $429 million, respectively.~~

In March 2020, we renewed and amended our five-year credit agreement. We increased the program’s borrowing authority from $750 million to $800 million. The amended agreement expires in 2025 and provides for borrowing at prevailing rates and includes covenants. We had 0 amounts outstanding under this facility at both September 30, ~~2020,~~2021 and December 31, ~~2019.~~2020.

The “Cash, cash equivalents, and restricted cash” line item on the Consolidated Statements of Cash Flows includes restricted cash of $88 million in 2019, reflecting deposits held by a third-party bond agent as collateral for certain debt obligations, which matured on October 1, 2019.

9. Pensions and Other Postretirement Benefits

We have both funded and unfunded defined benefit pension plans covering ~~principally salaried~~eligible employees. We also provide specified health care ~~and life insurance~~ benefits to eligible retired employees; these plans can be amended or terminated at our option. Under our self-insured retiree health care plan, for those participants who are not Medicare-eligible, certain health care expenses are covered for retired employees and their dependents, reduced by any deductibles, coinsurance, and, in some cases, coverage provided under other group insurance policies. ~~Those~~Eligible retired participants and their spouses who are Medicare-eligible are not covered under the self-insured retiree health care plan, but instead are provided with an employer-funded health reimbursement account which can be used for reimbursement of health insurance premiums or eligible out-of-pocket medical expenses.

Pension and postretirement benefit cost components for the third quarter and first nine months were as follows:

Other Postretirement
Pension Benefits Benefits
Third Quarter
2020 2019 2020 2019
($ in millions)
Service cost $ 10 $ 9 $ 2 $ 2
Interest cost 19 24 3 4
Expected return on plan assets (48) (45) (4) (4)
Amortization of net losses 13 11 0 0
Amortization of prior service benefit 0 0 (6) (6)
Net benefit $ (6) $ (1) $ (5) $ (4)



					Other Postretirement
	Pension Benefits				Benefits
	Third Quarter
	2021		2020		2021		2020
	($ in millions)

Service cost	$	10	$	10	$	1	$	2
Interest cost	14		19		1		3
Expected return on plan assets	(48)		(48)		(3)		(4)
Amortization of net losses	16		13		—		—
Amortization of prior service benefit	—		—		(6)		(6)

Net benefit	$	(8)	$	(6)	$	(7)	$	(5)


						Other Postretirement									Other Postretirement
		Pension Benefits				Benefits					Pension Benefits				Benefits
		First Nine Months									First Nine Months
		2020		2019		2020		2019			2021		2020		2021		2020
		($ in millions)									($ in millions)

Service cost	Service cost	$	30	$	26	$	5	$	5	Service cost	$	32	$	30	$	4	$	5
Interest cost	Interest cost	56		70		9		13		Interest cost	41		56		5		9
Expected return on plan assets	Expected return on plan assets	(143)		(134)		(10)		(11)		Expected return on plan assets	(144)		(143)		(9)		(10)
Amortization of net losses	Amortization of net losses	39		33		0		0		Amortization of net losses	49		39		1		—
Amortization of prior service benefit	Amortization of prior service benefit	0		0		(19)		(18)		Amortization of prior service benefit	—		—		(19)		(19)

Net benefit	Net benefit	$	(18)	$	(5)	$	(15)	$	(11)	Net benefit	$	(22)	$	(18)	$	(18)	$	(15)

The service cost ~~components~~component of defined benefit pension cost and postretirement benefit cost are reported within “Compensation and benefits” and all other components of net benefit cost are presented in “Other income – net” on the Consolidated Statements of Income.

10. Fair Values of Financial Instruments

The fair values of “Cash and cash equivalents,” “Accounts receivable – net,” and “Accounts payable,” 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. There are no other assets or liabilities measured at fair value on a recurring basis at September 30, ~~2020~~2021 or December 31, ~~2019.~~2020. The carrying amounts and estimated fair values, based on Level 1 inputs, of long-term debt ~~consisted~~consist of the following:

September 30, 2020 December 31, 2019
Carrying
Amount Fair
Value Carrying
Amount Fair
Value
($ in millions)
Long-term debt, including current maturities $ (12,723) $ (16,582) $ (12,196) $ (14,806)


	September 30, 2021				December 31, 2020
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	($ in millions)


Long-term debt, including current maturities	$	(13,832)	$	(17,034)	$	(12,681)	$	(16,664)

11. 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.~~earnings and, if material, disclosed below. 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. For lawsuits and other claims where a loss may be reasonably possible, but not probable, or is probable but not reasonably estimable, no accrual is established but the matter, if potentially material, is disclosed below. We routinely review relevant information with respect to our lawsuits and other claims and update our accruals, disclosures and estimates of reasonably possible losses based on such reviews.

In 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. In 2012, the court certified the case as a class action. The defendant railroads appealed this certification, and the Court of Appeals for the District of Columbia vacated the District Court’s decision and remanded the case for further consideration. On October 10, 2017, the District Court denied class certification. The decision was upheld by the Court of Appeals on August 16, 2019. Since that decision, various individual cases have been filed in multiple jurisdictions and also consolidated in the District of Columbia. 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.

In 2018, a lawsuit was filed against one of our subsidiaries by the minority owner in a jointly-owned terminal railroad company in which our subsidiary has the majority ownership. The lawsuit alleged violations of various state laws and federal antitrust laws. It is reasonably possible that we could incur a loss in the case; however, we intend to vigorously defend the case and believe that we will prevail. The potential range of loss cannot be estimated at this time.

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~~Job-

related personal injury and occupational claims are subject to the F~~ederal~~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 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 ~~claim~~ 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 reasonably estimable.

Employee personal injury claims – The largest component of claims expense is employee personal injury costs. The independent actuarial firm we engage 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. We adjust the liability quarterly based upon our assessment and the results of the study. ~~Our~~The accuracy of our estimate of the liability is subject to inherent limitation given the difficulty of predicting future events such as jury decisions, court interpretations, or legislative changes. As a result, actual claim settlements may vary from the estimated liability recorded.

Occupational claims – Occupational claims include injuries and illnesses alleged to be caused by exposures which occur over time as opposed to injuries or illnesses caused by a specific accident or event. Types of occupational claims commonly seen allege exposure to asbestos and other claimed toxic substances resulting in respiratory diseases or cancer. 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. 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 ~~claim payments.~~payment of claims. Adjustments to the recorded liability are reflected in operating expenses in the periods in which such adjustments become known.

Third-party claims – We record a liability for third-party claims including those for highway crossing accidents, trespasser and other injuries, 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. 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 reasonably estimable. Environmental specialists regularly participate in ongoing evaluations of all known sites and in determining any necessary adjustments to liability estimates.

Our Consolidated Balance Sheets include liabilities for environmental exposures of ~~$55 million and $56~~$52 million at September 30, ~~2020~~2021 and $54 million at December 31, ~~2019, respectively,~~2020, of which $15 million is classified as a current liability at the end of both ~~dates.~~periods. At September 30, ~~2020,~~2021, the liability represents our estimates of the probable cleanup, investigation, and remediation costs based on available information at ~~105~~97 known locations and projects compared with ~~110~~100 locations and projects at December 31, ~~2019.~~2020. At September 30, ~~2020, 17~~2021, 19 sites accounted for ~~$41~~$40 million of the liability, and no individual site was considered to be material. We anticipate that ~~much~~most of this liability will be paid out over five years; however, some costs will be paid out over a longer period.

