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Item 1. Financial Statements

2024-07-26 compared with 2024-04-24 · 180 added, 112 removed, 443 unchanged (40% of the section changed)

2 unchanged sentences

Consolidated Statements of Income

First Quarter

Second Quarter First Six Months

2024 2023 2024 2023

($ in millions, except per share amounts)

3 unchanged sentences

Purchased services and rents 516 506 1,044 1,002

Fuel 257 263 541 578

Depreciation 335 321 672 642

15 unchanged sentences

Consolidated Statements of Comprehensive Income

First Quarter

Second Quarter First Six Months

2024 2023 2024 2023

($ in millions)

2 unchanged sentences

Pension and other postretirement expense ( 11 ) ( 6 ) ( 13 ) ( 11 )

Other comprehensive loss of equity investees — ( 1 )

Other comprehensive income of equity investees 1 1 1 —

Other comprehensive loss, before tax ( 10 ) ( 5 ) ( 12 ) ( 11 )

44 unchanged sentences

Consolidated Statements of Cash Flows

First Three Months

First Six Months

($ in millions)

25 unchanged sentences

Debt repayments ( 202 ) ( 802 )

Net cash provided by (used in) financing activities 89 ( 686 )

Net cash used in financing activities ( 217 ) ( 1,005 )

Net increase (decrease) in cash and cash equivalents ( 909 ) 100

24 unchanged sentences

Balance at March 31, 2024 227 2,188 ( 322 ) 10,443 12,536

Comprehensive income:

Net income 737 737

Other comprehensive loss ( 8 ) ( 8 )

Total comprehensive income 729

Dividends on common stock,

$ 1.35 per share

( 305 ) ( 305 )

Stock-based compensation 20 ( 1 ) 19

Balance at June 30, 2024 $ 227 $ 2,208 $ ( 330 ) $ 10,874 $ 12,979

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, 2023 229 2,155 ( 355 ) 10,698 12,727

Comprehensive income:

Net income 356 356

Other comprehensive loss ( 4 ) ( 4 )

Total comprehensive income 352

Dividends on common stock,

$ 1.35 per share

( 308 ) ( 308 )

Share repurchases ( 1 ) ( 4 ) ( 135 ) ( 140 )

Stock-based compensation 9 9

Balance at June 30, 2023 $ 228 $ 2,160 $ ( 359 ) $ 10,611 $ 12,640

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, 2024 and December 31, 2023, our results of operations, comprehensive income and changes in stockholders’ equity for the first quarters of 2024 and 2023, and our cash flows for the first three months of 2024 and 2023 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, 2024 and December 31, 2023, our results of operations, comprehensive income and changes in stockholders’ equity for the second quarters and first six months of 2024 and 2023, and our cash flows for the first six months of 2024 and 2023 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

2024 2023 2024 2023

($ in millions)

5 unchanged sentences

Intermodal 742 745 1,487 1,559

Coal 398 409 794 849

Total $ 3,044 $ 2,980 $ 6,048 $ 6,112

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, 2024 and December 31, 2023.

We had no material remaining performance obligations at June 30, 2024 and December 31, 2023.

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

The revenues associated with these distinct performance obligations are recognized when the services are performed or as contractual obligations are met.

These revenues are included within each of the commodity groups and represent approximately 4 % and 6 % of total “Railway operating revenues” on the Consolidated Statements of Income for the first quarters of 2024 and 2023, respectively.

These revenues are included within each of the commodity groups and represent approximately 4 % of total “Railway operating revenues” on the Consolidated Statements of Income for the second quarters of 2024 and 2023 and first six months of 2024, an d 5 % for the first six months of 2023.

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.

We do no t have any material contract assets or liabilities at March 31, 2024 and December 31, 2023.

We do no t have any material contract assets or liabilities at June 30, 2024 and December 31, 2023.

Stock-Based Compensation

First Quarter

Second Quarter First Six Months

2024 2023 2024 2023

($ in millions)

1 unchanged sentence

Total tax benefit 3 3 8 9

During the first quarter of 2024, 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 2024, 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 8,090 $ 83.48 72,430 $ 80.08

2 unchanged sentences

Stock Options

First Quarter

Second Quarter First Six Months

2024 2023 2024 2023

($ 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

2024 2023 2024 2023

($ 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

No PSUs were earned or paid out during the second quarters of 2024 and 2023.

First Six Months

($ in millions)

3 unchanged sentences

Restructuring and Other Charges

During the first quarter of 2024, the Company executed a voluntary and an involuntary separation program that will result in a reduction to our nonagreement workforce.

