UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.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, 2022~~March 31, 2023

☐ 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.)


650 West Peachtree Street NW		30308-1925
Atlanta,	Georgia
(Address of principal executive offices)		(Zip Code)
(855)		667-3655
(Registrant’s telephone number, including area code)


No change
(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, 2022~~March 31, 2023
Common Stock ($1.00 par value per share)	~~231,514,213~~227,639,602	(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~~First Quarter ~~and First~~ ~~Nine~~of 202 3 ~~Months of 2022~~ and ~~2021~~202 2	3
		Consolidated Statements of Comprehensive Income ~~Third~~ ~~Quarter and~~ First ~~Nine~~Quarter of 202 3 ~~Months of 2022~~ and ~~2021~~202 2	4
		Consolidated Balance Sheets At ~~September~~March ~~30, 2022~~3 1 , 202 3 and December 31, ~~2021~~202 2	5
		Consolidated Statements of Cash Flows First ~~Nine~~Thre e Months of ~~2022~~202 3 and ~~2021~~202 2	6
		Consolidated Statements of Changes in Stockholders’ Equity ~~Third~~ ~~Quarter and~~ First ~~Nine~~Quarter ~~Months~~ of ~~2022~~202 3 and ~~2021~~202 2	7
		Notes to Consolidated Financial Statements	98
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1921
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2731
	Item 4.	Controls and Procedures	2731

Part II.	Other Information:
	Item 1.	Legal Proceedings	2932
	Item 1A.	Risk Factors	2932
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2933
	Item 3.	Defaults Upon Senior Securities	2933
	Item 4.	Mine Safety Disclosures	2933
	Item 5.	Other Information	2933
	Item 6.	Exhibits	3034

		Signatures	3135

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Income

(Unaudited)


		Third Quarter				First Nine Months					First Quarter
		2022		2021		2022		2021			2023		2022
		($ in millions, except per share amounts)									($ in millions, except per share amounts)

Railway operating revenues	Railway operating revenues	$	3,343	$	2,852	$	9,508	$	8,290	Railway operating revenues	$	3,132	$	2,915

Railway operating expenses	Railway operating expenses									Railway operating expenses
Compensation and benefits	Compensation and benefits	735		609		1,968		1,844		Compensation and benefits	690		619
Purchased services and rents	Purchased services and rents	484		432		1,402		1,254		Purchased services and rents	496		437
Fuel	Fuel	383		208		1,092		573		Fuel	315		301
Depreciation	Depreciation	306		297		912		883		Depreciation	321		302
Materials and other	Materials and other	163		170		506		418		Materials and other	212		171
Eastern Ohio incident										Eastern Ohio incident	387		—

Total railway operating expenses	Total railway operating expenses	2,071		1,716		5,880		4,972		Total railway operating expenses	2,421		1,830

Income from railway operations	Income from railway operations	1,272		1,136		3,628		3,318		Income from railway operations	711		1,085

Other income (expense) – net	Other income (expense) – net	(2)		14		(21)		56		Other income (expense) – net	56		(5)
Interest expense on debt	Interest expense on debt	177		164		515		481		Interest expense on debt	175		168

Income before income taxes	Income before income taxes	1,093		986		3,092		2,893		Income before income taxes	592		912

Income taxes	Income taxes	135		233		612		648		Income taxes	126		209

Net income	Net income	$	958	$	753	$	2,480	$	2,245	Net income	$	466	$	703

Earnings per share	Earnings per share									Earnings per share
Basic	Basic	$	4.11	$	3.07	$	10.49	$	9.03	Basic	$	2.04	$	2.94
Diluted	Diluted	4.10		3.06		10.45		8.99		Diluted	2.04		2.93

See accompanying notes to consolidated financial statements.

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income

(Unaudited)

Third Quarter First Nine Months
2022 2021 2022 2021
($ in millions)
Net income $ 958 $ 753 $ 2,480 $ 2,245
Other comprehensive income, before tax:
Pension and other postretirement benefits 6 10 17 31
Other comprehensive income of equity investees 5 — 13 —
Other comprehensive income, before tax 11 10 30 31
Income tax expense related to items of other
comprehensive income — (3) (5) (8)
Other comprehensive income, net of tax 11 7 25 23
Total comprehensive income $ 969 $ 760 $ 2,505 $ 2,268


	First Quarter
	2023		2022
	($ in millions)

Net income	$	466	$	703
Other comprehensive income (loss), before tax:
Pension and other postretirement benefit (expense)	(5)		6
Other comprehensive income (loss) of equity investees	(1)		6

Other comprehensive income (loss), before tax	(6)		12
Income tax benefit (expense) related to items of other
comprehensive income (loss)	2		(4)

Other comprehensive income (loss), net of tax	(4)		8

Total comprehensive income	$	462	$	711

See accompanying notes to consolidated financial statements.

Norfolk Southern Corporation and Subsidiaries

Consolidated Balance Sheets

(Unaudited)


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
		($ in millions)					($ in millions)
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	1,214	$	839	Cash and cash equivalents	$	552	$	456

Accounts receivable – net	Accounts receivable – net	1,151		976		Accounts receivable – net	1,170		1,148
Materials and supplies	Materials and supplies	276		218		Materials and supplies	262		253
Other current assets	Other current assets	74		134		Other current assets	138		150
Total current assets	Total current assets	2,715		2,167		Total current assets	2,122		2,007

Investments	Investments	3,686		3,707		Investments	3,738		3,694
Properties less accumulated depreciation of $12,445
and $12,031, respectively		31,838		31,653
Properties less accumulated depreciation of $12,810						Properties less accumulated depreciation of $12,810
and $12,592, respectively						and $12,592, respectively	32,240		32,156
Other assets	Other assets	1,067		966		Other assets	1,069		1,028

Total assets	Total assets	$	39,306	$	38,493	Total assets	$	39,169	$	38,885

Liabilities and stockholders’ equity	Liabilities and stockholders’ equity					Liabilities and stockholders’ equity
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	1,486	$	1,351	Accounts payable	$	1,315	$	1,293

Short-term debt						Short-term debt	—		100
Income and other taxes	Income and other taxes	299		305		Income and other taxes	438		312
Other current liabilities	Other current liabilities	408		312		Other current liabilities	668		341
Current maturities of long-term debt	Current maturities of long-term debt	605		553		Current maturities of long-term debt	403		603
Total current liabilities	Total current liabilities	2,798		2,521		Total current liabilities	2,824		2,649

Long-term debt	Long-term debt	14,463		13,287		Long-term debt	14,585		14,479
Other liabilities	Other liabilities	1,828		1,879		Other liabilities	1,785		1,759
Deferred income taxes	Deferred income taxes	7,193		7,165		Deferred income taxes	7,248		7,265

Total liabilities	Total liabilities	26,282		24,852		Total liabilities	26,442		26,152

Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Common stock $1.00 per share par value, 1,350,000,000 shares	Common stock $1.00 per share par value, 1,350,000,000 shares					Common stock $1.00 per share par value, 1,350,000,000 shares
authorized; outstanding 231,514,213 and 240,162,790 shares,
authorized; outstanding 227,639,602 and 228,076,415 shares,						authorized; outstanding 227,639,602 and 228,076,415 shares,
respectively, net of treasury shares	respectively, net of treasury shares	233		242		respectively, net of treasury shares	229		230
Additional paid-in capital	Additional paid-in capital	2,181		2,215		Additional paid-in capital	2,155		2,157
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(377)		(402)		Accumulated other comprehensive loss	(355)		(351)
Retained income	Retained income	10,987		11,586		Retained income	10,698		10,697

Total stockholders’ equity	Total stockholders’ equity	13,024		13,641		Total stockholders’ equity	12,727		12,733

Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	39,306	$	38,493	Total liabilities and stockholders’ equity	$	39,169	$	38,885

See accompanying notes to consolidated financial statements.

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)


			First Nine Months						First Three Months
			2022		2021				2023		2022
			($ in millions)						($ in millions)
Cash flows from operating activities	Cash flows from operating activities						Cash flows from operating activities
		Net income	$	2,480	$	2,245		Net income	$	466	$	703
		Reconciliation of net income to net cash provided by operating activities:						Reconciliation of net income to net cash provided by operating activities:
		Depreciation	912		883			Depreciation	321		302
		Deferred income taxes	23		158			Deferred income taxes	(15)		48
		Gains and losses on properties	(54)		(80)			Gains and losses on properties	(4)		(6)
		Changes in assets and liabilities affecting operations:						Changes in assets and liabilities affecting operations:
		Accounts receivable	(174)		(102)			Accounts receivable	(22)		(94)
		Materials and supplies	(58)		(14)			Materials and supplies	(9)		(46)
		Other current assets	57		57			Other current assets	12		21
		Current liabilities other than debt	273		294			Current liabilities other than debt	480		83
		Other – net	(35)		(128)			Other – net	(56)		(17)

		Net cash provided by operating activities	3,424		3,313			Net cash provided by operating activities	1,173		994

Cash flows from investing activities	Cash flows from investing activities						Cash flows from investing activities
		Property additions	(1,282)		(1,025)			Property additions	(428)		(389)
		Property sales and other transactions	193		135			Property sales and other transactions	20		36
		Investment purchases	(8)		(5)			Investment purchases	—		(1)
		Investment sales and other transactions	37		48			Investment sales and other transactions	17		19

		Net cash used in investing activities	(1,060)		(847)			Net cash used in investing activities	(391)		(335)

Cash flows from financing activities	Cash flows from financing activities						Cash flows from financing activities
		Dividends	(881)		(764)			Dividends	(307)		(297)
		Common stock transactions	(5)		8			Common stock transactions	(10)		(18)
		Purchase and retirement of common stock	(2,284)		(2,460)			Purchase and retirement of common stock	(163)		(600)
		Proceeds from borrowings	1,732		1,676			Proceeds from borrowings	594		989
		Debt repayments	(551)		(576)			Debt repayments	(800)		(1)

		Net cash used in financing activities	(1,989)		(2,116)			Net cash provided by (used in) financing activities	(686)		73

		Net increase in cash and cash equivalents	375		350			Net increase in cash and cash equivalents	96		732

Cash and cash equivalents	Cash and cash equivalents						Cash and cash equivalents
		At beginning of year	839		1,115			At beginning of year	456		839