At 118 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 Environmental Protection Agency or comparable state authorities), estimates of our ultimate potential financial exposure for a given site or in the aggregate for all such sites can change over time 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 we transport, particularly those classified as hazardous materials, pose special risks that we work diligently to reduce. 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.

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 purchase insurance covering legal liabilities for bodily injury and property damage to third parties. This insurance provides coverage above $75 million and below ~~$1.1 billion~~$800 million ($~~1.5~~1.1 billion for specific perils) per occurrence and/or policy year. In addition, we purchase insurance covering damage to property owned by us or in our care, custody, or control. This insurance covers approximately ~~85%~~87% of ~~damage~~potential losses above $75 million and below $275 million per occurrence and/or policy year.

12. New Accounting Pronouncements

On January 1, ~~2020,~~2021, we adopted ~~the~~ Financial Accounting Standards Board ~~(FASB)~~ Accounting Standards Update ~~(ASU) 2016-13, “Credit Losses - Measurement of Credit Losses on Financial Instruments~~,” which replaced the current incurred loss impairment method with a method that reflects expected credit losses. Historically, losses associated from the inability to collect on accounts receivable have been insignificant, with little divergence in collection trends through varying economic cycles. Short-term and long-term financial assets, as defined by the standard, are impacted by immediate recognition of estimated credit losses in the financial statements, reflecting the net amount expected to be collected. There was no material impact to the financial statements upon adoption.

~~In December 2019, the FASB issued ASU~~ 2019-12, “Simplifying the Accounting for Income Taxes,” which adds new guidance to simplify the accounting for income taxes, changes the accounting for certain income tax transactions, and makes other minor changes. ~~The new standard is effective as of January 1, 2021, and early adoption is permitted for any interim period for which~~There was no material impact to the financial statements ~~have not been issued. We do not expect this standard to have a material effect on our financial statements. We will not adopt the standard early.~~upon adoption.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations.~~Operations

Norfolk Southern Corporation and Subsidiaries

The following discussion and analysis should be read in conjunction with the Consolidated Financial Statements and Notes.

OVERVIEW

We are one of the nation’s premier transportation ~~companies.~~companies, moving goods and materials that help drive the U.S. economy. We connect customers to markets and communities to economic opportunity with safe, reliable, and cost-effective shipping solutions. Our Norfolk Southern Railway Company subsidiary operates ~~approximately 19,500 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.~~Columbia. We are a major transporter of industrial products, including agriculture, forest and consumer products, chemicals, ~~agriculture,~~ and metals and construction materials. In addition, in the East we serve every major container port and operate the most extensive intermodal ~~network in the East and~~network. We are also a principal carrier of coal, automobiles, and automotive parts.

~~The ongoing COVID-19 pandemic has caused significant economic disruption and continues~~We continued to ~~influence the demand for our services, as evidenced by the volume declines compared to prior year experienced across most of our major commodity groups in the third quarter. However, we have seen~~produce year-over-year improvement in ~~underlying demand. Overall volumes~~profitability in the third quarter ~~were down 7% compared to last year, marking a~~of 2021. Revenue growth well exceeded increased operating expenses and drove significant improvement ~~relative~~in net income and diluted earnings per share. Comparisons to the ~~26% year-over-year decline experienced~~prior year were aided in part by the ~~second quarter. While substantial uncertainty remains with respect~~absence of last year’s $99 million impairment charge related to ~~customer demand as a result~~an equity method investment.

The COVID-19 pandemic continues to impact the U.S. and global economies and has resulted in ongoing supply chain challenges. We are monitoring and reacting to the evolving nature of the pandemic ~~we continue to execute on operational initiatives to improve efficiencies~~ and ~~lower our cost structure.~~

~~COVID-19 is generating significant uncertainty in the economy and our outlook as we conclude 2020. We continue to monitor the impact of the pandemic~~its impacts on our ~~employees’~~business. Our compliance with the federal contractor vaccine mandate, which requires employees to be fully vaccinated against COVID-19 by December 8, 2021, unless legally entitled to an accommodation, could lead to employee absences, resignations, labor disputes or work stoppages. Significant employee availability ~~which has not been adversely affected~~issues could have a material impact on our operations, resulting in a ~~significant manner this year.~~material adverse impact on our financial results, financial position and liquidity. We remain committed to protecting our employees, operating safely, and providing excellent transportation service products for our customers.

SUMMARIZED RESULTS OF OPERATIONS

~~($ in millions, except per share amounts)~~


												Third Quarter							First Nine Months
		Third Quarter					First Nine Months							2021		2020		% change		2021		2020		% change
		2020		2019		% change	2020		2019		% change			($ in millions, except per share amounts)

Income from railway operations	Income from railway operations	$	840	$	996	(16%)	$	2,018	$	3,027	(33%)		Income from railway operations	$	1,136	$	840	35%		$	3,318	$	2,018	64%
Net income	Net income	$	569	$	657	(13%)	$	1,342	$	2,056	(35%)		Net income	$	753	$	569	32%		$	2,245	$	1,342	67%
Diluted earnings per share	Diluted earnings per share	$	2.22	$	2.49	(11%)	$	5.21	$	7.70	(32%)		Diluted earnings per share	$	3.06	$	2.22	38%		$	8.99	$	5.21	73%
Railway operating ratio (percent)	Railway operating ratio (percent)	66.5		64.9		2%	72.0		64.8		11%		Railway operating ratio (percent)	60.2		66.5		(9%)		60.0		72.0		(17%)

~~Decreases in railway operating revenues exceeded operating expense declines, resulting in reduced income~~Income from railway operations ~~and~~ increased ~~operating ratios. Railway operating revenues declined~~ in both periods, ~~as lower customer demand resulted in volume declines. Additionally, negative mix led to lower revenue per unit. Notwithstanding~~primarily a result of higher railway operating revenues. Overall volumes remained flat for the ~~charges noted below,~~third quarter but were up 8% for the first nine months. In both periods, railway operating expenses ~~decreased~~included increases due to ~~declines in~~higher fuel ~~price~~ and ~~consumption, reduced employment levels, lower volumes~~compensation and ~~operational efficiency improvements.~~benefits costs. These increases were partially offset by higher gains on the sale of operating properties.

~~Third-quarter~~Our third-quarter 2020 results ~~were adversely impacted by~~included a $99 million impairment charge related to an equity method investment. Additionally, the comparison of our current-year results for the first nine months ~~of 2020 were adversely~~was impacted by a $385 million loss on asset disposal ~~of $385 million~~in 2020 related to locomotives sold or designated as held-for-sale. For more information on the impact of these charges, see Notes 7 and 3.3, respectively.