Through these programs, approximately 350 nonagreement employees have already or will be separated from service by May 2024.

“Restructuring and other charges” in 2024 includes $ 64 million related to these programs, which primarily consists of separation payments to the impacted nonagreement employees.

Additionally, we have evaluated the impact on our pension and other postretirement benefit plans (see Note 11).

During the first quarter of 2024, we commenced voluntary and involuntary separation programs to reduce our management workforce.

Through these programs, approximately 350 management employees were separated from service by May 2024.

“Restructuring and other charges” in the first six months includes $ 61 million in “Total railway operating expenses” related to these programs, which primarily consists of separation payments to the impacted management employees.

Additionally, we evaluated the impact of these separation programs on our pension and other postretirement benefit plans, as further discussed in Note 11.

In March 2024, we appointed John Orr as Executive Vice President and Chief Operating Officer of the Company.

“Restructuring and other charges” also includes $ 35 million of costs related to this appointment, including an

agreement with his previous employer, Canadian Pacific Kansas City (CPKC), that resulted in a $ 25 million payment and certain commercial considerations to CPKC in exchange for a waiver of his noncompete provisions.

In the first quarter of 2024, our effective tax rate was ( 76.7 )%, compared with 21.3 % for the same period last year.

The negative effective rate for the first quarter of 2024 is driven by low pre-tax income coupled with a $ 27 million deferred income tax benefit, the result of a subsidiary restructuring that reduced our estimated deferred state income tax rate.

“Restructuring and other charges” in the first six months also includes $ 35 million of costs related to this appointment, including an agreement with his previous employer, Canadian Pacific Kansas City (CPKC), that resulted in a $ 25 million payment and certain commercial considerations to CPKC in exchange for a waiver of his noncompete provisions.

During the first six months of 2024, we recorded a $ 27 million deferred income tax benefit as a result of a subsidiary restructuring.

Earnings Per Share

1 unchanged sentence

Basic Diluted

First Quarter

Second Quarter

2024 2023 2024 2023

8 unchanged sentences

Earnings per share $ 3.26 $ 1.56 $ 3.25 $ 1.56

During the first quarters of 2024 and 2023, dividend equivalent payments were made to certain holders of stock options and RSUs.

Basic Diluted

First Six Months

2024 2023 2024 2023

($ in millions, except per share amounts,

shares in millions)

Net income $ 790 $ 822 $ 790 $ 822

Dividend equivalent payments ( 2 ) ( 1 ) ( 2 ) ( 1 )

Income available to common stockholders $ 788 $ 821 $ 788 $ 821

Weighted-average shares outstanding 225.9 227.6 225.9 227.6

Dilutive effect of outstanding options and share-settled awards 0.4 0.5

Adjusted weighted-average shares outstanding 226.3 228.1

Earnings per share $ 3.49 $ 3.61 $ 3.48 $ 3.60

During the second quarters and first six months of 2024 and 2023, 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 in both the first quarters ended March 31, 2024 and 2023.

0.1 million in the second quarters and first six months ended June 30, 2024 and 2023.

Accumulated Other Comprehensive Loss

4 unchanged sentences

($ in millions)

Three months ended March 31, 2024

Six months ended June 30, 2024

Pensions and other postretirement liabilities $ ( 292 ) $ ( 7 ) $ ( 4 ) $ ( 303 )

Other comprehensive loss of equity investees ( 28 ) — — ( 28 )

Other comprehensive income (loss) of equity investees ( 28 ) 1 — ( 27 )

Accumulated other comprehensive loss $ ( 320 ) $ ( 6 ) $ ( 4 ) $ ( 330 )

Three months ended March 31, 2023

Six months ended June 30, 2023

Pensions and other postretirement liabilities $ ( 319 ) $ — $ ( 8 ) $ ( 327 )

2 unchanged sentences

Stock Repurchase Program

We did not repurchase shares of Common Stock under our stock repurchase program in the first three months of 2024, while we repurchased and retire d 0.6 million shares of Common Stock at a cost of $ 163 million in the first three months of 2023, inclusive of excise taxes.

We did not repurchase any shares of Common Stock under our stock repurchase program in the first six months of 2024, while we repurchased and retire d 1.3 million shares of Common Stock at a cost of $ 305 million in the first six months of 2023, inclusive of excise taxes.

Investment in Conrail

2 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 $ 1.7 billion at both March 31, 2024 and December 31, 2023.

Our investment in Conrail was $ 1.7 billion at both June 30, 2024 and December 31, 2023.