		At end of period	$	1,214	$	1,465		At end of period	$	552	$	1,571

Supplemental disclosures of cash flow information	Supplemental disclosures of cash flow information						Supplemental disclosures of cash flow information
		Cash paid during the period for:						Cash paid during the period for:
		Interest (net of amounts capitalized)	$	425	$	391		Interest (net of amounts capitalized)	$	129	$	114
		Income taxes (net of refunds)	578		468			Income taxes (net of refunds)	(1)		9

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

Balance at December 31, 2021		$	242	$	2,215	$	(402)	$	11,586	$	13,641
Balance at December 31, 2022												Balance at December 31, 2022	$	230	$	2,157	$	(351)	$	10,697	$	12,733

Comprehensive income:	Comprehensive income:											Comprehensive income:
Net income	Net income							703		703		Net income							466		466
Other comprehensive income						8				8
Other comprehensive loss												Other comprehensive loss					(4)				(4)
Total comprehensive income	Total comprehensive income									711		Total comprehensive income									462
Dividends on common stock,	Dividends on common stock,											Dividends on common stock,
$1.24 per share								(297)		(297)
$1.35 per share												$1.35 per share							(307)		(307)
Share repurchases	Share repurchases	(2)		(19)				(579)		(600)		Share repurchases	(1)		(6)				(156)		(163)
Stock-based compensation	Stock-based compensation			7				(1)		6		Stock-based compensation			4				(2)		2

Balance at March 31, 2022		240		2,203		(394)		11,412		13,461
Balance at March 31, 2023												Balance at March 31, 2023	$	229	$	2,155	$	(355)	$	10,698	$	12,727

Comprehensive income:
Net income								819		819
Other comprehensive income						6				6
Total comprehensive income										825
Dividends on common stock,
$1.24 per share								(294)		(294)
Share repurchases		(4)		(29)				(821)		(854)
Stock-based compensation				16						16

Balance at June 30, 2022		236		2,190		(388)		11,116		13,154

Comprehensive income:
Net income								958		958
Other comprehensive income						11				11
Total comprehensive income										969
Dividends on common stock,
$1.24 per share								(290)		(290)
Share repurchases		(3)		(31)				(796)		(830)
Stock-based compensation				22				(1)		21

Balance at September 30, 2022		$	233	$	2,181	$	(377)	$	10,987	$	13,024


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

Balance at December 31, 2021	$	242	$	2,215	$	(402)	$	11,586	$	13,641

Comprehensive income:
Net income							703		703
Other comprehensive income					8				8
Total comprehensive income									711
Dividends on common stock,
$1.24 per share							(297)		(297)
Share repurchases	(2)		(19)				(579)		(600)
Stock-based compensation			7				(1)		6

Balance at March 31, 2022	$	240	$	2,203	$	(394)	$	11,412	$	13,461

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, 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 toconsolidatedfinancialstatements.~~

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, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, our results of operations, comprehensive income and changes in stockholders’ equity for the ~~third~~first quarters of 2023 and ~~first nine months of~~ 2022, ~~and 2021,~~ and our cash flows for the first ~~nine~~three months of ~~2022~~2023 and ~~2021~~2022 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					First Quarter
		2022		2021		2022		2021			2023		2022
		($ in millions)									($ in millions)
Merchandise:	Merchandise:									Merchandise:
Agriculture, forest and consumer products	Agriculture, forest and consumer products	$	642	$	564	$	1,839	$	1,681	Agriculture, forest and consumer products	$	653	$	573
Chemicals	Chemicals	570		504		1,620		1,457		Chemicals	541		498
Metals and construction	Metals and construction	442		424		1,237		1,196		Metals and construction	400		375
Automotive	Automotive	276		218		759		664		Automotive	284		226
Merchandise	Merchandise	1,930		1,710		5,455		4,998		Merchandise	1,878		1,672
Intermodal	Intermodal	942		812		2,768		2,332		Intermodal	814		854
Coal	Coal	471		330		1,285		960		Coal	440		389

Total	Total	$	3,343	$	2,852	$	9,508	$	8,290	Total	$	3,132	$	2,915

We recognize the amount of revenues to which we expect to be entitled 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 us for the transport of goods. These performance obligations are satisfied as the shipments move from origin to destination. As such, transportation 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 revenues associated with in-process shipments at period-end are recorded based on the estimated percentage of service completed. We had no material remaining performance obligations at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022.

We may provide customers ancillary services, such as switching, demurrage and other incidental activities, under their transportation contracts. ~~These are~~The revenues associated with these 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~~approximately 6% and 7% of total “Railway operating revenues” on the Consolidated Statements of Income ~~as follows: 7% for the third quarters of 2022 and 2021, and the first nine months of 2022, and 6%~~ for the first ~~nine months~~quarters of ~~2021.~~2023 and 2022, respectively.

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

Under the typical 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, 2022		December 31, 2021			March 31, 2023		December 31, 2022
		($ in millions)					($ in millions)

Customer	Customer	$	901	$	741	Customer	$	919	$	895
Non-customer	Non-customer	250		235		Non-customer	251		253

Accounts receivable – net	Accounts receivable – net	$	1,151	$	976	Accounts receivable – net	$	1,170	$	1,148

Non-customer receivables include ~~non-revenue related~~non-revenue-related amounts due from other railroads, governmental entities, and others. ~~There were no non-current customer receivables at September 30, 2022, while “Other assets” on the Consolidated Balance Sheets included $23 million at December 31, 2021.~~ We do not have any material contract assets or liabilities at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022.

2. Stock-Based Compensation


		Third Quarter				First Nine Months					First Quarter
		2022		2021		2022		2021			2023		2022
		($ in millions)									($ in millions)

Stock-based compensation expense	Stock-based compensation expense	$	13	$	14	$	49	$	46	Stock-based compensation expense	$	11	$	23
Total tax benefit	Total tax benefit	7		3		24		28		Total tax benefit	6		13

During ~~2022,~~the first quarter of 2023, 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				First Quarter
		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	6,000	$	74.95	139,810	$	61.30	Stock options	69,580	$	77.60
RSUs	RSUs	9,993	240.63		173,984	266.72		RSUs	173,221	237.70
PSUs	PSUs	6,960	256.12		58,415	272.48		PSUs	58,040	236.68

109

Stock Options


		Third Quarter				First Nine Months					First Quarter
		2022		2021		2022		2021			2023		2022
		($ in millions)									($ in millions)

Options exercised	Options exercised	116,881		22,502		275,770		363,982		Options exercised	66,811		119,343
Cash received upon exercise	Cash received upon exercise	$	9	$	2	$	23	$	33	Cash received upon exercise	$	5	$	10
Related tax benefits realized	Related tax benefits realized	5		1		11		13		Related tax benefits realized	3		5

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					First Quarter
		2022		2021		2022		2021			2023		2022
		($ in millions)									($ in millions)

RSUs vested	RSUs vested	557		1,100		247,510		260,227		RSUs vested	149,122		243,301
Common Stock issued net of tax withholding	Common Stock issued net of tax withholding	397		761		175,373		184,272		Common Stock issued net of tax withholding	104,608		172,364
Related tax benefits realized	Related tax benefits realized	$	—	$	—	$	5	$	7	Related tax benefits realized	$	1	$	5

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 2022 or 2021.~~

First Nine Months
2022 2021
($ in millions)
PSUs earned 86,420 78,727
Common Stock issued net of tax withholding 54,651 49,967
Related tax benefits realized $ 1 $ 1

~~3. Income Taxes~~

On July 8, 2022, House Bill 1342 was signed into law in the Commonwealth of Pennsylvania, which reduced its corporate income tax rate from 9.99% to 4.99%, through a series of phased reductions beginning each tax year from January 1, 2023 through January 1, 2031. GAAP requires companies to recognize the effect of tax law changes in the period of enactment. As a result, in the third quarter we recognized a $136 million benefit in “Income taxes” with a corresponding reduction in “Deferred income taxes.”


	First Quarter
	2023		2022
	($ in millions)

PSUs earned	58,599		86,420
Common Stock issued net of tax withholding	40,255		54,651
Related tax benefits realized	$	—	$	1

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4.3. Earnings Per Share

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


		Basic				Diluted					Basic				Diluted
		Third Quarter									First Quarter
		2022		2021		2022		2021			2023		2022		2023		2022
		($ in millions, except per share amounts, shares in millions)									($ in millions, except per share amounts, shares in millions)

Net income	Net income	$	958	$	753	$	958	$	753	Net income	$	466	$	703	$	466	$	703
Dividend equivalent payments	Dividend equivalent payments	—		(1)		—		—		Dividend equivalent payments	(1)		—		—		—

Income available to common stockholders	Income available to common stockholders	$	958	$	752	$	958	$	753	Income available to common stockholders	$	465	$	703	$	466	$	703

Weighted-average shares outstanding	Weighted-average shares outstanding	233.2		245.3		233.2		245.3		Weighted-average shares outstanding	227.7		239.3		227.7		239.3
Dilutive effect of outstanding options and share-settled awards	Dilutive effect of outstanding options and share-settled awards					0.8		1.1		Dilutive effect of outstanding options and share-settled awards					0.6		0.9
Adjusted weighted-average shares outstanding	Adjusted weighted-average shares outstanding					234.0		246.4		Adjusted weighted-average shares outstanding					228.3		240.2

Earnings per share	Earnings per share	$	4.11	$	3.07	$	4.10	$	3.06	Earnings per share	$	2.04	$	2.94	$	2.04	$	2.93

		Basic				Diluted
		First Nine Months
		2022		2021		2022		2021
		($ in millions, except per share amounts, shares in millions)

Net income		$	2,480	$	2,245	$	2,480	$	2,245
Dividend equivalent payments		(1)		(2)		(1)		—

Income available to common stockholders		$	2,479	$	2,243	$	2,479	$	2,245

Weighted-average shares outstanding		236.4		248.5		236.4		248.5
Dilutive effect of outstanding options and share-settled awards						0.8		1.2
Adjusted weighted-average shares outstanding						237.2		249.7

Earnings per share		$	10.49	$	9.03	$	10.45	$	8.99

During the ~~third~~first quarters of 2023 and ~~first nine months of~~ 2022, ~~and 2021,~~ 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. The dilution calculations exclude options having exercise prices exceeding the average market price of Common Stock as follows: 0.1 million in both the ~~third quarter~~first quarters ended March 31, 2023 and ~~first nine months ended September 30, 2022 and none in the third quarter and first nine months ended September 30, 2021.~~2022.