The following tables adjust our 2020 GAAP financial results for the third quarter and first nine months to exclude the effects of these charges. The income tax effects of these non-GAAP adjustments were calculated based on the applicable tax rates to which the non-GAAP adjustment related. We use these non-GAAP financial measures internally and believe this information

provides useful supplemental information to investors to facilitate making period-to-period comparisons by excluding the 2020 charges. While we believe that these non-GAAP financial measures are useful in evaluating our business, this information should be considered as supplemental in nature and is not meant to be considered in isolation from, or as a substitute for, the related financial information prepared in accordance with GAAP. In addition, these non-GAAP financial measures may not be the same as similar measures presented by other companies.


		Non-GAAP Reconciliation for the Third Quarter							Non-GAAP Reconciliation for the Third Quarter of 2020
		Reported 2020 (GAAP)		2020 Investment Impairment		Adjusted 2020 (non-GAAP)			Reported		Investment Impairment		Adjusted (non-GAAP)
		($ in millions, except per share amounts)							($ in millions, except per share amounts)

Railway operating expenses	Railway operating expenses	$	1,666	$	(99)	$	1,567	Railway operating expenses	$	1,666	$	(99)	$	1,567
Income from railway operations	Income from railway operations	$	840	$	99	$	939	Income from railway operations	$	840	$	99	$	939
Income before income taxes								Income before income taxes	$	724	$	99	$	823
Income taxes								Income taxes	$	155	$	25	$	180
Net income	Net income	$	569	$	74	$	643	Net income	$	569	$	74	$	643
Diluted earnings per share	Diluted earnings per share	$	2.22	$	0.29	$	2.51	Diluted earnings per share	$	2.22	$	0.29	$	2.51
Railway operating ratio (percent)	Railway operating ratio (percent)	66.5		(4.0)		62.5		Railway operating ratio (percent)	66.5		(4.0)		62.5

In the table below, references to the third quarter of 2020 results and related comparisons use the adjusted, non-GAAP results from the reconciliation in the table above.

Third Quarter
Adjusted 2020
(non-GAAP) 2019 Adjusted 2020 (non-GAAP)
vs. 2019
($ in millions, except per share amounts) % change
Railway operating expenses $ 1,567 $ 1,845 (15%)
Income from railway operations $ 939 $ 996 (6%)
Net income $ 643 $ 657 (2%)
Diluted earnings per share $ 2.51 $ 2.49 1%
Railway operating ratio (percent) 62.5 64.9 (4%)


	Third Quarter
	2021		Adjusted 2020 (non-GAAP)		2021 vs. Adjusted 2020 (non-GAAP)
	($ in millions, except per share amounts)				% change

Railway operating expenses	$	1,716	$	1,567	10%
Income from railway operations	$	1,136	$	939	21%
Income before income taxes	$	986	$	823	20%
Income taxes	$	233	$	180	29%
Net income	$	753	$	643	17%
Diluted earnings per share	$	3.06	$	2.51	22%
Railway operating ratio (percent)	60.2		62.5		(4%)


		Non-GAAP Reconciliation for First Nine Months									Non-GAAP Reconciliation for First Nine Months of 2020
		Reported 2020 (GAAP)		First Quarter Loss on Asset Disposal		Third Quarter Investment Impairment		Adjusted 2020 (non-GAAP)			Reported		Loss on Asset Disposal		Investment Impairment		Adjusted (non-GAAP)
		($ in millions, except per share amounts)									($ in millions, except per share amounts)

Railway operating expenses	Railway operating expenses	$	5,198	$	(385)	$	(99)	$	4,714	Railway operating expenses	$	5,198	$	(385)	$	(99)	$	4,714
Income from railway operations	Income from railway operations	$	2,018	$	385	$	99	$	2,502	Income from railway operations	$	2,018	$	385	$	99	$	2,502
Income before income taxes										Income before income taxes	$	1,663	$	385	$	99	$	2,147
Income taxes										Income taxes	$	321	$	97	$	25	$	443
Net income	Net income	$	1,342	$	288	$	74	$	1,704	Net income	$	1,342	$	288	$	74	$	1,704
Diluted earnings per share	Diluted earnings per share	$	5.21	$	1.12	$	0.29	$	6.62	Diluted earnings per share	$	5.21	$	1.12	$	0.29	$	6.62
Railway operating ratio (percent)	Railway operating ratio (percent)	72.0		(5.3)		(1.4)		65.3		Railway operating ratio (percent)	72.0		(5.3)		(1.4)		65.3

In the table below, references and comparisons to the 2020 results for the first nine months ~~of 2020 results and related comparisons~~ use the adjusted, non-GAAP results from the reconciliation in the table above.

First Nine Months
Adjusted 2020
(non-GAAP) 2019 Adjusted 2020 (non-GAAP)
vs. 2019
($ in millions, except per share amounts) % change
Railway operating expenses $ 4,714 $ 5,579 (16%)
Income from railway operations $ 2,502 $ 3,027 (17%)
Net income $ 1,704 $ 2,056 (17%)
Diluted earnings per share $ 6.62 $ 7.70 (14%)
Railway operating ratio (percent) 65.3 64.8 1%


	First Nine Months
	2021		Adjusted 2020 (non-GAAP)		2021 vs. Adjusted 2020 (non-GAAP)
	($ in millions, except per share amounts)				% change

Railway operating expenses	$	4,972	$	4,714	5%
Income from railway operations	$	3,318	$	2,502	33%
Income before income taxes	$	2,893	$	2,147	35%
Income taxes	$	648	$	443	46%
Net income	$	2,245	$	1,704	32%
Diluted earnings per share	$	8.99	$	6.62	36%
Railway operating ratio (percent)	60.0		65.3		(8%)

DETAILED RESULTS OF OPERATIONS

Railway Operating Revenues

The following tables present a comparison of revenues ($ in millions), ~~volumes (units in~~units (in thousands), and average revenue per unit ($ per unit) by commodity group.


	Third Quarter					First Nine Months
Revenues	2021		2020		% change	2021		2020		% change
Merchandise:
Agriculture, forest and consumer products	$	564	$	521	8%	$	1,681	$	1,570	7%
Chemicals	504		428		18%	1,457		1,371		6%
Metals and construction	424		337		26%	1,196		997		20%
Automotive	218		270		(19%)	664		597		11%
Merchandise	1,710		1,556		10%	4,998		4,535		10%
Intermodal	812		700		16%	2,332		1,924		21%
Coal	330		250		32%	960		757		27%

Total	$	2,852	$	2,506	14%	$	8,290	$	7,216	15%


		Third Quarter					First Nine Months
Revenues		2020		2019		% change	2020		2019		% change
Units												Units
Merchandise:	Merchandise:											Merchandise:
Agriculture, forest and consumer products	Agriculture, forest and consumer products	$	521	$	572	(9%)	$	1,570	$	1,707	(8%)	Agriculture, forest and consumer products	181.3	176.4	3%	547.3	523.7	5%
Chemicals	Chemicals	428		535		(20%)	1,371		1,586		(14%)	Chemicals	138.3	111.9	24%	399.0	366.3	9%
Metals and construction	Metals and construction	337		377		(11%)	997		1,131		(12%)	Metals and construction	179.2	157.2	14%	510.5	448.2	14%
Automotive	Automotive	270		247		9%	597		749		(20%)	Automotive	81.5	105.7	(23%)	257.5	233.2	10%
Merchandise	Merchandise	1,556		1,731		(10%)	4,535		5,173		(12%)	Merchandise	580.3	551.2	5%	1,714.3	1,571.4	9%
Intermodal	Intermodal	700		707		(1%)	1,924		2,127		(10%)	Intermodal	1,021.0	1,068.8	(4%)	3,100.0	2,908.3	7%
Coal	Coal	250		403		(38%)	757		1,306		(42%)	Coal	160.5	147.7	9%	500.2	422.8	18%

Total	Total	$	2,506	$	2,841	(12%)	$	7,216	$	8,606	(16%)	Total	1,761.8	1,767.7	—%	5,314.5	4,902.5	8%


Revenue per Unit
Merchandise:
Agriculture, forest and consumer products	$	3,113	$	2,953	5%	$	3,072	$	2,998	2%
Chemicals	3,647		3,827		(5%)	3,651		3,742		(2%)
Metals and construction	2,360		2,145		10%	2,342		2,226		5%
Automotive	2,679		2,548		5%	2,579		2,558		1%
Merchandise	2,946		2,822		4%	2,915		2,886		1%
Intermodal	796		655		22%	752		662		14%
Coal	2,057		1,698		21%	1,919		1,791		7%
Total	1,619		1,418		14%	1,560		1,472		6%

Units
Merchandise:
Agriculture, forest and consumer products 176.4 191.7 (8%) 523.7 583.0 (10%)
Chemicals 111.9 148.2 (24%) 366.3 446.9 (18%)
Metals and construction 157.2 182.5 (14%) 448.2 529.0 (15%)
Automotive 105.7 99.5 6% 233.2 299.4 (22%)
Merchandise 551.2 621.9 (11%) 1,571.4 1,858.3 (15%)
Intermodal 1,068.8 1,059.9 1% 2,908.3 3,179.4 (9%)
Coal 147.7 218.7 (32%) 422.8 713.3 (41%)
Total 1,767.7 1,900.5 (7%) 4,902.5 5,751.0 (15%)

Revenue per Unit
Merchandise:
Agriculture, forest and consumer products $ 2,953 $ 2,984 (1%) $ 2,998 $ 2,928 2%
Chemicals 3,827 3,609 6% 3,742 3,549 5%
Metals and construction 2,145 2,066 4% 2,226 2,138 4%
Automotive 2,548 2,480 3% 2,558 2,502 2%
Merchandise 2,822 2,783 1% 2,886 2,784 4%
Intermodal 655 668 (2%) 662 669 (1%)
Coal 1,698 1,842 (8%) 1,791 1,831 (2%)
Total 1,418 1,495 (5%) 1,472 1,496 (2%)

Specifically, certain commodities were shifted between: agriculture, forest, and consumer products; chemicals; and, metals and construction. These changes were made as a result of organizational initiatives to better align with how we manage these commodities. Prior period railway operating revenues, units, and revenue per unit have been reclassified to conform to the current presentation.

Railway operating revenues ~~decreased $335~~increased $346 million in the third quarter and ~~$1.4~~$1.1 billion for the first nine months compared with the same periods last year. The table below reflects the components of the revenue change by major commodity group ($ in millions).


		Third Quarter						First Nine Months
		Increase (Decrease)						Increase (Decrease)							Third Quarter						First Nine Months
															Merchandise		Intermodal		Coal		Merchandise		Intermodal		Coal
		Merchandise		Intermodal		Coal		Merchandise		Intermodal		Coal			Increase (Decrease)

Volume	Volume	$	(197)	$	6	$	(131)	$	(799)	$	(181)	$	(532)	Volume	$	82	$	(31)	$	22	$	412	$	127	$	139
Fuel surcharge revenue	Fuel surcharge revenue	(34)		(35)		(2)		(64)		(93)		(11)		Fuel surcharge revenue	43		54		2		37		106		1
Rate, mix and other	Rate, mix and other	56		22		(20)		225		71		(6)		Rate, mix and other	29		89		56		14		175		63

Total	Total	$	(175)	$	(7)	$	(153)	$	(638)	$	(203)	$	(549)	Total	$	154	$	112	$	80	$	463	$	408	$	203

Approximately 90% of our revenue base is covered by contracts that include negotiated fuel surcharges. Revenues associated with these surcharges totaled ~~$75~~$174 million and ~~$146~~$75 million in the third quarters of ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~$275~~$419 million and ~~$443~~$275 million for the first nine months of ~~2020~~2021 and ~~2019,~~2020, respectively. The ~~decreases~~increase in fuel surcharge revenues is driven by higher fuel commodity prices and, for the first nine months, increased volumes.

Merchandise

Merchandise revenues increased in the third quarter and first nine months ~~are driven by lower fuel commodity prices~~due to increased volume and ~~volume declines.~~

~~Merchandise~~

~~Merchandise revenue decreased in both periods as lower volumes were partially offset by~~ higher average revenue per unit driven by ~~pricing gains. Volumes fell~~higher fuel surcharge revenue and increased pricing. With the exception of Automotive in ~~most~~the third quarter, volumes increased in all merchandise commodity groups, ~~due to~~reflecting continued economic recovery following the ~~impact~~onset of the COVID-19 pandemic. ~~The pandemic has continued to cause many industries to suspend production which persists in negatively impacting customers’ needs for materials and shipping of finished and semi-finished goods.~~

Agriculture, forest and consumer products volume ~~decreased~~increased in both periods across almost all markets as the economy has improved since the early months of the pandemic in 2020. The markets with the largest gains in both periods were ethanol, pulpboard, and woodchips, which more than offset declines in soybeans and pulp. The first nine months also included gains in corn, lumber, and food industry products.

Chemicals volume rose in both periods due to economic and production recovery since the ~~continued impact~~beginning of ~~COVID-19 on ethanol demand, food service, and building, industrial and commercial activities.~~

~~Chemicals volume decreased in both periods due to~~ the ~~continued impact from COVID-19 and~~pandemic, despite ongoing ~~disruptions~~challenges in the energy market. ~~Oil~~The markets with the largest gains were solid waste, industrial chemicals, and ~~petroleum shipments continued to be negatively impacted due to reductions in gasoline/jet fuel demand and consumer travel. The pandemic created an overabundance of products~~sand. Additionally, crude oil volumes increased in the ~~market as companies reduced stockpiles before requiring more products.~~third quarter.

Metals and construction volume ~~fell~~increased in both periods ~~largely the result of weakened demand~~across almost all markets due to ~~reductions in~~economic improvement since the beginning of the pandemic. The markets serving the metal production industry, including coil, iron and ~~domestic vehicle production. Low coal power generation~~steel, and scrap metal, experienced the largest gains.

Automotive volumes declined in the third quarter ~~weakened scrubber stone demand, which negatively affected aggregates volumes. The pandemic caused industries~~due to ~~suspend~~plant shutdowns as a result of the global microchip shortage. Automotive volumes were higher in the first nine months due primarily to prior-year pandemic-induced production ~~which heavily impacted customers’ needs for materials~~shutdowns and ~~shipping of finished and semi-finished goods.~~increased retail demand.