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 $ 52 million and $ 45 million for the first quarters of 2024 and 2023, respectively.

Our equity in Conrail’s earnings, net of amortization, was $ 21 million and $ 16 million for the first quarters of 2024 and 2023, respectively.

“Purchased services and rents” and “Fuel” include expenses payable to CRC for operation of the Shared Assets Areas totaling $ 50 million and $ 39 million for the second quarters of 2024 and 2023,

respectively, and $ 102 million and $ 84 million for the first six months of 2024 and 2023, respectively.

Our equity in Conrail’s earnings, net of amortization, was $ 22 million and $ 19 million for the second quarters of 2024 and 2023, respectively, and $ 43 million and $ 35 million for the first six months of 2024 and 2023, 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, 2024 and December 31, 2023 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, 2024 and December 31, 2023 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 19.78 % ownership interest in TTX.

Expenses incurred for use of TTX equipment are included in “Purchased services and rents.” These expenses amounted to $ 74 million and $ 66 million for the first quarters of 2024 and 2023, respectively.

Our equity in TTX’s earnings partially offsets these costs and totaled $ 13 million and $ 9 million for the first quarters of 2024 and 2023, respectively.

Expenses incurred for use of TTX equipment are included in “Purchased services and rents.” These expenses amounted to $ 74 million and $ 69 million for the second quarters of 2024 and 2023, respectively, and $ 148 million and $ 135 million for the first six months of 2024 and 2023, respectively.

Our equity in TTX’s earnings partially offsets these costs and totaled $ 14 million and $ 12 million for the second quarters of 2024 and 2023, respectively, and $ 27 million and $ 21 million for the first six months of 2024 and 2023, respectively.

Acquisition of Assets of Cincinnati Southern Railway

3 unchanged sentences

The asset purchase is reflected in “Properties less accumulated depreciation” on the Consolidated Balance Sheet and is distinctly identified in the “Cash flows from investing activities” section of the Consolidated Statement of Cash Flows.

Lease expense associated with the terminated agreement totaled $ 5 million and $ 6 million in the first quarters of 2024 and 2023, respectively.

We have in place an accounts receivable securitization program with a maximum borrowing capacity of $ 400 million.

The lease expense recognized pursuant to the previous operating lease agreement was $ 6 million in the second quarter of 2023, and $ 5 million and $ 12 million for the first six months of 2024 and 2023, respectively.

In June 2024, we entered into an agreement that provides us the ability to issue up to $ 800 million of unsecured commercial paper and is backed by our credit agreement.

The unsecured short-term commercial paper program provides for borrowing at prevailing rates and includes covenants.

At June 30, 2024, we had no outstanding commercial paper.

During July 2024, we issued $ 300 million of unsecured commercial paper.

In May 2024, we renewed our accounts receivable securitization program with a maximum borrowing capacity of $ 400 million.

Amounts under our accounts receivable securitization program are borrowed and repaid from time to time in the ordinary course for general corporate and cash management purposes.

1 unchanged sentence

Amounts received under this facility are accounted for as borrowings.

We had $ 400 million (at an average variable interest rate of 6.06 %) outstanding under this program at March 31, 2024, which is included within “Short-term debt”, and no amounts outstanding under this program at December 31, 2023.

We had fully utilized our borrowing capacity under the program at March 31, 2024, while we had $ 400 million of available borrowing capacity at December 31, 2023.

Our accounts receivable securitization program was supported by $ 867 million and $ 903 million in receivables at March 31, 2024 and December 31, 2023, respectively, which are included in “Accounts receivable – net”.

On April 15, 2024, we repaid $ 150 million of the amount outstanding at the end of the first quarter.

We had $ 400 million (at an interest rate of 6.06 %) outstanding under this program at June 30, 2024, which is included within “Short-term debt”, and no amounts outstanding under this program at December 31, 2023.

We had fully utilized our borrowing capacity under the program at June 30, 2024, while we had $ 400 million of available borrowing capacity at December 31, 2023.

Our accounts receivable securitization program was supported by $ 847 million and $ 903 million in receivables at June 30, 2024 and December 31, 2023, respectively, which are included in “Accounts receivable – net”.

During July 2024, we repaid $ 400 million that was outstanding under this program.

In January 2024, we renewed and amended our $ 800 million credit agreement.

The amended agreement expires in January 2029, and provides for borrowings at prevailing rates and includes covenants.

We had no amounts outstanding under this facility at either March 31, 2024 or December 31, 2023, and we are in compliance with all of its covenants.