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5.4. 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		Reclassification Adjustments		Balance at End of Period			Balance at Beginning of Year		Net Income		Reclassification Adjustments		Balance at End of Period
		($ in millions)									($ in millions)
Nine months ended September 30, 2022
Three months ended March 31, 2023										Three months ended March 31, 2023
Pensions and other postretirement liabilities										Pensions and other postretirement liabilities	$	(319)	$	—	$	(4)	$	(323)
Other comprehensive loss of equity investees										Other comprehensive loss of equity investees	(32)		—		—		(32)

Accumulated other comprehensive loss										Accumulated other comprehensive loss	$	(351)	$	—	$	(4)	$	(355)

Three months ended March 31, 2022										Three months ended March 31, 2022
Pensions and other postretirement liabilities	Pensions and other postretirement liabilities	$	(356)	$	—	$	14	$	(342)	Pensions and other postretirement liabilities	$	(356)	$	—	$	4	$	(352)
Other comprehensive income (loss) of equity investees	Other comprehensive income (loss) of equity investees	(46)		11		—		(35)		Other comprehensive income (loss) of equity investees	(46)		4		—		(42)

Accumulated other comprehensive loss	Accumulated other comprehensive loss	$	(402)	$	11	$	14	$	(377)	Accumulated other comprehensive loss	$	(402)	$	4	$	4	$	(394)

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)

6.5. Stock Repurchase Program

We repurchased and retired ~~9.2~~0.6 million and ~~9.4~~2.2 million shares of Common Stock under our stock repurchase ~~program~~programs in the first three months of 2023 and 2022, respectively, at a cost of ~~$2.3 billion~~$163 million and $2.5 billion during the first nine months of 2022 and 2021, respectively. On March 29, 2022, our Board of Directors authorized a new program for the repurchase of up to $10.0 billion of Common Stock beginning April 1, 2022. Our previous share repurchase program terminated on March 31, 2022.$600 million.

7.6. 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 the jointly-owned entity, and CSX has the remainder of the economic and voting interests. Our investment in Conrail was $1.6 billion ~~and $1.5 billion~~ at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021, respectfully.~~2022.

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 expenses payable to CRC for operation of the Shared Assets Areas totaling ~~$42~~$45 million and ~~$37 million for the third quarters of 2022 and 2021, respectively, and $116 million and $108~~$38 million for the first ~~nine months~~quarters of ~~2022~~2023 and ~~2021,~~2022, respectively. Our equity in Conrail’s earnings, net of amortization, was ~~$15~~$16 million and $14 million for the ~~third~~first quarters of ~~2022~~2023 and ~~2021, respectively, and $40 million and $42 million for the first nine months of~~ 2022, ~~and 2021,~~ respectively. These amounts partially 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, 2022~~March 31, 2023 and December 31, ~~2021~~2022 for long-term advances from Conrail, maturing in 2050 that bear interest at an average rate of 1.31%.

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Investment in TTX

We and ~~eight~~seven other North American railroads collectively own TTX Company (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%~~19.78% ownership interest in TTX.

Expenses incurred for use of TTX equipment are included in “Purchased services and rents.” These expenses amounted to ~~$63~~$66 million and ~~$59 million for the third quarters of 2022 and 2021, respectively, and $193 million and $183~~$64 million for the first ~~nine months~~quarters of ~~2022~~2023 and ~~2021,~~2022, respectively. Our equity in TTX’s earnings partially offsets these costs and totaled ~~$18~~$9 million and ~~$12 million for the third quarters of 2022 and 2021, respectively, and $39 million and $43~~$10 million for the first ~~nine months~~quarters of ~~2022~~2023 and ~~2021,~~2022, respectively.

8.7. Debt

In ~~June 2022,~~February 2023, we issued ~~$750~~$500 million of ~~4.55%~~4.45% senior notes due ~~2053.~~2033.

~~In May 2022, we renewed our~~We have in place an accounts receivable securitization program with a maximum borrowing capacity of $400 ~~million. The~~million and a term that expires in May 2023. Amounts received under this facility are accounted for as borrowings. We had no amounts outstanding under this program at March 31, 2023 and our available borrowing capacity was $400 million. At December 31, 2022, we had $100 million (at an average variable interest rate of 5.05%) outstanding, which is included within “Short-term debt” and our available borrowing capacity was $300 million. Our accounts receivable securitization program was supported by $916 million and $883 million in receivables at ~~both September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~

~~In February~~ 2022, ~~we issued $600 million of 3.00% senior notes due 2032 and $400 million of 3.70% senior notes due 2053.~~respectively, which are included in “Accounts receivable – net”.

9.8. Pensions and Other Postretirement Benefits

We have both funded and unfunded defined benefit pension plans covering eligible employees. We also provide specified health care 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. 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:


		Pension Benefits				Other Postretirement Benefits					Pension Benefits				Other Postretirement Benefits
		Third Quarter									First Quarter
		2022		2021		2022		2021			2023		2022		2023		2022
		($ in millions)									($ in millions)
Service cost	Service cost	$	10	$	10	$	1	$	1	Service cost	$	6	$	10	$	1	$	1
Interest cost	Interest cost	17		14		3		1		Interest cost	27		17		4		2
Expected return on plan assets	Expected return on plan assets	(53)		(48)		(3)		(3)		Expected return on plan assets	(52)		(53)		(3)		(3)
Amortization of net losses	Amortization of net losses	12		16		—		—		Amortization of net losses	1		12		—		—
Amortization of prior service benefit	Amortization of prior service benefit	—		—		(6)		(6)		Amortization of prior service benefit	—		—		(6)		(6)

Net benefit	Net benefit	$	(14)	$	(8)	$	(5)	$	(7)	Net benefit	$	(18)	$	(14)	$	(4)	$	(6)

1413

Pension Benefits Other Postretirement Benefits
First Nine Months
2022 2021 2022 2021
($ in millions)
Service cost $ 30 $ 32 $ 4 $ 4
Interest cost 51 41 7 5
Expected return on plan assets (160) (144) (9) (9)
Amortization of net losses 36 49 — 1
Amortization of prior service benefit — — (19) (19)
Net benefit $ (43) $ (22) $ (17) $ (18)

The service cost 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 (expense) – net” on the Consolidated Statements of Income.

~~10.~~9. Fair Values of Financial Instruments

The fair values of “Cash and cash equivalents,” “Accounts receivable – net,” ~~and~~ “Accounts payable,” and “Short-term debt,” approximate carrying values because of the short maturity of these financial instruments. The carrying value of corporate-owned life insurance is recorded at cash surrender value and, accordingly, approximates fair value. There are no other assets or liabilities measured at fair value on a recurring basis at ~~September 30, 2022~~March 31, 2023 or December 31, ~~2021.~~2022. The carrying amounts and estimated fair values, based on Level 1 inputs, of long-term debt consist of the following:

September 30, 2022 December 31, 2021
Carrying
Amount Fair
Value Carrying
Amount Fair
Value
($ in millions)
Long-term debt, including current maturities $ (15,068) $ (13,481) $ (13,840) $ (17,033)


	March 31, 2023				December 31, 2022
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	($ in millions)


Long-term debt, including current maturities	$	(14,988)	$	(13,889)	$	(15,082)	$	(13,846)

~~11.~~10. Commitments and Contingencies

Eastern Ohio Incident

Summary

On February 3, 2023, a train we operated derailed in East Palestine, Ohio. The derailed equipment included 38 railcars, 11 of which were non-Company-owned tank cars containing hazardous materials. Fires associated with the derailment threatened certain of the tank cars. There was concern about the risk that the content of five of the tank cars carrying vinyl chloride might polymerize, which would have posed the risk of a catastrophic explosion. As a consequence, on February 6, 2023, the local incident commander—in consultation with the incident command that included, among others, federal, state and local officials and Norfolk Southern—opted to conduct a controlled vent and burn of five derailed tank cars, all of which contained vinyl chloride. This procedure involved creating holes in the five tank cars to drain the vinyl chloride into adjacent trenches that had been dug into the ground where such vinyl chloride was then burned, with any material remaining after burning of the vinyl chloride being remediated. The February 3rd derailment, the associated fire, and the resulting vent and burn of the tank cars containing vinyl chloride on February 6th is hereinafter referred to as the “Incident.”

In response to the Incident, we have worked to clean the site safely and thoroughly, including those activities described in the Environmental Matters section below with respect to potentially impacted air, soil and water and to monitor for any impact on public health and the environment. We are working with federal, state, and local officials to mitigate impacts from the Incident, including, among other efforts, conducting environmental monitoring and clean-up activities (as more fully described below), and establishing a family assistance center to provide financial support to affected members of the East Palestine and surrounding communities.

Financial Impact

Although we cannot predict the final outcome or estimate the reasonably possible range of loss with certainty, we have recognized $387 million of expense for costs directly attributable to the Incident, which is presented in “Eastern Ohio incident” on the Consolidated Statements of Income. During the first quarter, our cash expenditures attributable to the Incident were $55 million, which are presented in “Net cash provided by operating activities” on the Consolidated Statement of Cash Flows. The remainder, $332 million, is primarily comprised of our estimates of

probable and reasonably estimable liabilities principally associated with environmental matters and legal proceedings, which are discussed in further detail below.

While certain costs recorded in the first quarter may be recoverable under our insurance policies in effect at the date of the Incident, no estimate of potential recoveries has yet been recorded. Any amounts recoverable under our insurance policies will be reflected in future periods in which recovery is considered probable. For additional information about our insurance coverage, see “Insurance” below.

Environmental Matters – In response to the Incident, we have been working with federal, state, and local officials such as the U.S. Environmental Protection Agency (EPA), the Ohio EPA, and the Pennsylvania Department of Environmental Protection, to conduct environmental response and remediation activities, including but not limited to, air monitoring, indoor air quality screenings, municipal water and private water well testing, residential, commercial, and agricultural soil sampling, surface water and groundwater sampling, re-routing a local waterway around the affected site, capturing and shipping stormwater that enters the impacted derailment site to proper disposal facilities, and excavating and disposing of potentially affected soil at hazardous waste landfills or incinerators. The U.S. EPA issued a Unilateral Administrative Order (UAO) on February 21, 2023, containing various requirements, including the submission of numerous work plans to assess and remediate various environmental media and performance of certain removal actions at the affected site. On February 24, 2023, we submitted to the U.S. EPA our Notice of Intent to Comply with the UAO and are currently cooperating with U.S. EPA as well as the Ohio EPA and Pennsylvania Department of Environmental Protection, pursuant to the UAO and the directives issued thereunder.