~~Automotive volume increased in the third quarter, but decreased~~Merchandise revenues for the ~~first nine months. The third-quarter volume strength was driven by increased demand which partially offset~~remainder of the ~~first-half 2020 unplanned automotive plant shutdowns, primarily~~year are expected to be higher due to ~~the COVID-19 pandemic.~~increased average revenue per unit, due to higher fuel surcharge revenue and pricing gains, and volume growth.

~~Merchandise~~Intermodal

Intermodal revenues ~~for~~increased in both periods, the ~~remainder~~result of ~~the year are expected to decline as decreased volumes will be partially offset by increased~~higher average revenue per unit driven by ~~pricing gains.~~

~~Intermodal~~

~~Intermodal revenue declined in both periods. The third-quarter decline is a result of lower revenue per unit driven by decreased~~increased storage service charges, higher fuel surcharge revenue ~~partially offset by positive mix~~ and ~~increased volumes. The decline~~pricing gains. In addition, for the first nine months, ~~resulted from decreased volumes and lower revenue per unit, a result of lower fuel surcharge revenue partially offset by improved price and mix.~~volume growth contributed to the overall increase in revenues.

Intermodal units (in thousands) by market were as follows:

Third Quarter First Nine Months
2020 2019 % change 2020 2019 % change
Domestic 699.9 643.2 9% 1,864.8 1,935.3 (4%)
International 368.9 416.7 (11%) 1,043.5 1,244.1 (16%)
Total 1,068.8 1,059.9 1% 2,908.3 3,179.4 (9%)


	Third Quarter			First Nine Months
	2021	2020	% change	2021	2020	% change

Domestic	656.6	699.9	(6%)	1,957.5	1,864.8	5%
International	364.4	368.9	(1%)	1,142.5	1,043.5	9%

Total	1,021.0	1,068.8	(4%)	3,100.0	2,908.3	7%

Domestic ~~volumes increased~~volume declined in the third quarter ~~but decreased~~due to limited chassis availability, labor and capacity constraints, and overall supply chain congestion, which more than offset strong consumer demand. Domestic volumes grew in the first nine months ~~driven~~due to strong consumer demand which was partially offset by ~~a strong third-quarter recovery from~~chassis availability issues and overall supply chain ~~disruptions related to COVID-19.~~congestion. International ~~volumes fell~~volume declined in ~~both periods,~~the third quarter as supply chain constraints with warehousing, drayage, terminals, ports, labor, and rail equipment more than offset strong consumer demand. International volume rose in the first nine months, the result of continued strong import demand partially offset by various supply chain ~~disruptions from COVID-19.~~constraints.

Intermodal revenues for the remainder of the year are expected to ~~increase primarily due to volume gains partially offset~~rise, driven by ~~lower~~increased average revenue per unit due to ~~decreased~~higher storage service charges, increased fuel surcharge ~~revenue.~~revenue, and pricing gains that should more than offset volume declines.

Coal

Coal revenues ~~decreased~~increased in both ~~periods, primarily~~periods. The increases are due to increased volumes and higher average revenue per unit driven by ~~significant volume declines.~~pricing gains and positive mix.

Coal tonnage (in thousands) by market was as follows:


		Third Quarter			First Nine Months				Third Quarter			First Nine Months
		2020	2019	% change	2020	2019	% change		2021	2020	% change	2021	2020	% change

Utility	Utility	9,867	14,124	(30%)	24,465	47,008	(48%)	Utility	8,234	9,867	(17%)	25,343	24,465	4%
Export	Export	3,585	5,403	(34%)	13,323	18,417	(28%)	Export	5,650	3,585	58%	18,923	13,323	42%
Domestic metallurgical	Domestic metallurgical	2,379	3,649	(35%)	6,993	10,431	(33%)	Domestic metallurgical	3,074	2,379	29%	8,886	6,993	27%
Industrial	Industrial	864	1,125	(23%)	2,592	3,528	(27%)	Industrial	940	864	9%	2,710	2,592	5%

Total	Total	16,695	24,301	(31%)	47,373	79,384	(40%)	Total	17,898	16,695	7%	55,862	47,373	18%

~~In both periods, low natural gas prices and reduced demand in global and domestic manufacturing due to COVID-19 negatively impacted each market. Utility coal~~Coal tonnage ~~was challenged~~rose in both periods driven by ~~low natural gas prices, high stockpiles,~~increased export and ~~diminished industrial and commercial electricity demand.~~domestic metallurgical volumes. Export ~~coal tonnage declined in both periods as a result of continued COVID-19 related~~volumes increased due to improved global ~~disruptions, weak~~economic conditions, higher seaborne pricing, and ~~import restrictions.~~strong global demand. Domestic metallurgical volumes were higher resulting from strong recovery in the steel market. Utility tonnage decreased in the third quarter due primarily to coal supply challenges and ~~coke tonnage fell in both periods due to continued reduced domestic steel demand which led to idled customer facilities and lower production. Industrial coal tonnage~~mine outages. For the first nine months,

~~decreased in both periods as a result of customer sourcing changes and continued pressure from~~utility volumes increased due to higher natural gas ~~conversions.~~prices, reduced stockpiles, and improved industrial electricity demand.

Coal revenues ~~are expected to decline in each market~~ for the remainder of the year ~~being negatively impacted by decreased volumes resulting from COVID-19.~~are expected to rise, primarily a result of increased demand.

Railway Operating Expenses

Railway operating expenses summarized by major classifications ~~were as follows~~follow ($ in millions):


		Third Quarter					First Nine Months						Third Quarter					First Nine Months
		2020		2019		% change	2020		2019		% change		2021		2020		% change	2021		2020		% change

Compensation and benefits	Compensation and benefits	$	578	$	682	(15%)	$	1,786	$	2,121	(16%)	Compensation and benefits	$	609	$	578	5%	$	1,844	$	1,786	3%
Purchased services and rents	Purchased services and rents	486		423		15%	1,261		1,265		—%	Purchased services and rents	432		486		(11%)	1,254		1,261		(1%)
Fuel	Fuel	126		226		(44%)	399		730		(45%)	Fuel	208		126		65%	573		399		44%
Depreciation	Depreciation	293		286		2%	867		853		2%	Depreciation	297		293		1%	883		867		2%
Materials and other	Materials and other	183		228		(20%)	500		610		(18%)	Materials and other	170		183		(7%)	418		500		(16%)
Loss on asset disposal	Loss on asset disposal	—		—			385		—			Loss on asset disposal	—		—		—%	—		385		(100%)

Total	Total	$	1,666	$	1,845	(10%)	$	5,198	$	5,579	(7%)	Total	$	1,716	$	1,666	3%	$	4,972	$	5,198	(4%)

Compensation and benefits expense ~~decreased~~increased in both periods as follows:

•~~employment levels (down $76~~incentive and stock-based compensation (up $43 million for the quarter and ~~$250 million for the first nine months),~~

•~~health and welfare benefits for agreement employees (down $22 million for the quarter and $61 million for the first nine months),~~

•~~stock-based and incentive compensation (down $15 million for the quarter and $48~~$104 million for the first nine months),

•overtime and recrews ~~(down $11~~(up $10 million for the quarter and ~~$48~~$36 million for the first nine months),

•increased pay rates (up $10 million for the quarter and ~~$40~~$31 million for the first nine months),

•~~lower capitalized labor (additional expense of $18~~health and welfare benefits for craft employees (down $2 million for the quarter and ~~$41~~$17 million for the first nine months),

•employee activity levels (down $40 million for the quarter and $121 million for the first nine months), and

•other ~~(down $8~~(up $10 million for the quarter and $9$25 million for the first nine months).