We had no amounts

outstanding under this facility at either June 30, 2024 or December 31, 2023, and we are in compliance with all of its covenants.

In January 2024, we entered into a term loan credit agreement that established a 364-day , $ 1.0 billion, unsecured delayed draw term loan facility under which we can borrow for general corporate purposes.

The term loan credit agreement provides for borrowing at prevailing rates and includes covenants that align with the $ 800 million credit agreement.

We had no amounts outstanding under this facility at March 31, 2024 and if left undrawn, the term loan credit agreement is set to expire at the end of July 2024.

We had no amounts outstanding under this facility at June 30, 2024.

During July 2024, we extended the availability period of the term loan agreement.

If left undrawn, the term loan will be available until October 2024.

Pensions and Other Postretirement Benefits

2 unchanged sentences

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.

1 unchanged sentence

Pension Benefits Other Postretirement Benefits

First Quarter

Second Quarter

2024 2023 2024 2023

5 unchanged sentences

Amortization of prior service benefit — — ( 6 ) ( 7 )

Curtailment gain — — ( 20 ) —

Net benefit $ ( 13 ) $ ( 18 ) $ ( 24 ) $ ( 4 )

Pension Benefits Other Postretirement Benefits

First Six Months

2024 2023 2024 2023

($ in millions)

Service cost $ 13 $ 12 $ 2 $ 2

Interest cost 54 54 7 9

Expected return on plan assets ( 102 ) ( 104 ) ( 6 ) ( 6 )

Amortization of net losses 8 2 — —

Amortization of prior service benefit — — ( 12 ) ( 13 )

Curtailment gain — — ( 20 ) —

Net benefit $ ( 27 ) $ ( 36 ) $ ( 29 ) $ ( 8 )

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 – net” on the Consolidated Statements of Income.

During the first quarter of 2024, we executed a voluntary and an involuntary separation program that will reduce our management workforce.

Through these programs, approximately 350 nonagreement employees have already or will be separated from service by May 2024.

We evaluated whether a plan curtailment had occurred for our pension and other postretirement benefit plans.

While the reduction in our workforce did not result in a curtailment to our pension benefit plans, we will recognize a curtailment gain related to our other postretirement benefit plan.

In accordance with Financial Accounting Standards Board (FASB) Accounting Standard Codification (ASC) Topic 715, “ Compensation-Retirement Benefits, ” the curtailment gain will be recognized during the second quarter of 2024, when the eligible employees have terminated.

During the first quarter of 2024, we commenced voluntary and involuntary separation programs to reduce our management workforce.

Through these programs, approximately 350 management employees were separated from service by May 2024.

In accordance with Financial Accounting Standards Board (FASB) Accounting Standard Codification (ASC) Topic 715, “ Compensation-Retirement Benefits ,” we evaluated whether a curtailment of our pension and other postretirement benefit plans had occurred.

While the reduction in our workforce did no t result in a curtailment to our pension benefit plans, a curtailment to our other postretirement benefit plan did occur as the future years of service of plan participants were reduced in excess of 10 %.

As a result, we remeasured the other postretirement benefit obligation using a discount rate of 5.74 % and recorded an $ 11 million reduction to the obligation.

Additionally, we recognized a curtailment gain of $ 20 million in the second quarter of 2024, the period in which the employees departed the Company, for the impacted portion of the prior service benefit previously recorded within accumulated other comprehensive loss.

Fair Values of Financial Instruments

1 unchanged sentence

The carrying value of corporate-owned life insurance (COLI) 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, 2024 or December 31, 2023.

There are no other assets or liabilities measured at fair value on a recurring basis at June 30, 2024 or December 31, 2023.

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

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Value Carrying

5 unchanged sentences

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 contents of five of the tank cars carrying vinyl chloride might polymerize, which would have posed the risk of a catastrophic explosion.

Fires associated with the derailment threatened certain tank cars.

There was concern that the pressure inside of the tank cars carrying vinyl chloride was rising and that the pressure relief devices were no longer functioning properly, which would have posed the risk of a catastrophic explosion.

As a consequence, on February 6, 2023, the local incident commander (the East Palestine Fire Chief)—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.

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 the vinyl chloride was ignited and burned.

Any remaining materials released from the derailment or during the vent and burn have been or are 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.”

3 unchanged sentences

Although we cannot predict the final outcome or estimate the reasonably possible range of loss related to the Incident with certainty, we have accrued amounts for probable and reasonably estimable liabilities for those environmental and non-environmental matters described below.

