What changed in this filing

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Item 1. Financial Statements

2022-07-27 compared with 2022-04-27 · 114 added, 46 removed, 339 unchanged (32% of the section changed)

2 unchanged sentences

Consolidated Statements of Income

First Quarter

Second Quarter First Six Months

2022 2021 2022 2021

($ in millions, except per share amounts)

3 unchanged sentences

Purchased services and rents 481 429 918 822

Fuel 408 188 709 365

Depreciation 304 294 606 586

13 unchanged sentences

Consolidated Statements of Comprehensive Income

First Quarter

Second Quarter First Six Months

2022 2021 2022 2021

($ in millions)

4 unchanged sentences

Other comprehensive income, before tax 7 10 19 21

Income tax expense related to items of other comprehensive income ( 4 ) ( 3 )

Income tax expense related to items of other

comprehensive income ( 1 ) ( 2 ) ( 5 ) ( 5 )

Other comprehensive income, net of tax 6 8 14 16

40 unchanged sentences

Consolidated Statements of Cash Flows

First Three Months

First Six Months

($ in millions)

24 unchanged sentences

Debt repayments ( 550 ) ( 85 )

Net cash provided by (used in) financing activities 73 ( 930 )

Net increase (decrease) in cash and cash equivalents 732 ( 117 )

Net cash used in financing activities ( 877 ) ( 1,013 )

Net increase in cash and cash equivalents 420 555

Cash and cash equivalents

24 unchanged sentences

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

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

See accompanying notes to consolidated financial statements.

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity

Stock Additional

14 unchanged sentences

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

See accompanying notes to consolidated financial statements.

1 unchanged sentence

Notes to Consolidated Financial Statements

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 March 31, 2022 and December 31, 2021, our results of operations, comprehensive income and changes in stockholders’ equity for the first quarters of 2022 and 2021, and our cash flows for the first three months of 2022 and 2021 in conformity with U.S.

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 June 30, 2022 and December 31, 2021, our results of operations, comprehensive income and changes in stockholders’ equity for the second quarters and first six months of 2022 and 2021, and our cash flows for the first six months of 2022 and 2021 in conformity with U.S.

Generally Accepted Accounting Principles (GAAP).

2 unchanged sentences

The following table disaggregates our revenues by major commodity group:

First Quarter

Second Quarter First Six Months

2022 2021 2022 2021

($ in millions)

5 unchanged sentences

Intermodal 972 801 1,826 1,520

Coal 425 318 814 630

Total $ 3,250 $ 2,799 $ 6,165 $ 5,438

6 unchanged sentences

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 March 31, 2022 and December 31, 2021.

We had no material remaining performance obligations at June 30, 2022 and December 31, 2021.

We may provide customers ancillary services, such as switching, demurrage and other incidental activities, under their transportation contracts.

These are distinct performance obligations that are recognized at a point in time when the services are performed or as contractual obligations are met.

These revenues are included within each of the commodity groups and represent approximately 7 % and 6 % of total “Railway operating revenues” on the Consolidated Statements of Income for the first quarters ended March 31, 2022 and 2021, respectively.

These revenues are included within each of the commodity groups and represent approximately 6 % of total “Railway operating revenues” on the Consolidated Statements of Income for the second quarters of 2022 and 2021 and first six months of 2021 and 7 % for the first six months of 2022.

Revenues related to interline transportation services that involve another railroad are reported on a net basis.

8 unchanged sentences

Non-customer receivables include non-revenue related amounts due from other railroads, governmental entities, and others.

There were no non-current customer receivables at March 31, 2022, while “Other assets” on the Consolidated Balance Sheets includes $ 23 million at December 31, 2021.

We do no t have any material contract assets or liabilities at March 31, 2022 and December 31, 2021.

There were no non-current customer receivables at June 30, 2022, while “Other assets” on the Consolidated Balance Sheets included $ 23 million at December 31, 2021.

We do no t have any material contract assets or liabilities at June 30, 2022 and December 31, 2021.

Stock-Based Compensation

First Quarter

Second Quarter First Six Months

2022 2021 2022 2021

($ in millions)

1 unchanged sentence

Total tax benefit 4 8 17 25

During the first quarter of 2022, we granted stock options, restricted stock units (RSUs) and performance share units (PSUs) pursuant to the Long-Term Incentive Plan (LTIP), as follows:

First Quarter

Granted Weighted-Average Grant-Date Fair Value

During 2022, we granted stock options, restricted stock units (RSUs) and performance share units (PSUs) pursuant to the Long-Term Incentive Plan (LTIP), as follows:

Second Quarter First Six Months

Granted Weighted-Average Grant-Date Fair Value Granted Weighted-Average Grant-Date Fair Value

Stock options 1,640 $ 84.01 133,810 $ 60.69

2 unchanged sentences

Stock Options

First Quarter

Second Quarter First Six Months

2022 2021 2022 2021

($ in millions)

5 unchanged sentences

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.