Average rail headcount for the quarter was down by ~~approximately 4,400~~over 1,400 compared with the third quarter of ~~2019.~~2020.

Purchased services and rents decreased in both periods as follows ($ in millions):


	Third Quarter					First Nine Months
	2021		2020		% change	2021		2020		% change

Purchased services	$	355	$	419	(15%)	$	1,025	$	1,042	(2%)
Equipment rents	77		67		15%	229		219		5%

Total	$	432	$	486	(11%)	$	1,254	$	1,261	(1%)

Purchased services decreased in both periods due to a $99 million impairment in the prior year related to an equity method investment. This was partially offset in both periods by higher technology, Conrail-related, and drayage costs. The first nine months also includes higher volume-related intermodal expenses. Equipment rents increased in the third quarter primarily due to greater volume-related general use time and mileage expense. For the first nine months, equipment rents were higher as an increase in volume-related general use time and mileage expense was partially offset by higher equity in TTX earnings and lower intermodal costs.

~~Purchased services and rents~~ ~~increased in the third quarter but decreased slightly for the first nine months as follows ($ in millions):~~

Third Quarter First Nine Months
2020 2019 % change 2020 2019 % change
Purchased services $ 419 $ 355 18% $ 1,042 $ 1,048 (1%)
Equipment rents 67 68 (1%) 219 217 1%
Total $ 486 $ 423 15% $ 1,261 $ 1,265 —%

~~The increase in purchased services for the third quarter was due to a $99 million impairment related to an equity method investment. Both periods reflect volume-related decreases.~~

Fuel expense, which includes the cost of locomotive fuel as well as other fuel used in railway operations, ~~decreased~~increased due to ~~lower~~higher locomotive fuel prices ~~(down 34%~~(up 58% in the third quarter and ~~32%~~35% in the first nine months), and ~~reduced~~increased consumption ~~(down 17%~~(up 5% in the third quarter and ~~21%~~6% in the first nine months).

Materials and other expenses decreased in both periods as follows ($ in millions):


		Third Quarter					First Nine Months						Third Quarter					First Nine Months
		2020		2019		% change	2020		2019		% change		2021		2020		% change	2021		2020		% change

Materials	Materials	$	72	$	85	(15%)	$	206	$	254	(19%)	Materials	$	71	$	72	(1%)	$	193	$	206	(6%)
Claims	Claims	59		48		23%	141		147		(4%)	Claims	56		59		(5%)	137		141		(3%)
Other	Other	52		95		(45%)	153		209		(27%)	Other	43		52		(17%)	88		153		(42%)

Total	Total	$	183	$	228	(20%)	$	500	$	610	(18%)	Total	$	170	$	183	(7%)	$	418	$	500	(16%)

Materials ~~costs~~expense decreased ~~in both periods,~~for the first nine months due ~~primarily~~ to lower maintenance ~~requirements~~costs as a result of fewer locomotives ~~and freight cars~~ in service. Claims ~~expenses increased~~expense declined in the third quarter as a result of ~~derailments. Claims expense declined in~~lower costs associated with personal injuries. For the first nine months, ~~driven by~~ lower costs ~~related to environmental remediation matters~~associated with personal injuries were partially offset by increased ~~derailment costs.~~costs related to derailments. Other expense decreased in both periods ~~primarily~~ due to ~~a prior year write off~~higher gains from sales of ~~a $32 million receivable as a result of a legal dispute as well as reduced travel.~~operating property. Gains from operating property sales ~~included in Other,~~ totaled ~~$15~~$5 million and ~~$21~~$2 million for the third quarters of 2021 and 2020, respectively, and $76 million and $15 million in the first nine months of 2021 and 2020, ~~and 2019,~~ respectively. In addition, third-quarter other expense decreased due to lower property taxes.

Other income – net

Other income – net ~~increased $17~~decreased $25 million in the third quarter and ~~$22~~$54 million for the first nine ~~months. Both periods experienced higher~~months due to lower net returns on corporate-owned life ~~insurance~~insurance.

Income taxes

The third-quarter effective tax rate was 23.6% compared with 21.4% in the same period last year due to lower tax benefits associated with stock-based compensation and ~~lower pension~~corporate-owned life insurance.

The effective tax rates were 22.4% and ~~postretirement benefit expenses.~~19.3% for the first nine months of 2021 and 2020, respectively. The first nine months ~~reflect~~of 2020 includes a $19 million reduction of taxes from the ~~impact of a prior year impairment loss on our natural resource assets and lower 2020 non-operating property sales. Coal royalties were lower in both periods due to the sale~~resolution of our ~~natural resource assets~~2012 amended federal return, while the current year includes a $23 million reduction in ~~the first quarter of 2020. Full-year 2019 coal royalties totaled $24 million.~~deferred taxes associated with a state tax law change. The effective rate for 2021 also reflects lower tax benefits on stock-based compensation and returns on corporate-owned life insurance.

~~Income taxes~~

The third-quarter effective tax rate was 21.4% compared with 24.3% for the same period last year. Both periods were aided by tax benefits on stock-based compensation while the current quarter reflects increased tax benefits from higher returns on corporate-owned life insurance. The effective tax rates were 19.3% and 22.8% for the first nine months of 2020 and 2019, respectively. Both periods reflect tax benefits on stock-based compensation, while the effective rate for the first nine months includes a $19 million reduction of taxes upon the resolution of our 2012 amended federal return.

FINANCIAL CONDITION AND LIQUIDITY

Cash provided by operating activities, our principal source of liquidity, was ~~$2.8~~$3.3 billion for the first nine months of ~~2020,~~2021, compared with ~~$3.0~~$2.8 billion for the same period of ~~2019.~~2020, primarily due to improved operating results. We had working capital of ~~$574~~$312 million and $158 million at September 30, ~~2020,~~2021 and ~~negative working capital of $219 million at~~ December 31, ~~2019.~~2020, respectively. Cash and cash equivalents totaled ~~$1.4~~$1.5 billion at September 30, ~~2020.~~2021.

Cash used in investing activities was ~~$818~~$847 million for the first nine months of ~~2020,~~2021, compared with ~~$1.3 billion~~$818 million for the same period last year. The ~~decrease~~increase was primarily driven by lower proceeds from property ~~additions in 2020.~~sales, partially offset by reduced corporate-owned life insurance policy loan repayments and lower property additions.