As of March 31, 2024 and December 31, 2023, we had accruals for probable and reasonably estimable liabilities principally associated with environmental matters and legal proceedings of $ 939 million and $ 464 million, respectively, which are discussed in further detail below.

As of June 30, 2024 and December 31, 2023, our probable and reasonably estimable liabilities principally associated with environmental matters and legal proceedings were $ 858 million and $ 464 million, respectively, which are discussed in further detail below.

These amounts represent the difference between the recognized expense and cash expenditures (net of insurance recoveries) related to the Incident as of each respective date.

From the inception of the Incident, we have recognized a total of $ 1.7 billion in expenses directly attributable to the Incident, which included $ 209 million in insurance recoveries made from claims on our insurance policies.

We have also recorded a deferred tax asset of $ 248 million and $ 249 million at March 31, 2024 and December 31, 2023, respectively, related to the Incident expecting that certain expenses will be deductible for tax purposes in future periods or offset with insurance recoveries.

From the inception of the Incident, we have

recognized a total of $ 1.6 billion in expenses directly attributable to the Incident, which included $ 365 million of insurance recoveries from claims made under our insurance policies.

We have also recorded a deferred tax asset of $ 232 million and $ 249 million at June 30, 2024 and December 31, 2023, respectively, related to the Incident expecting that certain expenses will be deductible for tax purposes in future periods or offset with insurance recoveries.

Certain costs incurred thus far and related to the Incident may be recoverable under our insurance policies in effect at the date of the Incident or from third parties.

2 unchanged sentences

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, the Pennsylvania Department of Environmental Protection (DEP), and the Columbiana County Health District 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.

Environmental Protection Agency (EPA), the Ohio EPA, the Pennsylvania Department of Environmental Protection (DEP), and the Columbiana County Health District to conduct environmental response and remediation activities, some of which have concluded and some which are continuing, 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.

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 our Notice of Intent to Comply with the UAO and we continue to conduct environmental assessment and remediation, as required by U.S.

EPA as well as the Ohio EPA and Pennsylvania DEP, pursuant to the UAO and the directives issued thereunder.

1 unchanged sentence

EPA issued a second unilateral order under Section 311(c) of the Clean Water Act (CWA), requiring preparation of additional environmental work plans.

We timely submitted our Notice of Intent to Comply with the CWA order and continue to cooperate with the U.S.

We timely submitted our Notice of Intent to Comply with the CWA order and continue to complete environmental assessment and remediation as required by the U.S.

EPA, as well as state agencies, in compliance with the CWA order.

Once approved by the court, the proposed Consent Decree (discussed below) will supersede the UAO and CWA Order.

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

Department of Justice (DOJ) filed a civil complaint on behalf of the U.S.

EPA (the DOJ Complaint) in the Northern District of Ohio (Eastern Division) seeking injunctive relief and civil penalties alleged for violations of the Clean Water Act and cost recovery under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA).

EPA (the DOJ Complaint) in the Northern District of Ohio (Eastern Division) seeking injunctive relief and civil penalties for alleged violations of the CWA and cost recovery under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA).

The Ohio Attorney General (AG) also filed a lawsuit (the Ohio Complaint) in the Northern District of Ohio (Eastern Division) seeking damages for a variety of common law and environmental statutory claims under CERCLA and various state laws.

The DOJ and Ohio AG cases have been consolidated for discovery purposes.

We have filed an answer, and discovery is ongoing.

We have filed an answer, and discovery is ongoing in the Ohio AG case.

On June 30, 2023, we filed third-party claims against certain railcar defendants and shippers involved in the Incident.

The Court dismissed the third party claims on March 6, 2024, and on March 26, 2024, we filed a motion requesting the Court to enter partial final judgment as to the third party claims.

In accordance with FASB ASC 410-30 “ Environmental Liabilities, ” as of March 31, 2024 and December 31, 2023, we had recognized probable and reasonably estimable liabilities in connection with the foregoing environmental matters of $ 292 million and $ 319 million, respectively, and which are primarily included in “Other current liabilities” on the Consolidated Balance Sheet.

We recognized $ 60 million and $ 286 million of expense during the first quarters of 2024 and 2023 respectively, and made $ 87 million and $ 31 million in payments during the first quarters of 2024 and 2023 respectively, related to these matters.

On May 23, 2024, DOJ and the Company reached a settlement to resolve all of the government’s civil claims against the Company related to the Incident, and jointly lodged a proposed Consent Decree with the court.