First Quarter

Second Quarter First Six Months

2022 2021 2022 2021

($ in millions)

6 unchanged sentences

The market condition fair value was measured on the date of grant using a Monte Carlo simulation model.

First Quarter

earned or paid out during the second quarters of 2022 or 2021.

First Six Months

($ in millions)

5 unchanged sentences

Basic Diluted

First Quarter

Second Quarter

2022 2021 2022 2021

8 unchanged sentences

Earnings per share $ 3.46 $ 3.29 $ 3.45 $ 3.28

During the first quarters of 2022 and 2021, dividend equivalent payments were made to certain holders of stock options and RSUs.

Basic Diluted

First Six Months

2022 2021 2022 2021

($ in millions, except per share amounts,

shares in millions)

Net income $ 1,522 $ 1,492 $ 1,522 $ 1,492

Dividend equivalent payments ( 1 ) ( 1 ) ( 1 ) —

Income available to common stockholders $ 1,521 $ 1,491 $ 1,521 $ 1,492

Weighted-average shares outstanding 238.0 250.1 238.0 250.1

Dilutive effect of outstanding options and share-settled awards 0.9 1.2

Adjusted weighted-average shares outstanding 238.9 251.3

Earnings per share $ 6.39 $ 5.96 $ 6.37 $ 5.94

During the second quarters and first six 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.

2 unchanged sentences

The dilution calculations exclude options having exercise prices exceeding the average market price of Common Stock as follows:

0.1 million and none in the first quarters ended March 31, 2022 and 2021, respectively.

0.1 million in the second quarter and first six months ended June 30, 2022 and none in the second quarter and first six months ended June 30, 2021.

Accumulated Other Comprehensive Loss

4 unchanged sentences

($ in millions)

Three months ended March 31, 2022

Six months ended June 30, 2022

Pensions and other postretirement liabilities $ ( 356 ) $ — $ 8 $ ( 348 )

1 unchanged sentence

Accumulated other comprehensive loss $ ( 402 ) $ 6 $ 8 $ ( 388 )

Three months ended March 31, 2021

Six months ended June 30, 2021

Pensions and other postretirement liabilities $ ( 526 ) $ — $ 16 $ ( 510 )

2 unchanged sentences

Stock Repurchase Program

We repurchased and retire d 2.2 million and 2.3 million shares of Common Stock under our stock repurchase program during the first three months of 2022 and 2021, respectively, at a cost of $ 600 million and $ 591 million, respectively.

We repurchased and retire d 5.7 million shares of Common Stock under our stock repurchase program at a cost of $ 1.5 billion during the first six months of both 2022 and 2021.

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.

4 unchanged sentences

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 $ 1.5 billion at both March 31, 2022 and December 31, 2021.

Our investment in Conrail was $ 1.6 billion and $ 1.5 billion at June 30, 2022 and December 31, 2021, respectfully.

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.

1 unchanged sentence

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 $ 38 million and $ 34 million for the first quarters of 2022 and 2021, respectively.

Our equity in Conrail’s earnings, net of amortization, was $ 14 million for both the first quarters of 2022 and 2021.

“Purchased services and rents” and “Fuel” include expenses payable to CRC for operation of the Shared Assets Areas totaling $ 36 million and $ 37 million for the second quarters of 2022 and 2021, respectively, and $ 74 million and $ 71 million for the first six months of 2022 and 2021, respectively.

Our equity in Conrail’s earnings, net of amortization, was $ 11 million and $ 14 million for the second quarters of 2022 and 2021, respectively, and $ 25 million and $ 28 million for the first six 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 March 31, 2022, and December 31, 2021 for long-term advances from Conrail, maturing in 2050 that bear interest at an average rate of 1.31 %.

“Other liabilities” includes $ 534 million at both June 30, 2022 and December 31, 2021 for long-term advances from Conrail, maturing in 2050 that bear interest at an average rate of 1.31 %.

Investment in TTX

1 unchanged sentence

We have a 19.65 % ownership interest in TTX.

Expenses incurred for use of TTX equipment are included in “Purchased services and rents.” This amounted to $ 64 million and $ 63 million for the first quarters of 2022 and 2021, respectively.

Our equity in TTX’s earnings partially offsets these costs and totaled $ 10 million and $ 17 million for the first quarters of 2022 and 2021, respectively.