Cash used in financing activities was ~~$1.2~~$2.1 billion for the first nine months of ~~2020,~~2021, compared with ~~$1.6~~$1.2 billion in the same period last year, reflecting ~~lower~~higher repurchases of Common Stock and debt repayments, partially offset by ~~reduced borrowing proceeds.~~increased proceeds from borrowing. We repurchased ~~$960 million~~$2.5 billion of Common Stock in the first nine months of ~~2020~~2021 compared to ~~$1.6 billion~~$960 million in the same period last year. The timing and volume of future share repurchases will be guided by our assessment of market conditions, cash flow 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.

Our ~~total-debt-to-total~~debt-to-total capitalization ratio was ~~46.0%~~49.9% at September 30, ~~2020,~~2021, and ~~44.5%~~46.2% at December 31, ~~2019.~~2020.

In August 2021, we issued $600 million of 2.90% senior notes due 2051.

In May ~~2020,~~2021, we issued ~~$800~~$500 million of ~~3.05%~~2.30% senior notes due ~~2050, resulting~~2031 and $600 million of 4.10% senior notes due 2121. The net proceeds of the 2.30% senior notes due 2031 will be allocated to existing or future investments in ~~$790 million in~~projects that provide environmental benefits. The net ~~proceeds.~~proceeds of the notes due 2121 will be used for general corporate purposes.

In May 2020, we also issued $800 million of 3.155% senior notes due 2055 in exchange for $554 million of our previously-issued notes ($450 million at 5.1% due 2118, $42 million at 6% due 2111, $29 million at 7.9% due 2097, $26 million at 6% due 2105, and $7 million at 7.05% due 2037). As part of the debt exchange, a $4 million loss on extinguishment was recognized in “Other income – net.”

~~In May 2020,~~2021, we renewed, amended and ~~amended~~restated our accounts receivable securitization program with a maximum borrowing capacity of $400 ~~million and a~~million. The term ~~expiring~~expires in May ~~2021.~~2022. We had no amounts outstanding ~~at September 30, 2020, or December 31, 2019,~~under this program and our available borrowing capacity was $400 million ~~and $429 million, respectively. In addition, we have investments in general purpose corporate-owned life insurance policies and had the ability to borrow up to $750 million against these policies~~ at both September 30, 2021, and December 31, 2020.

InWe also have in place and available an $800 million credit agreement expiring in March ~~2020, we renewed and amended our five-year credit agreement. We increased the program’s borrowing authority from $750 million to $800 million. The amended agreement expires in~~ 2025, ~~and~~which provides for borrowings at prevailing rates and includes covenants. We had no amounts outstanding under this facility at September 30, ~~2020,~~2021 or December 31, ~~2019,~~2020. In addition, we have investments in general purpose corporate-owned life insurance policies and ~~we are in compliance with all of its covenants.~~had the ability to borrow against these policies up to $720 million and $750 million at September 30, 2021 and December 31, 2020, respectively.

We expect cash on hand combined with cash provided by operating activities will be sufficient to meet our ongoing obligations. In addition, we believe our currently-available borrowing capacity, access to additional financing, and ability to reduce or defer expenditures on property additions and decrease shareholder distributions, including share repurchases, provide additional flexibility to meet our ongoing obligations. Nonetheless, we are monitoring the ongoing impacts of the COVID-19 pandemic, which could lead to a ~~further~~ decline of cash inflows from operations. There have been no material changes to the information on future contractual obligations contained in our Form 10-K for the

year ended December 31, ~~2019,~~2020, with the exception of additional senior notes (see Note 8) ~~and $150 million of unconditional purchase obligations, which extend through 2021.~~.

APPLICATION OF CRITICAL ACCOUNTING POLICIES

The preparation of financial statements in accordance with 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 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. There have been no significant changes to the application of the critical accounting policies contained in our Form 10-K at December 31, ~~2019.~~2020.

OTHER MATTERS

Labor Agreements

Approximately 80% of our railroad employees are covered by collective bargaining agreements with various labor unions. Pursuant to the Railway Labor Act, these agreements remain in effect until new agreements are reached, or until the bargaining procedures mandated by the Railway Labor Act are completed. We largely bargain nationally in concert with other major railroads, represented by the National ~~Carriers~~Carriers’ Conference Committee. Moratorium provisions in the labor agreements govern when the railroads and unions may propose changes to the agreements. The current round of bargaining commenced on November 1, 2019, with both management and the unions serving their formal proposals for changes to the collective bargaining ~~agreements.~~agreements, and negotiations are ongoing.

New Accounting Pronouncements

For a detailed discussion of new accounting pronouncements, see Note 12.

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 long-lived assets. 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.

FORWARD-LOOKING STATEMENTS

Certain statements in Management’s Discussion and Analysis of Financial Condition and Results of Operations are “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, as amended. These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance, or our achievements or those of our industry to be materially different from those expressed or implied by any forward-looking statements. In some cases, forward-looking statements can be identified by terminology such as “may,” “will,” “could,” “would,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “project,” “consider,” “predict,” “potential,” “feel,” or other comparable terminology. We have based these forward-looking statements on our current expectations, assumptions, estimates, beliefs, and projections. While we believe these expectations, assumptions, estimates, beliefs, and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which involve factors or circumstances that are beyond our control. These and other important factors, including ~~the risks and uncertainties related to the COVID-19 pandemic and~~ those discussed under “Risk Factors” in our latest Form 10-K, as well as our subsequent filings with the Securities and Exchange Commission, may cause actual results, performance, or achievements to differ materially from those expressed or implied by these forward-looking

statements. The forward-looking statements herein are made only as of the date they were first issued, and unless otherwise required by applicable securities laws, we disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

Additional Information

Investors and others should note that we routinely use the Investor Relations and Sustainability sections of our website (www.norfolksouthern.com/content/nscorp/en/investor-relations.html & www.nscorp.com/content/nscorp/en/about-ns/sustainability.html) to post presentations to investors and other important information, including

information that may be deemed material to investors. Information about us, including information that may be deemed material, may also be announced by posts on our social media channels, including Twitter (www.twitter.com/nscorp) and LinkedIn (www.linkedin.com/company/norfolk-southern). We may also use our website and social media channels for the purpose of complying with our disclosure obligations under Regulation FD. As a result, we encourage investors, the media, and others interested in Norfolk Southern to review the information posted on our website and social media channels. The information posted on our website and social media channels is not incorporated by reference in this Quarterly Report on Form 10-Q.

Item 3. Quantitative and Qualitative Disclosures About Market ~~Risk.~~Risk

The information required by this item is included in Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the heading “Financial Condition and Liquidity.”

Item 4. Controls and ~~Procedures.~~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 September 30, ~~2020.~~2021. Based on such evaluation, our officers have concluded that, at September 30, ~~2020,~~2021, our disclosure controls and procedures were effective in alerting them on a timely basis to material information required to be included in our periodic filings under the Exchange Act.

Changes in Internal Control Over Financial Reporting

During the third quarter of ~~2020,~~2021, we have not identified any changes in internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal ~~Proceedings.~~Proceedings

Item 1A. Risk ~~Factors.~~Factors

The risks set forth in “Risk Factors” included in our ~~2019~~2020 Form 10-K could have a material adverse effect on our financial position, results of operations, or liquidity in a particular year or quarter, and could cause those results to differ materially from those expressed or implied in our forward-looking statements. Those risks remain unchanged and are incorporated herein by ~~reference and are updated to include the following risk.~~reference.