We are also subject to the following legal proceedings that principally relate to the environmental impact of the Incident:

•The U.S. Department of Justice (DOJ) and the U.S. EPA filed a civil complaint (the DOJ Complaint) in the Northern District of Ohio (Eastern Division) seeking injunctive relief, cost recovery and civil penalties for violations of the Clean Water Act and seeking cost recovery under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA); and

•The Ohio Attorney General filed a CERCLA lawsuit (the Ohio Complaint) in the Northern District of Ohio (Eastern Division) requesting statutory damages for a variety of tort and environmental claims under CERCLA.

In connection with the foregoing items, we recognized $317 million of expense during the first quarter, of which $31 million was paid, related to probable obligations that are reasonably estimable, in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 410-30, “Environmental Obligations.” Our current estimate includes ongoing and future environmental cleanup activities and remediation efforts, governmental oversight costs (including those incurred by the U.S. EPA and the Ohio EPA), and other related costs, including those in connection with the DOJ Complaint (including potential civil penalties related to violations of the Clean Water Act). Our current estimates of future environmental cleanup and remediation liabilities related to the Incident may change over time due to various factors, including but not limited to, the success of current cleanup techniques, the nature and extent of required future cleanup activities, and the extent of governmental oversight, amongst other factors. As clean-up efforts progress and more information is available, including any federal and state requirements, we will review these estimates and revise as appropriate.

Legal Proceedings (Non-Environmental) – To date, numerous non-environmental legal actions have been filed with respect to the Incident, including those more specifically set forth below.

•There are currently numerous putative class action and individual lawsuits that have been filed, primarily consolidated in the Northern District of Ohio (Eastern Division). The putative class

action complaints currently allege numerous claims, including negligence, nuisance, trespass, and medical monitoring, and seek as relief, among other things, compensatory and punitive damages. The putative classes are currently defined by reference to class areas ranging from the evacuation zone up to 100 miles away. Additional multi-plaintiff lawsuits are also pending in the same court and others, such as additional lawsuits pending in the Western District of Pennsylvania brought by local school districts including claims such as negligence, nuisance, trespass, and future health monitoring. No responsive pleadings have yet been filed with respect to these matters (collectively referred to herein as the Incident Lawsuits). In accordance with ASC 450, “Contingencies,” we have recognized a $12 million probable loss in the first quarter with respect to the Incident Lawsuits, which is in addition to $16 million in amounts paid during the first quarter with respect to these matters.

•Securities litigation, including a securities class action lawsuit filed in the Southern District of Ohio alleging multiple securities law violations for which no responsive pleading has yet been filed, as well as multiple shareholder demand letters that we have received (collectively, the Shareholder Lawsuits).

If and when we conclude that it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated, it will be accrued through a charge to earnings and, if material, disclosed. Any adjustments to the recorded liability will be reflected in earnings in the periods in which such adjustments become known. Because the final outcome of any of these legal proceedings cannot be predicted with certainty, unfavorable or unexpected developments or outcomes could result in additional accruals that could be significant to results of operations in a particular year or quarter. For legal proceedings 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.

The reserves established by us during the first quarter do not include any estimate of loss for the following items, for which we believe a loss is either not probable or not reasonably estimable for the reasons noted: (i) the overall cost to us for programs being developed in conjunction with the Ohio Attorney General for affected residents and businesses, which amounts will impact our loss contingency analysis with respect to the Incident Lawsuits described above, namely a healthcare fund, tailored protection for property owners, and programs to protect drinking water over the long term (given the preliminary nature of such discussions), or (ii) any fines or penalties (in excess of the reserves established for Clean Water Act-related civil penalties) that may be imposed as a result of the Incident Inquiries and Investigations, as more specifically set forth and defined below (the outcome of which are uncertain at this time). Additionally, as noted above, amounts recognized during the first quarter do not include potential recoveries from third parties, including the impact of our insurance coverage, which may apply to various Incident-related expenses or liabilities, as more specifically set forth further below (given the preliminary nature of any related discussions with our insurers).

Inquiries and Investigations

As set forth above, we are subject to inquiries and investigations by numerous federal, state, and local government authorities and regulatory agencies regarding the Incident, including but not limited to, the DOJ and the U.S. EPA, the Ohio EPA, the National Transportation Safety Board (NTSB), the Federal Railroad Administration (FRA), the Occupational Safety and Health Administration, the Ohio Attorney General, and the Pennsylvania Attorney General. Further details regarding the NTSB and FRA investigations are set forth below. We are cooperating with all inquiries and investigations, including responding to civil and criminal subpoenas and other requests for information (the aforementioned inquiries and investigations, as well as the civil and criminal subpoenas are collectively referred to herein as the Incident Inquiries and Investigations). The outcome of any current or future Incident Inquiries and Investigations is uncertain at this time, including any related fines, penalties or settlements. Therefore, our first quarter expenses do not include estimates of the total amount that we may incur for any such fines, penalties or settlements.

Subsequent to the Incident, investigators from the NTSB examined railroad equipment and track conditions; reviewed data from the signal system, wayside defect detectors, local surveillance cameras, and the lead locomotive’s event recorder and forward-facing and inward-facing image recorders; and completed certain interviews (the NTSB Investigation). The NTSB issued a preliminary report indicating that one of the cars involved in the derailment appeared to have a wheel bearing in the final stage of overheat failure moments before the derailment. Their preliminary report also indicates that the rail crew was operating the train within our rules; the rail crew operated the train below the track speed limit, the wayside heat detectors were operating as designed; and once the rail crew was alerted by the wayside detector, they immediately began to stop the train. The NTSB’s investigation remains ongoing.

Concurrent with the NTSB Investigation, the FRA is also investigating the Incident. Similar in scope to the NTSB Investigation, the FRA is examining railroad equipment, track conditions, hazardous materials train placement and routing, and emergency response (the FRA Incident Investigation). The FRA Incident Investigation may result in the assessment of civil penalties. In addition to the FRA Incident Investigation, the FRA announced on March 7, 2023 that it would conduct a 60-day supplemental safety assessment (the FRA Safety Assessment). The FRA Safety Assessment will review findings from a previously completed 2022 system audit and assess operational elements including, but not limited to: track, signal, and rolling stock maintenance, inspection and repair practices; protection of employees; communications between transportation departments and mechanical and engineering staff; operation control center procedures and dispatcher training. The overall scope of the FRA Safety Assessment is to examine our safety culture. At the conclusion of the FRA Safety Assessment, the FRA will issue a public report which will include its findings and recommended corrective actions. The FRA Incident Investigation and the FRA Safety Assessment remain ongoing.

Other 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 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 loss 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. ~~Summary~~On January 3, 2023, the court granted summary judgment ~~has been briefed~~to us on all of the compensatory claims but ~~not decided, and trial is likely to occur in~~denied summary judgment for all equitable relief claims. On January 18, 2023, the ~~first quarter~~court dismissed the federal equitable relief claims, leaving the state equitable relief claims as the sole remaining issue under consideration. On April 19, 2023, the court disposed of ~~2023. We~~all remaining state equitable relief claims. These rulings may be appealed. If appealed, we will continue to vigorously defend the lawsuit and, although it is reasonably possible we could incur a loss in the case, we believe that we will prevail. However, given that litigation is inherently unpredictable and subject to uncertainties, there can be no assurances that the final outcome of the litigation ~~or a litigation settlement~~(including any related appeal) will not ~~have a material adverse affect on our financial position or results of operations. We~~be material. Until such appeal is final, we cannot reasonably estimate the potential loss or range of loss associated with ~~the litigation at~~ this ~~time.~~matter.

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 ~~consulting~~ firm. Job-related personal injury and occupational claims are subject to the Federal Employer’s Liability Act (FELA), which is applicable only to railroads. The variability inherent in FELA’s fault-based tort system could result in actual costs being different from the liability recorded. While the ultimate amount of claims incurred is dependent on future developments, in our opinion, the recorded liability is adequate to cover the future payments of claims and is supported by the most recent actuarial study. In all cases, we record a liability when the expected loss for the claim is both probable and reasonably estimable.

Employee personal injury claims – ~~The~~Other than Incident-related matters noted above, 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. 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~~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. Our 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 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~~In addition to environmental claims associated with the Incident, our Consolidated Balance Sheets include liabilities for other environmental exposures of ~~$57~~$61 million at ~~September 30, 2022~~March 31, 2023 and ~~$49~~$66 million at December 31, ~~2021,~~2022, of which $15 million is classified as a current liability at the end of both periods. At ~~September 30,~~March 31, 2023 and December 31, 2022, the liability represents our estimates of the probable cleanup, investigation, and remediation costs based on available information at 8685 known locations and ~~projects compared with 88 locations and projects at December~~projects. At March 31, ~~2021. At September 30, 2022,~~2023, twenty sites accounted for ~~$46~~$49 million of the liability, and no individual site was considered to be material. We anticipate that most of this liability will be paid out over five years; however, some costs will be paid out over a longer period.

At eight 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~~CERCLA 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~~As set forth above, with respect to known environmental sites (whether identified by us or by the ~~Environmental Protection Agency~~U.S. EPA 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.

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. Moratorium provisions in the labor agreements govern when the railroads and unions may propose changes to the agreements. We largely bargain nationally in concert with other major railroads, represented by the National Carriers’ Conference Committee.

The latest round of national bargaining concluded in December 2022, when agreements were either ratified or enacted through legislative action for all twelve of our unions. We are currently participating in additional

discussions (none of which carry the risk of a work stoppage) with several of our unions to conclude the implementation of these national agreements. With the conclusion of national bargaining, neither party can compel mandatory bargaining around any new proposals until November 1, 2024.

In ~~September 2022, management reached tentative agreements with all relevant unions. These tentative agreements, which pertain~~addition, we understand the imperative to ~~years 2020-2024, included retroactive pay increases and other benefits~~continue improving quality of life for our craft employees ~~that~~and are ~~higher than~~actively engaged in voluntary local discussions with our estimates previously recorded for such items. For the third quarter of 2022, “Compensation and benefits” includes $85 million and “Purchased services and rents” includes $3 million of additional expenses pertaining to estimated wage increases recorded in periods prior to July 1, 2022. For the first nine months of 2022, “Compensation and benefits” includes $54 million and “Purchased services and rents” includes $2 million of additional expenses pertaining to estimated wage increases recorded in periods prior to January 1, 2022.