As proposed, the Consent Decree will require the Company to pay for the federal government’s oversight costs of $ 57 million through November 30, 2023 as well as additional oversight costs from December 1, 2023 until the remediation is complete.

The proposed Consent Decree also requires the Company to pay a civil penalty of $ 15 million for alleged violations of the CWA.

Other provisions of the proposed Consent Decree relate to

injunctive relief for safety, community support, and environmental support, which provisions, if approved by the court, will be in effect between five years to twenty years .

The proposed Consent Decree is subject to a mandatory public comment period and then will be subject to review by the judge, prior to entry of the Consent Decree.

The Ohio AG did not join this settlement.

In accordance with FASB ASC 410-30 “ Environmental Liabilities, ” as of June 30, 2024 and December 31, 2023, we had recognized probable and reasonably estimable liabilities in connection with the foregoing environmental matters of $ 265 million and $ 319 million, respectively, and which are primarily included in “Other current liabilities” on the Consolidated Balance Sheet.

We recognized $ 53 million and $ 264 million of expense during the second quarters of 2024 and 2023, respectively, and $ 113 million and $ 581 million during the first six months of 2024 and 2023, respectively.

We made $ 80 million and $ 177 million in payments during the second quarters of 2024 and 2023, respectively, and $ 167 million and $ 208 million during the first six months of 2024 and 2023, respectively, related to these matters.

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).

EPA and the Ohio EPA), and other related costs, including those in connection with the proposed DOJ Consent Decree (including civil penalties related to alleged violations of the CWA).

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 nature and extent of required future cleanup and removal activities (including those resulting from soil, water, sediment, and air assessment and investigative activities that are currently being, and will continue to be, conducted at the site), and the extent and duration of governmental oversight, amongst other factors.

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Fact discovery ended on February 5, 2024.

denied in part and granted in part all motions to dismiss, as to the plaintiffs’ case and as to our third-party complaint, on March 13, 2024.

On April 9, 2024, we announced that we have reached an agreement in principle to settle the Ohio Class Action for $ 600 million.

The agreement in principle does not resolve, and expressly preserves, our third-party claims in the third-party complaint.

Final settlement is subject to reducing the agreement to writing in a form acceptable to the parties and necessary court approval.

The Court denied in part and granted in part all motions to dismiss, as to the plaintiffs’ case and as to our third-party complaint, on March 13, 2024.

On April 9, 2024, we announced that we reached an agreement in principle to settle the Ohio Class Action for $ 600 million.

The settlement agreement does not resolve, and expressly preserves, our third-party claims in the third-party complaint.

The court granted preliminary approval of the settlement on May 21, 2024.

The court will consider whether to grant final approval of the settlement on September 25, 2024.

If approved by the court, the terms of the agreement will resolve all class action claims within a 20 -mile radius from the derailment and, for those residents who choose to participate, personal injury claims within a 10 -mile radius from the derailment.

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Another putative class action is pending in the Western District of Pennsylvania, brought by Pennsylvania school districts and students.

On August 22, 2023, three school districts voluntarily dismissed their actions, that were then individual lawsuits.

On the same day, six Pennsylvania school districts and students filed a putative class action lawsuit alleging negligence, strict liability, nuisance, and trespass, and seeking damages and health monitoring.

On August 22, 2023, six Pennsylvania school districts and students filed a putative class action lawsuit alleging negligence, strict liability, nuisance, and trespass, and seeking damages and health monitoring.

On December 8, 2023, the school districts amended their complaint to add additional companies as defendants in the action.

On February 23, 2024, we and the other defendants filed motions to dismiss.

The school districts’ and students’ response is due by May 13, 2024.

On February 23, 2024, we and the other defendants filed motions to dismiss and those motions are fully briefed and currently pending before the court.

Combined with the Ohio Class Action, these lawsuits are collectively referred to herein as the Incident Lawsuits.

In accordance with FASB ASC 450, “ Contingencies, ” as of March 31, 2024 and December 31, 2023, we had accruals for probable and reasonably estimable liabilities principally associated with the Incident Lawsuits and related contingencies of $ 676 million and $ 82 million, respectively.

In accordance with FASB ASC 450, “ Contingencies, ” as of June 30, 2024 and December 31, 2023, we had accruals for probable and reasonably estimable liabilities principally associated with the Incident Lawsuits and related contingencies of $ 644 million and $ 82 million, respectively.

For the reasons set forth below, our estimated loss or range of loss with respect to the Incident Lawsuits may change from time to time, and it is reasonably possible that we will incur actual losses in excess of the amounts currently accrued and such additional amounts may be material.

While we continue to work with parties with respect to potential resolution, no assurance can be given that we will be successful in doing so and we cannot predict the outcome of these matters.

• We have received securities and derivative litigation and multiple shareholder document and litigation demand letters, including a securities class action lawsuit under the Securities Exchange Act of 1934 initially filed in the Southern District of Ohio alleging multiple securities law violations but since transferred to the Northern District of Georgia, a securities class action lawsuit under the Securities Act of 1933 (Securities Act) filed in the Southern District of New York alleging misstatements in association with our debt offerings, and three shareholder derivative complaints in Virginia state court asserting claims for breach of fiduciary duties, waste of corporate assets, and unjust enrichment in connection with safety of the Company's operations (collectively, the Shareholder Matters).

On February 2, 2024, defendants filed a motion to dismiss the complaint in the Securities Act lawsuit;

plaintiffs’ opposition to the motion to dismiss was filed on April 2, 2024.

• We have received securities and derivative litigation and multiple shareholder document and litigation demand letters, including a securities class action lawsuit under the Securities Exchange Act of 1934 (Exchange Act) initially filed in the Southern District of Ohio alleging multiple securities law violations but since transferred to the Northern District of Georgia, a securities class action lawsuit under the Securities Act of 1933 (Securities Act) filed in the Southern District of New York alleging misstatements in association with our debt offerings, and six shareholder derivative complaints filed in Virginia state court asserting claims for breach of fiduciary duties, waste of corporate assets, and unjust enrichment in connection with safety of the Company’s operations, among other claims (collectively, the Shareholder Matters).

On February 2, 2024, defendants filed a motion to dismiss the complaint in the Securities Act lawsuit, the court held oral argument regarding the motion to dismiss on May 29, 2024, and a decision is pending.

The plaintiffs filed an amended complaint in the Exchange Act lawsuit on April 25, 2024, and the defendants filed a motion to dismiss on June 24, 2024.

No responsive pleadings have been filed yet with respect to the other Shareholder Matters.

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In addition, if it is reasonably possible that we will incur Incident-related losses in excess of the amounts currently recorded as a loss contingency, we disclose the potential range of loss, if reasonably estimable, or we disclose that we cannot reasonably estimate such an amount at this time.

Incident-related litigation and regulatory matters where a loss may be reasonably possible, but not probable, or probable but not reasonably estimable, no accrual is established but the matter, if potentially material, is disclosed.

For Incident-related litigation and regulatory matters where a loss may be reasonably possible, but not probable, or probable but not reasonably estimable, no accrual is established but the matter, if potentially material, is disclosed.

Our estimates of probable losses and reasonably possible losses are based upon currently available information and involve significant judgement and a variety of assumptions, given that (1) these legal and regulatory proceedings are in early stages;

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At this time, we are unable to estimate the possible loss or range of loss in excess of the amounts accrued with respect to the matters described above.

The amounts recorded do not include any estimate of loss for which we believe a loss is either not probable or not reasonably estimable for any fines or penalties (in excess of the liabilities 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).

The amounts recorded do not include any estimate of loss for which we believe a loss is either not probable or not reasonably estimable for any fines or penalties (in excess of the liabilities established for CWA-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).

Inquiries and Investigations

EPA, the Ohio EPA, the National Transportation Safety Board (NTSB), the Federal Railroad Administration (FRA), the Occupational Safety and Health Administration, the Ohio AG, and the Pennsylvania AG.

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 National Transportation Safety Board (NTSB), the Federal Railroad Administration (FRA), the Occupational Safety and Health Administration, the Ohio AG, and the Pennsylvania AG.

Further details regarding the NTSB and FRA investigations are set forth below.

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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 conducted a subsequent investigative field hearing in East Palestine, Ohio on June 22 and 23, 2023.

The NTSB’s investigation remains ongoing.

We expect the NTSB to issue a final report, with a probable cause determination and safety recommendations, in June 2024, with a follow on “safety culture” report expected for issuance later in 2024 or early 2025.

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.

The NTSB concluded its investigation and adopted a final investigative report on June 25, 2024, then issued the final public report on July 12, 2024.

The NTSB found that the probable cause of the derailment was the failure of a bearing which overheated and caused the axle to separate, derailing the train and leading to a post-derailment fire.

The NTSB issued over 30 recommendations, of which four were issued to Norfolk Southern.

The NTSB continues to work on a safety culture investigation, and a report on this part of the investigation is expected to be issued by the fall of 2024.

Concurrent with the NTSB Investigation, the FRA also investigated the Incident.

Similar in scope to the NTSB Investigation, the FRA examined railroad equipment, track conditions, hazardous materials train placement and routing, and emergency response (the FRA Incident Investigation).

The FRA Incident Investigation will likely result in the assessment of civil penalties, though the amount and materiality of these penalties cannot be reasonably estimated at this time.

In addition to the FRA Incident Investigation, the FRA completed a 60-day supplemental safety assessment (the FRA Safety Assessment).

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The overall scope of the FRA Safety Assessment was to examine our safety culture.

The FRA issued a public report in early August and included its findings and recommended corrective actions.

The FRA Incident Investigation remains ongoing.

The FRA issued a public report in early August 2023 which included its findings and related corrective actions.

We have launched initiatives to implement all of these items, and will monitor progress on these initiatives going forward.

Other Commitments and Contingencies

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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.

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.

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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.

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.

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Many such claims are being asserted by former or retired employees, some of whom have not been employed in the rail industry for decades.

The independent actuarial firm provides an estimate of the occupational claims liability based upon our history of claim filings, severity, payments, and other pertinent facts.

The independent actuarial firm provides an estimate of the

occupational claims liability based upon our history of claim filings, severity, payments, and other pertinent facts.

The liability is dependent upon judgments we make as to the specific case reserves as well as judgments of the actuarial firm in the quarterly studies.

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

In addition to environmental claims associated with the Incident, our Consolidated Balance Sheets include liabilities for other environmental exposures of $ 56 million at March 31, 2024 and $ 60 million at December 31, 2023, of which $ 15 million is classified as a current liability at the end of both periods.

At March 31, 2024, the liability represents our estimates of the probable cleanup, investigation, and remediation costs based on available information at 77 known locations and projects compared with 81 locations and projects at December 31, 2023.

At March 31, 2024, nineteen sites accounted for $ 46 million of the liability, and no individual site was considered to be material.

In addition to environmental claims associated with the Incident, our Consolidated Balance Sheets include liabilities for other environmental exposures of $ 58 million at June 30, 2024 and $ 60 million at December 31, 2023, of which $ 15 million is classified as a current liability at the end of both periods.

At June 30, 2024, the liability represents our estimates of the probable cleanup, investigation, and remediation costs based on available information at 77 known locations and projects compared with 81 locations and projects at December 31, 2023.

At June 30, 2024, twenty sites accounted for $ 47 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 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.

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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 of our unions.

With the conclusion of national bargaining, neither party can compel mandatory bargaining around any new proposals until November 1, 2024.

Under current moratorium provisions, neither party can serve notice to compel a new round of mandatory collective bargaining until November 1, 2024, and any agreements reached would take effect no earlier than January 1, 2025.

When the moratoriums expire, the parties will exchange bargaining notices and commence direct negotiations.

Even if the parties are unable to reach voluntary agreement during this first phase of negotiations, self-help, e.g., a strike or other work stoppage, related to this collective bargaining process remains prohibited by law until a lengthy series of additional procedures mandated by the Railway Labor Act, including federal mediation, are exhausted.

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

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Our current property insurance provides limits for approximately 82 % of covered losses above $ 75 million and below $ 275 million per occurrence and/or policy year.

With respect to the Incident, our insurance in effect at such time provided coverage above $ 75 million and below $ 800 million (or up to $ 1.1 billion for specified types of pollution releases) per occurrence and/or policy year, and with respect to property owned by us or in our care, custody, or control, our insurance covered approximately 82 % of potential losses above $ 75 million and below $ 275 million per occurrence and/or policy year.

Insurance coverage with respect to the Incident is 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 some governmental fines or penalties.

Some (re)insurers have questioned certain payments we have made, for example, as part of our effort to respond to, mitigate, and compensate for the impact to the community and affected residents and businesses.

We are pursuing

coverage with respect to the Incident, and we have recognized $ 209 million in insurance recoveries (including $ 108 million during the first quarter of 2024), principally from excess liability (re)insurers.

We are pursuing coverage with respect to the Incident, and we have recognized $ 365 million in insurance recoveries (including $ 156 million and $ 264 million during the second quarter and first six months of 2024, respectively), principally from excess liability (re)insurers.

At June 30, 2024, $ 119 million was outstanding and is included in “Accounts receivable – net” on the Consolidated Balance Sheets.

With the exception of amounts that have been previously recognized, potential recoveries under our insurance coverage have not yet been recorded (given the insurers ongoing evaluation of our claims).

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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