The COVID-19 pandemic could impact us, our customers, our supply chain and our operations. The pandemic has negatively impacted the economy and continues to generate significant economic uncertainty. It has had a significant adverse impact on our results of operations, and may have material adverse impacts on our financial position, results of operations, or liquidity. The magnitude and duration of the pandemic, and its impact on our customers and general economic conditions will influence the demand for our services and affect our revenues. In addition, COVID-19 could affect our operations and business continuity if a significant number of our essential employees, overall or in a key location, are quarantined from contraction of or exposure to the disease or if governmental orders prevent our operating employees or critical suppliers from working. To the extent COVID-19 adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in the risk factors included in our 2019 Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of ~~Proceeds.~~Proceeds

(a) Total
Number
of Shares
(or Units) (b) Average
Price Paid
per Share (c) Total
Number of
Shares
(or Units)
Purchased
as Part of
Publicly
Announced
Plans or (d) Maximum
Number (or
Approximate
Dollar Value)
of Shares (or Units)
that may yet be
purchased under
the Plans or
Period
Purchased (1)
(or Unit)
Programs (2)
Programs (2)
July 1-31, 2020 370,977 $ 181.20 370,532 23,814,662
August 1-31, 2020 463,900 207.56 459,832 23,354,830
September 1-30, 2020 602,751 214.44 601,940 22,752,890
Total 1,437,628 1,432,304


Period	(a) Total Number of Shares (or Units) Purchased (1)	(a) Total Number of Shares (or Units)		(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs (2)	(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that may yet be purchased under the Plans or Programs (2)

July 1-31, 2021	1,083,372	$	262.34	1,081,820	13,896,044
August 1-31, 2021	1,267,526	260.88		1,267,526	12,628,518
September 1-30, 2021	1,300,073	246.32		1,300,073	11,328,445

Total	3,650,971			3,649,419

(1)Of this amount, ~~5,324~~1,552 represent shares tendered by employees in connection with the exercise of options under the stockholder-approved Long-Term Incentive Plan.

(2)On September 26, 2017, our Board of Directors authorized the repurchase of up to an additional 50 million shares of Common Stock through December 31, 2022. As of September 30, ~~2020, 22.8~~2021, 11.3 million shares remain authorized for repurchase.

3130

Item 6. ~~Exhibits.~~

Exhibits



1.1			Underwriting Agreement, dated August 16, 2021, among the Registrant and Citigroup Global Markets Inc., Goldman Sachs & Co. LLC and U.S. Bancorp Investments, Inc., is incorporated by reference to Exhibit 1.1 of the Registrant’s Current Report on Form 8-K filed on August 18, 2021.

4.1			Seventh Supplemental Indenture, dated as of August 25, 2021, between the Registrant and U.S. Bank National Association, as trustee, is incorporated by reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K filed on August 25, 2021.

31-A*			Rule 13a-14(a)/15d-014(a) CEO Certifications.

31-B*			Rule 13a-14(a)/15d-014(a) CFO Certifications.

32*			Section 1350 Certifications.

101*			The following financial information from Norfolk Southern Corporation’s Quarterly Report on Form 10-Q for the third quarter of ~~2020,~~2021, formatted in Inline Extensible Business Reporting Language (iXBRL) includes (i) the Consolidated Statements of Income for the third quarter and first nine months of ~~2020~~2021 and ~~2019;~~2020; (ii) the Consolidated Statements of Comprehensive Income for the third quarter and first nine months of ~~2020~~2021 and ~~2019;~~2020; (iii) the Consolidated Balance Sheets at September 30, ~~2020~~2021 and December 31, ~~2019;~~2020; (iv) the Consolidated Statements of Cash Flows for the first nine months of ~~2020~~2021 and ~~2019;~~2020; (v) the Consolidated Statements of Changes in Stockholders’ Equity for the third quarter and first nine months of ~~2020~~2021 and ~~2019;~~2020; and (vi) the Notes to Consolidated Financial Statements.

104*			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

* Filed herewith.

3231

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		NORFOLK SOUTHERN CORPORATION Registrant



Date:	October ~~28, 2020~~27, 2021	/s/ Clyde H. Allison, Jr.
		Clyde H. Allison, Jr. Vice President and Controller (Principal Accounting Officer) (Signature)


Date:	October ~~28, 2020~~27, 2021	/s/ Denise W. Hutson
		Denise W. Hutson Corporate Secretary (Signature)

3332


	September 30, 2020		December 31, 2019
	($ in millions)
Assets
Current assets:
Cash and cash equivalents	$	1,359	$	580

Accounts receivable – net	883		920
Materials and supplies	247		244
Other current assets	90		337
Total current assets	2,579		2,081

Investments	3,566		3,428
Properties less accumulated depreciation of $11,873
and $11,982, respectively	31,239		31,614
Other assets	795		800

Total assets	$	38,179	$	37,923

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	1,273	$	1,428

Income and other taxes	257		229
Other current liabilities	386		327
Current maturities of long-term debt	89		316
Total current liabilities	2,005		2,300

Long-term debt	12,634		11,880
Other liabilities	1,701		1,744
Deferred income taxes	6,898		6,815

Total liabilities	23,238		22,739

Stockholders’ equity:
Common stock $1.00 per share par value, 1,350,000,000 shares
authorized; outstanding 253,985,338 and 257,904,956 shares,
respectively, net of treasury shares	255		259
Additional paid-in capital	2,246		2,209
Accumulated other comprehensive loss	(471)		(491)
Retained income	12,911		13,207

Total stockholders’ equity	14,941		15,184

Total liabilities and stockholders’ equity	$	38,179	$	37,923


	September 30, 2020		December 31, 2019
	($ in millions)

Customer	$	664	$	682
Non-customer	219		238

Accounts receivable – net	$	883	$	920


	Balance at Beginning of Year		Net Income (Loss)		Reclassification Adjustments		Balance at End of Period
	($ in millions)
Nine Months Ended September 30, 2020
Pensions and other postretirement liabilities	$	(421)	$	0	$	14	$	(407)
Other comprehensive income (loss) of equity
investees	(70)		6		0		(64)

Accumulated other comprehensive loss	$	(491)	$	6	$	14	$	(471)

Nine Months Ended September 30, 2019
Pensions and other postretirement liabilities	$	(497)	$	0	$	11	$	(486)
Other comprehensive loss of equity investees	(66)		(1)		0		(67)

Accumulated other comprehensive loss	$	(563)	$	(1)	$	11	$	(553)


	September 30, 2020				December 31, 2019
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	($ in millions)


Long-term debt, including current maturities	$	(12,723)	$	(16,582)	$	(12,196)	$	(14,806)


	(a) Total Number of Shares (or Units)	(b) Average Price Paid per Share		(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or	(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that may yet be purchased under the Plans or
Period	Purchased (1)	(or Unit)		Programs (2)	Programs (2)

July 1-31, 2020	370,977	$	181.20	370,532	23,814,662
August 1-31, 2020	463,900	207.56		459,832	23,354,830
September 1-30, 2020	602,751	214.44		601,940	22,752,890

Total	1,437,628			1,432,304