~~Although some of these agreements have been finalized through ratification by union membership, others remain subject to ratification. In addition, two labor~~ unions did not initially ratify their tentative agreements (with one union putting out a second tentative agreement for a vote and the other agreeing to maintain the status quo as negotiations continue). The outcome of the ratification process cannot be predicted with certainty aton this ~~time~~; however, if one or more of the tentative agreements fails ratification and is not subsequently ratified during a final “status quo” period where self-help (strike or lockout) is not permitted, self-help could occur in mid-November or early December (dates vary by tentative agreement). A service disruption, depending on the duration, could have a material adverse effect on our financial position, results of operations, or liquidity. In addition, the resulting changes in our finalized labor agreements (and our tentative agreements, if ratified) are expected to increase our labor costs.important issue.

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 $800 million ~~($1.1~~(or up to $1.1 billion for ~~specific perils)~~specified types of pollution releases) 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 82% of potential losses above $75 million and below $275 million per occurrence and/or policy year.

~~12. New Accounting Pronouncements~~

~~In November 2021, the Financial Accounting Standards Board issued Accounting Standards Update 2021-10, “Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance,” which requires annual disclosures when an entity has received government assistance. Entities are required~~Our ability to ~~disclose the types of government assistance received, the accounting treatment for that government assistance, and the effect~~recoup any of the ~~government assistance on~~foregoing amounts under our insurance coverage, including any amounts that may be recoverable with respect to the ~~financial statements. The new standard~~Incident, is ~~effective~~subject to certain conditions, including but not limited to our insurers’ reservation of rights to further investigate and contest coverage, the express restrictions and sub-limits of coverage, and various policy exclusions, including those for ~~annual periods beginning after December 15, 2021,~~some governmental fines or penalties, as well as potential coverage disputes over payments we make as part of our effort to mitigate the impact to the community and ~~early adoption is permitted.~~affected residents. We ~~do not expect~~are working with our insurers to confirm applicable coverage with respect to the Incident, but no estimate for potential insurance recovery has been accrued at this ~~standard to have a material effect on our disclosures. We did not adopt the standard early.~~

time.

1820

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

Norfolk Southern Corporation and Subsidiaries

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

OVERVIEW

We are one of the nation’s premier transportation companies, moving goods and materials that help drive the U.S. economy. We connect customers to markets and communities to economic opportunity with safe, reliable, and cost-effective shipping solutions. Our Norfolk Southern Railway Company subsidiary operates in 22 states and the District of Columbia. We are a major transporter of industrial products, including agriculture, forest and consumer products, chemicals, and metals and construction materials. In addition, in the East we serve every major container port and operate the most extensive intermodal network. We are also a principal carrier of coal, automobiles, and automotive parts.

~~During~~Our first quarter results were impacted by a February 2023 derailment in Eastern Ohio. The derailment consisted of 38 railcars and resulted in the release of certain chemicals that were being transported for our customers. Following the Incident (as defined and as further described in Note 10 in the Notes to Consolidated Financial Statements), we have worked to clean the derailment site safely and thoroughly and to monitor for any impact on public health and the environment. Expenses recognized in the first quarter amounted to $387 million and relate to our initial response costs, ongoing cleanup efforts and estimates associated with environmental remediation and legal proceedings. Our current estimates of future environmental cleanup and remediation liabilities related to the Incident may change over time due to various factors, and the final outcome of any legal proceedings cannot be predicted with certainty. Thus, unfavorable or unexpected developments or outcomes could result in additional accruals that could be significant to results of operations in a particular year or quarter. This amount does not include any estimate of loss for specific items for which we believe a loss is either not probable or not reasonably estimable for the reasons noted. In addition, this amount does not include any amounts that may be recoverable from third ~~quarter, strong revenue~~parties, including expenses or liabilities that may be recovered under our insurance policies and for which such amounts will be reflected in future periods when reimbursement is considered probable. Please see Note 10 in the Notes to Consolidated Financial Statements for a detailed discussion of these estimates and exclusions. We continue to work with federal, state, and local officials to mitigate impacts from the Incident and to provide support to affected members of the community.

Revenue growth ~~drove improved profitability despite~~over the prior year was driven by higher ~~inflation-related operating expenses.Higher fuel surcharge revenues, resulting from higher fuel commodity prices, and pricing gains led to~~average revenue per unit, ~~growth that more than offset~~as our volumes for the ~~impact of lower volume.The increase in fuel commodity prices also led~~quarter were flat. In addition to the costs recognized from the Incident, our operating expenses were higher, ~~fuel expense.Additionally, tentative agreements, resulting as part of ongoing labor union negotiations, included retroactive pay increases~~driven by inflationary pressures and ~~other benefits for our craft employees that resulted in increased compensation and benefits expenses.Finally, although~~service-related costs. As we ~~incurred incremental service-related costs, we continued~~continue to make progress ~~on efforts~~in response to ~~increase network fluidity~~the derailment and ~~improve~~support the impacted community, we are committed to our strategy — a balanced approach of delivering safe, reliable and resilient service, ~~for our customers.~~smart and sustainable growth, and continuous productivity improvement.

SUMMARIZED RESULTS OF OPERATIONS


												First Quarter
		Third Quarter					First Nine Months							2023		2022		% change
		2022		2021		% change	2022		2021		% change			($ in millions, except per share amounts)
		($ in millions, except per share amounts)

Income from railway operations	Income from railway operations	$	1,272	$	1,136	12%	$	3,628	$	3,318	9%		Income from railway operations	$	711	$	1,085	(34%)

Net income	Net income	$	958	$	753	27%	$	2,480	$	2,245	10%		Net income	$	466	$	703	(34%)
Diluted earnings per share	Diluted earnings per share	$	4.10	$	3.06	34%	$	10.45	$	8.99	16%		Diluted earnings per share	$	2.04	$	2.93	(30%)
Railway operating ratio (percent)	Railway operating ratio (percent)	62.0		60.2		3%	61.8		60.0		3%		Railway operating ratio (percent)	77.3		62.8		23%

~~Income~~First-quarter 2023 income from railway operations included $387 million of expenses arising from the Incident, which reduced net income by $293 million and diluted earnings per share by $1.28. For more information see Note 10 in the Notes to Consolidated Financial Statements. First quarter income from railway operations, net income, and diluted earnings per share were further impacted by the factors set forth further below.

The following table adjusts our 2023 GAAP financial results to exclude the effects of the Incident. The income tax effect of this non-GAAP adjustment was calculated based on the applicable tax rates to which the non-GAAP adjustment related. We use these non-GAAP financial measures internally and believe this information provides useful supplemental information to investors to facilitate making period-to-period comparisons by excluding the 2023 costs arising from the Incident. 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, 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 First Quarter 2023
	Reported		Eastern Ohio Incident		Adjusted (non-GAAP)
	($ in millions, except per share amounts)


Income from railway operations	$	711	$	387	$	1,098


Net income	$	466	$	293	$	759
Diluted earnings per share	$	2.04	$	1.28	$	3.32
Railway operating ratio (percent)	77.3		(12.4)		64.9

In the table below, references to 2023 results and related comparisons use the adjusted, non-GAAP results from the reconciliation in the table above.


	First Quarter
	Adjusted 2023 (non-GAAP)		2022		Adjusted 2023 (non-GAAP) vs. 2022
	($ in millions, except per share amounts)				% change


Income from railway operations	$	1,098	$	1,085	1%


Net income	$	759	$	703	8%
Diluted earnings per share	$	3.32	$	2.93	13%
Railway operating ratio (percent)	64.9		62.8		3%

On a non-GAAP basis excluding the impact of the Incident, income from railway operations increased ~~in both periods, driven by~~due to higher railway operating revenues. Revenue growth was ~~the result of~~driven by higher fuel surcharge revenues and pricing gains, ~~which more than offset~~as volumes remained flat compared to the ~~impact of volume declines in both the third quarter and first nine months.~~same period last year. The rise in revenues was ~~partly~~partially offset by increased railway operating expenses, primarily driven by ~~higher fuel prices, increased labor-related costs resulting from ongoing labor union negotiations, other~~ inflationary pressures and service-related costs. The first nine months also include higher claims-related expenses and lower gains on the sale of operating properties. The increase in estimates for retroactive wage increases anticipated under our tentative labor agreements and that pertain to prior periods lowered diluted earnings per share by $0.28 and $0.18 in the third quarter and first nine months, respectively. Additionally, net income in both periods includes a $136 million deferred tax benefit resulting from a corporate income tax rate change in the Commonwealth of Pennsylvania, which increased diluted earnings per share by $0.58 and $0.57 in the third quarter and first nine months, respectively. Our share repurchase activity resulted in the percentage increase in diluted earnings per share that exceeded that of net income.

1923

DETAILED RESULTS OF OPERATIONS

Railway Operating Revenues

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


		Third Quarter					First Nine Months						First Quarter
Revenues	Revenues	2022		2021		% change	2022		2021		% change	Revenues	2023		2022		% change
Merchandise:	Merchandise:											Merchandise:
Agriculture, forest and consumer products	Agriculture, forest and consumer products	$	642	$	564	14%	$	1,839	$	1,681	9%	Agriculture, forest and consumer products	$	653	$	573	14%
Chemicals	Chemicals	570		504		13%	1,620		1,457		11%	Chemicals	541		498		9%
Metals and construction	Metals and construction	442		424		4%	1,237		1,196		3%	Metals and construction	400		375		7%
Automotive	Automotive	276		218		27%	759		664		14%	Automotive	284		226		26%
Merchandise	Merchandise	1,930		1,710		13%	5,455		4,998		9%	Merchandise	1,878		1,672		12%
Intermodal	Intermodal	942		812		16%	2,768		2,332		19%	Intermodal	814		854		(5%)
Coal	Coal	471		330		43%	1,285		960		34%	Coal	440		389		13%
Total	Total	$	3,343	$	2,852	17%	$	9,508	$	8,290	15%	Total	$	3,132	$	2,915	7%


Units	Units							Units
Merchandise:	Merchandise:							Merchandise:
Agriculture, forest and consumer products	Agriculture, forest and consumer products	178.0	181.3	(2%)	539.2	547.3	(1%)	Agriculture, forest and consumer products	187.7	177.6	6%
Chemicals	Chemicals	137.9	138.3	—%	407.3	399.0	2%	Chemicals	136.1	129.4	5%
Metals and construction	Metals and construction	168.3	179.2	(6%)	480.2	510.5	(6%)	Metals and construction	153.4	148.0	4%
Automotive	Automotive	85.4	81.5	5%	252.3	257.5	(2%)	Automotive	88.1	81.2	8%
Merchandise	Merchandise	569.6	580.3	(2%)	1,679.0	1,714.3	(2%)	Merchandise	565.3	536.2	5%
Intermodal	Intermodal	972.7	1,021.0	(5%)	2,945.7	3,100.0	(5%)	Intermodal	916.8	956.5	(4%)
Coal	Coal	183.0	160.5	14%	514.7	500.2	3%	Coal	173.8	165.6	5%
Total	Total	1,725.3	1,761.8	(2%)	5,139.4	5,314.5	(3%)	Total	1,655.9	1,658.3	—%


Revenue per Unit	Revenue per Unit											Revenue per Unit
Merchandise:	Merchandise:											Merchandise:
Agriculture, forest and consumer products	Agriculture, forest and consumer products	$	3,606	$	3,113	16%	$	3,411	$	3,072	11%	Agriculture, forest and consumer products	$	3,477	$	3,228	8%
Chemicals	Chemicals	4,135		3,647		13%	3,978		3,651		9%	Chemicals	3,979		3,850		3%
Metals and construction	Metals and construction	2,625		2,360		11%	2,575		2,342		10%	Metals and construction	2,607		2,535		3%
Automotive	Automotive	3,231		2,679		21%	3,008		2,579		17%	Automotive	3,226		2,776		16%
Merchandise	Merchandise	3,388		2,946		15%	3,249		2,915		11%	Merchandise	3,323		3,118		7%
Intermodal	Intermodal	968		796		22%	940		752		25%	Intermodal	887		893		(1%)
Coal	Coal	2,575		2,057		25%	2,498		1,919		30%	Coal	2,533		2,347		8%
Total	Total	1,938		1,619		20%	1,850		1,560		19%	Total	1,891		1,758		8%

2024

Railway operating revenues increased ~~$491~~$217 million ~~in the third quarter and $1.2 billion for the first nine months~~ compared with the same ~~periods~~period last year. The table below reflects the components of the revenue change by major commodity group ($ in millions).


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

Volume	Volume	$	(32)	$	(38)	$	46	$	(103)	$	(116)	$	28	Volume	$	91	$	(35)	$	19
Fuel surcharge revenue	Fuel surcharge revenue	168		124		35		356		333		58		Fuel surcharge revenue	84		29		18
Rate, mix and other	Rate, mix and other	84		44		60		204		219		239		Rate, mix and other	31		(34)		14

Total	Total	$	220	$	130	$	141	$	457	$	436	$	325	Total	$	206	$	(40)	$	51

Approximately 95% of our revenue base is covered by contracts that include negotiated fuel surcharges. Revenues associated with these surcharges totaled ~~$501~~$375 million and ~~$174~~$244 million in the ~~third~~first quarters of ~~2022~~2023 and ~~2021, respectively, and $1.2 billion and $419 million for the first nine months of~~ 2022, ~~and 2021,~~ respectively. The increase in fuel surcharge revenues is driven by higher fuel commodity prices. ~~Should the current fuel price environment persist for~~

For the remainder of ~~2022,~~2023, we expect that revenue growth will be a challenge, as there is substantial economic uncertainty. We expect revenue headwinds resulting from lower fuel ~~surcharge revenue to continue to be higher than 2021.~~prices, softening coal pricing, and declining storage service charges.

Merchandise

Merchandise revenues increased ~~in both periods~~ due to higher average revenue per unit, driven by higher fuel surcharge revenue and increased pricing, ~~partially offset by lower volume. Volumes fell~~as well as higher volumes in both periods as declines in metals and construction and agriculture, forest, and consumer products shipments more than offset higher automotive shipments in the third quarter and chemicals shipments in the first nine months.all commodity groups.

Agriculture, forest and consumer products volume ~~decreased in both periods. During~~increased as the ~~third quarter, declines in~~shipment demand for corn, soybeans, ethanol, ~~pulpboard, fertilizer,~~feed, and ~~pulp,~~lumber, more than offset the declines in pulpboard. Volume gains in corn, ~~food oils,~~ethanol, feed and soybeans. During the first nine months, declines in fertilizer, corn, pulpboard, and pulp more than offset increases in feed, soybeans, and food oils. Decreased ethanol shipments in the third quarter were due to a decline in gasoline consumption. Pulpboard shipments declined in both periods due to decreased demand. Lower fertilizer shipments in both periodslumber were driven by ~~high fertilizer prices causing customers to draw down on existing inventories or delay purchases. Pulp shipments decreased in both periods~~increased market demand. Higher soybean volume was due to ~~equipment availability, service disruptions and over-the-road competition. Increased corn shipments~~an extended export season. The decline in ~~the third quarter were~~pulpboard was due to ~~improved cycle times on grain trains. In both periods, feed and food oils shipments increased due to increased customer~~higher inventories slowing down the demand ~~and soybean volumes were higher due to increased opportunity~~ for ~~exports.~~shipments.

Chemicals volume ~~was flat in the third quarter but increased for the first nine months driven by~~rose as growth in shipments of sand, petroleum products, and solid waste more than the offset declines in plastics, organic chemicals and natural gas liquids. Volume gains for sand were driven by current market demand, while the volume increases for petroleum and solid waste were both ~~periods~~driven by growth with existing customers. Plastics volumes declined due to ~~increased demand. Both periods~~lower demand as a result of decreased activity in the housing market, while organic chemicals volumes declined as a result of production delays due to weather events. Natural gas liquid volumes were ~~impacted by reduced shipments of inorganic chemicals, plastics, and organic chemicals,~~down due to decreased demand. ~~The first nine months also saw an increase in solid waste shipments due to growth with existing customers.~~

Metals and construction volume ~~fell in both periods,~~increased, largely ~~the result of decreased shipments of coil steel, iron and steel,~~driven by higher demand for aggregates and scrap ~~metal driven by service disruptions and slower equipment cycle times.~~metal.

Automotive volume ~~increased in the third quarter but decreased for the first nine months. Higher shipments in the third quarter were primarily~~was higher due to ~~increased~~an increase in production ~~due to fewer parts supply issues when compared to the prior year,~~of vehicles partially offset by ~~slower equipment~~elongated cycle times. ~~Volume declines for the first nine months were driven by slower equipment cycle times partially offset by fewer parts supply issues when compared to the prior year.~~

~~Merchandise revenues for the remainder of the year are expected to be higher due to increased average revenue per unit, driven by higher fuel surcharge revenue and pricing gains.~~

Intermodal

Intermodal revenues ~~increased in both periods,~~decreased, driven by ~~higher~~lower volumes, and lower average revenue per unit, a result of decreased storage service charges partially offset by higher fuel surcharge ~~revenues and pricing gains, partially offset by lower volume. The first nine months also included higher storage services~~ revenue.

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


		Third Quarter			First Nine Months				First Quarter
		2022	2021	% change	2022	2021	% change		2023	2022	% change

Domestic	Domestic	630.6	656.6	(4%)	1,954.4	1,957.5	—%	Domestic	587.7	653.4	(10%)
International	International	342.1	364.4	(6%)	991.3	1,142.5	(13%)	International	329.1	303.1	9%

Total	Total	972.7	1,021.0	(5%)	2,945.7	3,100.0	(5%)	Total	916.8	956.5	(4%)

Domestic volume declined ~~in both periods~~ due to ~~service disruptions~~high inventories and ~~terminal congestion.~~increased truck availability resulting in strong over-the-road competition. International volume ~~decreased in both periods as supply chain constraints, equipment shortages, as well as excess retail inventory which more than offset strong consumer demand.~~

~~Intermodal revenues for the remainder of the year are expected to be higher due to~~ increased ~~average revenue per unit,~~ driven by ~~higher fuel surcharge revenue and pricing gains.~~ocean carriers favoring inland point intermodal traffic.

Coal

Coal revenues increased ~~in both periods~~ due to higher average revenue per unit, driven by ~~pricing gains~~traffic mix and higher fuel surcharge revenue, and ~~higher volume.~~increased export coal volumes.

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


		Third Quarter			First Nine Months				First Quarter
		2022	2021	% change	2022	2021	% change		2023	2022	% change

Utility	Utility	9,908	8,234	20%	27,136	25,343	7%	Utility	8,210	8,961	(8%)
Export	Export	6,391	5,650	13%	19,319	18,923	2%	Export	8,206	6,414	28%
Domestic metallurgical	Domestic metallurgical	3,232	3,074	5%	8,444	8,886	(5%)	Domestic metallurgical	2,331	2,430	(4%)
Industrial	Industrial	963	940	2%	2,849	2,710	5%	Industrial	689	803	(14%)

Total	Total	20,494	17,898	15%	57,748	55,862	3%	Total	19,436	18,608	4%

Coal tonnage increased ~~in both periods primarily~~ due to increased ~~utility and~~ export ~~tonnage. Utility tonnage increased~~volume, partially offset by decreased volumes in ~~both periods due to stronger demand.~~all other market groups. Export tonnage ~~increased~~was higher due to increased demand, coal ~~supply.~~supply, and metal production. Utility tonnage decreased as a result of low natural gas prices and mild winter weather. Domestic metallurgical and industrial coal tonnage ~~increased for the third quarter~~decreased due to ~~increased~~reduced coal ~~supply, partially offset by reduced coke~~ shipments related to idled customer ~~sourcing changes. For the first nine months domestic metallurgical coal~~facilities.

2226

~~tonnage decreased due to reduced coke shipments related to customer sourcing changes. Industrial coal tonnage increased in both periods due to increased demand.~~

~~Coal revenues for the remainder of the year are expected to rise due to increased average revenue per unit, driven primarily by higher fuel surcharge revenue, and volume growth.~~

Railway Operating Expenses

Railway operating expenses summarized by major classifications follow ($ in millions):


		Third Quarter					First Nine Months						First Quarter
		2022		2021		% change	2022		2021		% change		2023		2022		% change

Compensation and benefits	Compensation and benefits	$	735	$	609	21%	$	1,968	$	1,844	7%	Compensation and benefits	$	690	$	619	11%
Purchased services and rents	Purchased services and rents	484		432		12%	1,402		1,254		12%	Purchased services and rents	496		437		14%
Fuel	Fuel	383		208		84%	1,092		573		91%	Fuel	315		301		5%
Depreciation	Depreciation	306		297		3%	912		883		3%	Depreciation	321		302		6%
Materials and other	Materials and other	163		170		(4%)	506		418		21%	Materials and other	212		171		24%
Eastern Ohio incident												Eastern Ohio incident	387		—

Total	Total	$	2,071	$	1,716	21%	$	5,880	$	4,972	18%	Total	$	2,421	$	1,830	32%

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

•increased pay rates (up ~~$130 million for the quarter and $151 million for the first nine months)~~$49 million),

•employee activity levels (up ~~$28 million for the quarter and $13 million for the first nine months)~~$36 million),

•~~overtime (up $4 million for the quarter and $17 million for the first nine months),~~

•~~incentive and~~ stock-based compensation (down ~~$38 million for the quarter and $62 million for the first nine months)~~$12 million), and

•other ~~(up~~(down $2 ~~million for the quarter and $5 million for the first nine months)~~million).

The increase in pay rates in 2022 includes higher estimates associated with previously recorded amounts for retroactive wage increases and other benefits anticipated under our labor agreements. For the third quarter of 2022, compensation and benefits includes $85 million and purchased services includes $3 million of additional expenses pertaining to estimated wage increases recorded in periods prior to July 1, 2022. For the first nine months of 2022, compensation and benefits includes $54 million and purchased services includes $2 million of additional expenses pertaining to estimated wage increases recorded in periods prior to January 1, 2022.

Average rail headcount for the quarter was up by over ~~800~~1,400 compared with the ~~third~~first quarter of ~~2021~~2022 primarily due to the hiring of additional ~~conductor trainees.~~train and engine craft employees.

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

Third Quarter First Nine Months
2022 2021 % change 2022 2021 % change
Purchased services $ 397 $ 355 12% $ 1,133 $ 1,025 11%
Equipment rents 87 77 13% 269 229 17%
Total $ 484 $ 432 12% $ 1,402 $ 1,254 12%


	First Quarter
	2023		2022		% change

Purchased services	$	399	$	349	14%
Equipment rents	97		88		10%

Total	$	496	$	437	14%

Purchased services primarily increased ~~in both periods~~ due to inflationary pressures which resulted in higher intermodal-related expenses, increased operational and transportation expenses, as well as higher technology-related costs. Equipment rents increased ~~in both periods~~ as lower network fluidity led to ~~greater time-and-mileage expenses,~~ increased ~~automotive~~intermodal equipment expenses and greater time-and-mileage expenses. We also incurred higher ~~short-term locomotive resource~~freight car lease costs.

Fuel expense, which includes the cost of locomotive fuel as well as other fuel used in railway operations, increased ~~in both periods~~ due to higher locomotive fuel prices ~~(up 88% in the third quarter and 97% in the first nine months), partially offset by decreased~~(5%). Locomotive fuel consumption ~~(down 2% in the third quarter and 3% in the first nine months). Should the current fuel price environment persist for the remainder of 2022, we expect fuel expenses to continue to be higher~~was flat compared to ~~2021.~~the same period last year.

Depreciation expense increased due to our higher asset base and the impact of the results of our periodic roadway study.

Materials and other expenses ~~decreased in the third quarter but~~ increased ~~in the first nine months~~ as follows ($ in millions):


		Third Quarter					First Nine Months						First Quarter
		2022		2021		% change	2022		2021		% change		2023		2022		% change

Materials	Materials	$	83	$	71	17%	$	215	$	193	11%	Materials	$	91	$	62	47%
Claims	Claims	58		56		4%	171		137		25%	Claims	54		49		10%
Other	Other	22		43		(49%)	120		88		36%	Other	67		60		12%

Total	Total	$	163	$	170	(4%)	$	506	$	418	21%	Total	$	212	$	171	24%

Materials expense increased ~~in both periods~~ due to increased locomotive and freight car ~~and track~~ materials costs. Claims expense increased ~~in both periods~~ as a result of higher costs associated with ~~environmental remediation matters and personal injuries partially offset by lower derailment costs. Other expense decreased in~~derailments not related to the ~~third quarter due to a favorable legal settlement and increased gains on operating property sales, partially offset by higher travel-related expenses.~~Incident. Other expense increased ~~the first nine months~~ due to ~~lower gains on operating property sales and~~ higher travel-related expenses. Gains from operating property sales, included in Other, totaled ~~$17~~$3 million and $5$6 million in 2023 and 2022, respectively.

Eastern Ohio incident

During the first quarter, we recorded $387 million for ~~the third quarters of 2022~~costs primarily associated with environmental matters and ~~2021, respectively, and $51 million and $76 million~~legal proceedings. The expense recorded in the first ~~nine months of 2022 and 2021, respectively.~~quarter does not include any estimates for amounts that may be recovered under our insurance policies. For further details regarding the Incident, see Note 10 in the Notes to Consolidated Financial Statements.

Other income (expense) – net

Other income ~~decreased $16~~increased $61 million ~~in the third quarter and $77 million for the first nine months. Both periods experienced lower net~~due to higher returns on corporate-owned life insurance (COLI) ~~partially offset by a higher net pension benefit.~~and increased interest income.

Income taxes

The first-quarter effective tax ~~rates for the third quarter and first nine months of 2022 were 12.4% and 19.8%, lower than the 23.6% and 22.4%, respectively,~~rate was 21.3% compared with 22.9% for the same ~~periods~~period last ~~year primarily due to a change in a state corporate income~~year. The effective rate for 2023 includes the recognition of certain business tax ~~rate. On July 8, 2022, House Bill 1342 was signed into law in the Commonwealth of Pennsylvania, which reduced its corporate income~~credits and tax rate from 9.99% to 4.99%, through a series of phased reductions beginning each tax year from January 1, 2023 through January 1, 2031. GAAP requires companies to recognize the effect of tax law changes in the period of enactment. As a result, we recognized a benefit of $136 million in the third quarter of 2022.benefits on stock-based compensation.

FINANCIAL CONDITION AND LIQUIDITY

Cash provided by operating activities, our principal source of liquidity, was ~~$3.4~~$1.2 billion for the first ~~nine~~three months of ~~2022,~~2023, compared with ~~$3.3~~$1.0 billion for the same period of ~~2021.~~2022. The increase reflected changes in working capital, offset in part by lower operating results. We had negative working capital of ~~$83~~$702 million and ~~$354~~$642 million at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. Cash and cash equivalents totaled ~~$1.2 billion~~$552 million at ~~September 30, 2022.~~March 31, 2023.

Cash used in investing activities was ~~$1.1 billion~~$391 million for the first ~~nine~~three months of ~~2022,~~2023, compared with ~~$847~~$335 million for the same period last year. The increase was primarily driven by higher property additions.

Cash used in financing activities was ~~$2.0 billion~~$686 million for the first ~~nine~~three months of ~~2022, compared with $2.1 billion~~2023, while cash provided by financing activities was $73 million for the same period last year, reflecting higher debt repayments and decreased proceeds from borrowing. Partially offsetting this activity was lower repurchases of Common ~~Stock, and increased proceeds from borrowing, partially offset by higher dividends.~~Stock. We repurchased ~~$2.3 billion~~$163 million of Common Stock in the first ~~nine~~three months of ~~2022~~2023 compared to ~~$2.5 billion~~$600 million in the same period last year. On March 29, 2022, our Board of Directors authorized a new program for the repurchase of up to an additional $10.0 billion of Common Stock beginning April 1, 2022. Our previous share repurchase program terminated on March 31, 2022. The timing and volume of future share repurchases will be guided by our assessment of market conditions and other pertinent factors. Repurchases may be executed in the open market, through derivatives, accelerated repurchase and other negotiated transactions and through plans designed to comply with Rule 10b5-1(c)

and Rule 10b-18 under the Securities and Exchange Act of 1934. Any near-term purchases under the program are expected to be made with internally-generated cash, cash on hand, or proceeds from borrowings.

In February 2023, we issued $500 million of 4.45% senior notes due 2033.

Our debt-to-total capitalization ratio was ~~53.6%~~54.1% at ~~September 30, 2022,~~March 31, 2023 and ~~50.4%~~54.4% at December 31, ~~2021.~~

~~In June 2022, we issued $750 million of 4.55% senior notes due 2053.~~

~~In May 2022, we renewed our accounts receivable securitization program with a maximum borrowing capacity of $400 million. The term expires in May 2023.~~2022. We ~~had no amounts outstanding under this program and our available borrowing capacity was $400 million at both September 30, 2022, and December 31, 2021.~~

~~In February 2022, we issued $600 million of 3.00% senior notes due 2032 and $400 million of 3.70% senior notes due 2053.~~

~~We also~~ have in place and available an $800 million credit agreement expiring in March 2025, which provides for borrowings at prevailing rates and includes covenants. We had no amounts outstanding under this facility at ~~September 30, 2022~~March 31, 2023 or December 31, ~~2021.~~2022. We also have in place an accounts receivable securitization program with a maximum borrowing capacity of $400 million. The term expires in May 2023. We had no amounts outstanding under this program at March 31, 2023 and $100 million outstanding at December 31, 2022. Our available borrowing capacity was $400 million and $300 million at March 31, 2023 and December 31, 2022, respectively.

In addition, we have investments in general purpose COLI policies and had the ability to borrow against these policies up to ~~$605~~$620 million and ~~$715~~$610 million at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, 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 decline of cash inflows from operations.~~ There have been no material changes to the information on future contractual obligations, including those that may have material cash requirements, contained in our Form 10-K for the year ended December 31, ~~2021,~~2022, with the exception of additional senior notes (see Note ~~8) and approximately $1.0 billion of additional unconditional purchase obligations, which extend through 2025.~~7).

CRITICAL ACCOUNTING ESTIMATES

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~~In addition to the critical accounting estimates below, the remainder of our critical accounting estimates are contained in our ~~Form 10-K at~~ December 31, ~~2021.~~2022 Form 10-K.

Contingencies

We are currently involved in certain environmental response and remediation activities and subject to numerous legal proceedings and regulatory inquiries and investigations resulting from the Incident. As required, we have accrued estimates of the probable and reasonably estimable costs for the resolution of these matters. Our environmental estimates are based upon types of remediation efforts currently anticipated, the volume of contaminants in the impacted areas, and governmental oversight and other costs, amongst other factors. Estimates associated with the legal proceedings to which we are subject are based on information that is currently available, including but not limited to an assessment of the proceedings and the potential and likely results of such proceedings.

Our current estimates of future environmental cleanup and remediation liabilities related to the Incident may change over time due to various factors, including but not limited to, the success of current cleanup techniques, the nature and extent of required future cleanup activities, and the extent of governmental oversight, amongst other factors. Additionally, the final outcome of any of the legal proceedings and regulatory inquiries and investigations cannot be predicted with certainty, and unfavorable or unexpected developments or outcomes could result in new or additional accruals that could be material. Furthermore, certain of these costs may be recoverable under our insurance policies in effect at the date of the Incident. Any amounts that are recoverable under our insurance policies will be reflected in periods in which we determine that such amounts are probable of recovery.

See Note 10 in the Notes to Consolidated Financial Statements for more detailed information as it pertains to these contingencies.

OTHER MATTERS

Labor Agreements

~~After management and~~The latest round of national bargaining concluded in December 2022, when agreements were either ratified or enacted through legislative action for all twelve of our unions. We are currently participating in additional discussions (none of which carry the risk of a work stoppage) with several of our unions ~~served their formal proposals in November 2019 for changes~~ to conclude the collective bargaining agreements, negotiations began in 2020 following the expiration of the last moratorium. On June 17, 2022, the National Mediation Board notified the parties that all practical methods of ending the dispute had been exhausted without effecting a settlement and that its mediation services had been terminated. Shortly thereafter, President Biden created Presidential Emergency Board (PEB) No. 250, effective July 18, 2022, to investigate the facts of the dispute and make recommendations. The PEB issued its recommendations on August 16, 2022, and the parties engaged in further negotiations. By late September, management had reached tentative agreements with all relevant unions. Someimplementation of these agreements have since been finalized through ratification by union membership, but others are still subject to ratification. In addition, two labor unions did not initially ratify their tentative agreements (with one union putting out a second tentative agreement for a vote andnational agreements. With the ~~other agreeing to maintain the status quo as negotiations continue).~~conclusion of national bargaining, neither party can compel mandatory bargaining around any new proposals until November 1, 2024.

The outcome of the ratification process for the outstanding tentative agreements cannot be predicted with certainty at this time; however, if one or more of the tentative agreements fails ratification and is not subsequently ratified during a final “status quo” period where self-help (strike or lockout) is not permitted, self-help could occur in mid-November or early December (dates vary by tentative agreement). In this scenario, the parties could voluntarily agree to further delay self-help and continue to pursue voluntary ratification, or Congress could take legislative action to preempt self-help and avert a service disruption. A service disruption, depending on the duration, could have a material adverse effect on our financial position, results of operations, or liquidity. In addition, we understand the ~~resulting changes~~imperative to continue improving quality of life for our craft employees and are actively engaged in voluntary local discussions with our ~~finalized labor agreements (and our tentative agreements, if ratified) are expected to increase labor costs.~~

~~New Accounting Pronouncements~~

~~For a detailed discussion of new accounting pronouncements, see Note 12.~~unions on this important issue.

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~~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 those discussed under “Risk Factors” in our latest Form 10-K, as supplemented in Part II, Item 1 A of this Form 10-Q, 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, Performance Metrics, and Sustainability sections of our website (www.norfolksouthern.com/content/nscorp/en/investor-relations.html, http://www.nscorp.com/content/nscorp/en/investor-relations/performance-metrics.html & www.nscorp.com/content/nscorp/en/about-ns/sustainability.html) to post presentations to investors and other important information, including information that may be deemed material to investors. 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

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

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, 2022.~~March 31, 2023. Based on such evaluation, our officers have concluded that, at ~~September 30, 2022,~~March 31, 2023, 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~~first quarter of ~~2022,~~2023, 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.

2831

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

For information on our legal proceedings, see Note 1110 “Commitments and Contingencies” in the Notes to Consolidated Financial Statements.

Item 1A. Risk Factors

The risks set forth in “Risk Factors” included in our ~~2021~~2022 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.~~reference and are updated to include the following risks.

INCIDENT RISKS

As defined and as further described in Note 10 in the Notes to Consolidated Financial Statements, there was an Incident that occurred in the first quarter that consisted of a February 3, 2023 train derailment in East Palestine, Ohio that included 11 non-Company-owned tank cars containing hazardous materials, fires associated with the derailment that threatened certain of the tank cars, and a controlled vent and burn procedure conducted on February 6, 2023 on five of the derailed tank cars, all of which contained vinyl chloride. As a result of the Incident, we have become subject to numerous legal, regulatory, legislative and other proceedings related thereto, including but not limited to, the NTSB Investigation, the FRA Incident Investigation, the FRA Safety Assessment, the DOJ Complaint, the Ohio Complaint, the Incident Lawsuits, the Shareholder Lawsuits, and the Incident Inquiries and Investigations, in addition to other proceedings, actions, or potential changes in response to the Incident, including but not limited to those related to, among other items, train size, train length, train composition, or crew size (collectively, the “Incident Proceedings”). Set forth below are additional risks pertaining to an investment in the Company that are related to the Incident and the Incident Proceedings.

New or additional governmental regulation and/or operational changes resulting from or related to the Incident or the Incident Proceedings may negatively impact us, our customers, the rail industry, or the markets we serve. The legislative, regulatory, operational or other actions taken, protocols adopted (including by us), or changes resulting from the Incident or any of the Incident Proceedings may, either individually or in the aggregate, negatively impact us, our customers, the rail industry, or the markets we serve. Our inability to comply with the requirements of any new or additional laws, regulations or operating protocols resulting from or related to the Incident or the Incident Proceedings may have a material adverse effect on our financial position, results of operations, liquidity, or operations.

The costs, liabilities, fines, penalties, and/or financial impact resulting from or related to the Incident or the Incident Proceedings may be significant, exceed expected or accrued amounts, or negatively affect our financial results. We have incurred and will continue to remain subject to incurring significant costs, liabilities, fines, and penalties related to the Incident and the Incident Proceedings, including amounts that may have a material adverse effect on our financial position, results of operations, or liquidity.

In addition, while we have provided estimates of probable and reasonably estimable liabilities with respect to the Incident and the Incident Proceedings, we cannot predict the final outcome or estimate the reasonably possible range of loss with certainty and such estimates may change over time due to a variety of factors, including unfavorable or unexpected developments or outcomes which could result in our current estimates being insufficient. These estimated amounts also do not include any estimate of loss for specific items for which we believe a loss is either not probable or not reasonably estimable for the reasons set forth in Note 10 hereto. As a result, our currently accrued amounts of estimated liabilities may be insufficient, and any additional, new or updated accruals may potentially have a material adverse effect on our results of operations or financial condition.

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

Period
(a) Total Number of Shares (or Units) Purchased (1)
(b) Average Price Paid per Share (or Unit)
(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, 2022 1,129,867 $ 231.31 1,129,867 $ 8,884,909,445
August 1-31, 2022 1,166,795 254.47 1,166,795 8,587,999,396
September 1-30, 2022 1,179,619 230.72 1,179,619 8,315,840,542
Total 3,476,281 3,476,281


Period	(a) Total Number of Shares (or Units) Purchased (1)	(b) Average Price Paid per Share (or Unit)		(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)

January 1-31, 2023	491,282	$	252.38	490,984	$	7,365,890,306
February 1-28, 2023	157,502	245.64		157,194	7,327,270,905
March 1-31, 2023	—	—		—	7,327,270,905

Total	648,784			648,178

(1)Of this amount, no606 represent shares were tendered by employees in connection with the exercise of options under the stockholder-approved LTIP.

(2)On March 29, 2022, our Board of Directors authorized a new program for the repurchase of up to $10.0 billion of Common Stock beginning April 1, 2022. As of ~~September 30, 2022, $8.3~~March 31, 2023, $7.3 billion remains authorized for repurchase. ~~Our previous share repurchase program terminated on March 31, 2022.~~

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

2933

Item 6. Exhibits



4.1			Tenth Supplemental Indenture, dated as of February 2, 2023, between the Registrant and U.S. Bank Trust Company, National Association (as successor to 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 February 2, 2023.

10.1*			~~Amendment No. 1 dated~~The Norfolk Southern Corporation Executive Life Insurance Plan, as amended and restated effective November 30, 2022 and executed as of May 27, 2022, to the Amended and Restated Transfer and Administration Agreement, dated as of May 28, 2021 (the Registrant will furnish supplementally to the Securities and Exchange Commission upon request a copy of any omitted exhibit or schedule).February 21, 2023.

10.2*			Third Omnibus Amendment ~~No. 2~~Agreement , dated January 23, 2023 between NSRC, BA Leasing, BSC, LLC, Bank of America, N.A as Administrative Agent, and each of ~~June 30, 2022, to~~ the Amended and Restated Transfer and Administration Agreement, dated as of May 28, 2021 (the Registrant will furnish supplementally to the Securities and Exchange Commission upon request a copy of any omitted exhibit or schedule).Rent Assignees.

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

31-B*			Rule 13a-14(a)/~~15d-14(a)~~15d-14(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~~first quarter of ~~2022,~~2023, formatted in Inline Extensible Business Reporting Language (iXBRL) includes (i) the Consolidated Statements of Income for the ~~third~~first quarter of 2023 and ~~first nine months of 2022 and 2021;~~2022; (ii) the Consolidated Statements of Comprehensive Income for the ~~third~~first quarter of 2023 and ~~first nine months of 2022 and 2021;~~2022; (iii) the Consolidated Balance Sheets at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021;~~2022; (iv) the Consolidated Statements of Cash Flows for the first ~~nine~~three months of ~~2022~~2023 and ~~2021;~~2022; (v) the Consolidated Statements of Changes in Stockholders’ Equity for the ~~third~~first quarter of 2023 and ~~first nine months of 2022 and 2021;~~2022; 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.

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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~~April 26, ~~2022~~2023	/s/ Claiborne L. Moore
		Claiborne L. Moore Vice President and Controller (Principal Accounting Officer) (Signature)


Date:	~~October~~April 26, ~~2022~~2023	/s/ Denise W. Hutson
		Denise W. Hutson Corporate Secretary (Signature)

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	September 30, 2022				December 31, 2021
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	($ in millions)


Long-term debt, including current maturities	$	(15,068)	$	(13,481)	$	(13,840)	$	(17,033)