Expenses incurred for use of TTX equipment are included in “Purchased services and rents.” These expenses amounted to $ 66 million and $ 61 million for the second quarters of 2022 and 2021, respectively, and $ 130 million and $ 124 million for the first six months of 2022 and 2021, respectively.

Our equity in TTX’s earnings partially offsets these costs and totaled $ 11 million and $ 14 million for the second quarters of 2022 and 2021, respectively, and $ 21 million and $ 31 million for the first six months of 2022 and 2021, respectively.

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.

We had no amounts outstanding under this program and our available borrowing capacity was $ 400 million at both June 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 have in place an accounts receivable securitization program with a maximum borrowing capacity of $ 400 million and a term that expires in May 2022.

We had no amounts outstanding under this program and our available borrowing capacity was $ 400 million at both March 31, 2022 and December 31, 2021.

Pensions and Other Postretirement Benefits

4 unchanged sentences

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 were as follows:

Pension and postretirement benefit cost components for the second quarter and first six months were as follows:

Pension Benefits Other Postretirement Benefits

First Quarter

Second Quarter

2022 2021 2022 2021

6 unchanged sentences

Net benefit $ ( 15 ) $ ( 7 ) $ ( 6 ) $ ( 6 )

Pension Benefits Other Postretirement Benefits

First Six Months

2022 2021 2022 2021

($ in millions)

Service cost $ 20 $ 22 $ 3 $ 3

Interest cost 34 27 4 4

Expected return on plan assets ( 107 ) ( 96 ) ( 6 ) ( 6 )

Amortization of net losses 24 33 — 1

Amortization of prior service benefit — — ( 13 ) ( 13 )

Net benefit $ ( 29 ) $ ( 14 ) $ ( 12 ) $ ( 11 )

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.

2 unchanged sentences

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 March 31, 2022 or December 31, 2021.

There are no other assets or liabilities measured at fair value on a recurring basis at June 30, 2022 or December 31, 2021.

The carrying amounts and estimated fair values, based on Level 1 inputs, of long-term debt consist of the following:

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Value Carrying

19 unchanged sentences

The lawsuit alleged violations of various state laws and federal antitrust laws.

It is reasonably possible that we could incur a loss in the case;

however, we intend to vigorously defend the case and believe that we will prevail.

The potential range of loss cannot be estimated at this time.

Summary judgment has been briefed but not decided, and trial is likely to occur in the first quarter of 2023.

We 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 will not be material.

We cannot reasonably estimate the potential loss or range of loss associated with the litigation at this time.

Casualty Claims

1 unchanged sentence

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 actuarial consulting firm.

related personal injury and occupational claims are subject to the Federal Employer’s Liability Act (FELA), which is applicable only to railroads.

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.

26 unchanged sentences

Environmental specialists regularly participate in ongoing evaluations of all known sites and in determining any necessary adjustments to liability estimates.

Our Consolidated Balance Sheets include liabilities for environmental exposures of $ 49 million at both March 31, 2022 and December 31, 2021, of which $ 15 million is classified as a current liability at the end of both periods.

At March 31, 2022, the liability represents our estimates of the probable cleanup, investigation, and remediation costs based on available information at 89 known locations and projects compared with 88 locations and projects at December 31, 2021.

At March 31, 2022, eighteen sites accounted for $ 37 million of the liability, and no individual site was considered to be material.

Our Consolidated Balance Sheets include liabilities for environmental exposures of $ 56 million at June 30, 2022 and $ 49 million at December 31, 2021, of which $ 15 million is classified as a current liability at the end of both periods.

At June 30, 2022, the liability represents our estimates of the probable cleanup, investigation, and remediation costs based on available information at 91 known locations and projects compared with 88 locations and projects at December 31, 2021.

At June 30, 2022, nineteen sites accounted for $ 45 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.

Liability Act of 1980 or comparable state statutes that impose joint and several liability for cleanup costs.

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 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.

8 unchanged sentences

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.

Bargaining procedures, which began in November 2019, are ongoing, with the ultimate outcome unknown.

The ultimate changes in our labor agreements resulting from this process could significantly increase our costs for health care, wages, and other benefits.

We purchase insurance covering legal liabilities for bodily injury and property damage to third parties.

9 unchanged sentences

We did not adopt the standard early.

Subsequent Events

On July 8, 2022, House Bill 1342 was signed into law in the Commonwealth of Pennsylvania, making significant changes to its corporate income tax rate.

The bill reduces its corporate income tax rate from 9.99% to 4.99%, with reductions occurring in phases 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, it is expected that there will be a decrease in “Deferred income taxes” on the Consolidated Balance Sheet and a corresponding decrease in “Income taxes” on the Income Statement in the third quarter of 2022.

We currently estimate that the impact will be approximately $ 135 million.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements