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Item 2. Management’s Discussion and Analysis

2026-04-24 compared with 2025-10-23 · 114 added, 176 removed, 143 unchanged (67% of the section changed)

4 unchanged sentences

We have the most extensive intermodal network in the eastern U.S.

Our network serves a majority of the country's population and manufacturing base, with connections to every major container port on the Atlantic coast as well as major ports across the Gulf Coast and Great Lakes.

On July 28, 2025, we entered into a Merger Agreement with Union Pacific, an agreement to create America’s first transcontinental railroad.

Details are further described in Note 1 in the Notes to Consolidated Financial Statements.

Our third quarter financial results reflected continued improvements in labor productivity and fuel efficiency while also delivering revenue growth driven by increased automotive and chemicals traffic.

Significantly impacting the comparison of our financial results to the prior year is the absence of $380 million in gains on sales of railway lines that occurred in 2024.

Additionally, net benefits related to the Eastern Ohio Incident (as defined further and described in Note 15 in the Notes to Consolidated Financial Statements) were lower in the current year.

For the third quarter, we achieved an operating ratio (a measure of the amount of operating revenues consumed by operating expenses) of 64.6%, and an adjusted operating ratio of 63.3% (see our non-GAAP reconciliations beginning on page 29).

Our network serves a majority of the country's population and manufacturing base, with connections to every major container port on the Atlantic coast as well as major ports in the Gulf Coast and Great Lakes.

On July 28, 2025, we entered into a Merger Agreement with Union Pacific, marking a transformational step toward creating America’s first transcontinental railroad – an outcome we believe will unlock new opportunities for our customers, employees, and the broader U.S.

By integrating two complementary networks, we believe the merged company will be positioned to deliver more efficient, reliable, and sustainable freight service across the nation.

Details of the proposed transaction are further described in Note 1.

Our first-quarter performance reflected disciplined cost control despite headwinds from rising fuel costs.

Our year-over-year results were impacted by incremental Merger-related expenses and the absence of insurance recoveries related to the Eastern Ohio Incident.

Nevertheless, we continued to drive improvements in labor productivity and fuel efficiency.

For the first quarter, we achieved an operating ratio (a measure of the amount of operating revenues consumed by operating expenses) of 70.7%, and an adjusted operating ratio of 68.7% (see our non-GAAP reconciliations beginning on page 24).

We remain committed to being a safe, productive, resilient, and efficient railroad with industry-competitive margins.

SUMMARIZED RESULTS OF OPERATIONS

Third Quarter First Nine Months

2025 2024 % change 2025 2024 % change

First Quarter

2026 2025 % change

($ in millions, except per share amounts)

5 unchanged sentences

Railway operating ratio (percent) 70.7 61.7 15%

Income from railway operations, net income, and diluted earnings per share decreased in the third quarter but increased for the first nine months.

The decrease in the third quarter was the result of higher railway operating expenses as 2024 included significant gains on sales of railway lines and higher insurance recoveries related to the Eastern Ohio Incident.

For the first nine months, railway operating expenses were lower.

In 2025, insurance and other recoveries resulting from the Incident exceeded incremental Incident-related costs.

Additionally, expenses associated with restructuring activities were lower.

Partially offsetting those items were lower gains from the sales of railway lines and properties.

Both periods reflect higher railway operating revenues, driven by a combination of improved traffic mix, favorable pricing, and increased volume, which was partially offset by lower fuel surcharge revenue.

The following tables adjust our GAAP financial results for the third quarter and first nine months of 2025 to exclude Merger-related expenses, restructuring and other charges, and the overall impact on operating expenses resulting from costs and recoveries associated with the Incident.

The following tables adjust our GAAP financial results for the third quarter and first nine months of 2024 to exclude gains on railway line sales, restructuring and other charges, and costs and recoveries associated with the Incident.

Additionally, the adjusted results for the first nine months of 2024 exclude shareholder advisory costs and a deferred income tax adjustment.

Income from railway operations, net income, and diluted earnings per share decreased, the result of higher railway operating expenses, primarily related to the absence of insurance recoveries related to the Eastern Ohio Incident recognized in the prior year.

Our financial results were further impacted by Merger-related expenses, inflation, and higher fuel prices, partially offset by productivity savings and an increase in average revenue per unit, primarily driven by favorable mix.

The following tables adjust our GAAP financial results for the first quarters of 2026 and 2025 to exclude the effects of the Incident.

First quarter 2026 results are also adjusted to exclude Merger-related expenses.

The income tax effects of these non-GAAP adjustments were calculated based on the applicable tax rates to which the non-GAAP adjustments 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 these items.

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 these items.

While we believe that these non-GAAP financial measures are useful in evaluating our business, this information should be considered as supplemental in nature and is not meant to be considered in isolation from, or as a substitute for, the related financial information prepared in accordance with GAAP.

In addition, these non-GAAP financial measures may not be the same as similar measures presented by other companies.

Non-GAAP Reconciliation for Third Quarter 2025

Reported (GAAP) Merger - Related Expenses Restructuring and Other Charges Eastern Ohio Incident Adjusted (non-GAAP)

($ in millions, except per share amounts)

Railway operating expenses $ 2,005 $ (15) $ (12) $ (13) $ 1,965

Income from railway operations $ 1,098 $ 15 $ 12 $ 13 $ 1,138

Net income $ 711 $ 11 $ 9 $ 10 $ 741

Diluted earnings per share $ 3.16 $ 0.05 $ 0.04 $ 0.05 $ 3.30

Railway operating ratio (percent) 64.6 (0.5) (0.4) (0.4) 63.3

Non-GAAP Reconciliation for Third Quarter 2024

Reported (GAAP) Gains on Railway Line Sales Restructuring and Other Charges Eastern Ohio Incident Adjusted

Non-GAAP Reconciliation for First Quarter 2026

Reported (GAAP) Merger - Related Expenses Eastern Ohio Incident Adjusted

($ in millions, except per share amounts)

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Railway operating ratio (percent) 70.7 (1.7) (0.3) 68.7

In the table below, references to the results for the third quarters of 2025 and 2024 and related comparisons use the adjusted, non-GAAP results from the reconciliations in the tables above.

Third Quarter

Adjusted 2025

(non-GAAP) Adjusted 2024

(non-GAAP) Adjusted 2025

Adjusted 2024

($ in millions, except per share amounts) % change

Railway operating expenses $ 1,965 $ 1,934 2%

Income from railway operations $ 1,138 $ 1,117 2%

Net income $ 741 $ 737 1%

Diluted earnings per share $ 3.30 $ 3.25 2%

Railway operating ratio (percent) 63.3 63.4 —%

Non-GAAP Reconciliation for First Nine Months 2025

Reported (GAAP) Merger - Related Expenses Restructuring and Other Charges Eastern Ohio Incident Adjusted

Non-GAAP Reconciliation for First Quarter 2025

Reported (GAAP) Eastern Ohio Incident Adjusted

($ in millions, except per share amounts)

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Railway operating ratio (percent) 61.7 6.2 67.9

Non-GAAP Reconciliation for First Nine Months 2024

Reported (GAAP) Gains on Railway Line Sales Restructuring

and Other Charges Eastern Ohio Incident Shareholder Advisory Costs Deferred Income Tax Adjustment Adjusted 2024

In the table below, references to the results for the first quarters of 2026 and 2025 and related comparisons use the adjusted, non-GAAP results from the reconciliations in the previous tables.

Adjusted (non-GAAP)

First Quarter

2026 2025 % change

($ in millions, except per share amounts)

Railway operating $ 6,159 $ 380 $ (156) $ (368) $ — $ — $ 6,015

railway $ 2,940 $ (380) $ 156 $ 368 $ — $ — $ 3,084

Net income $ 1,889 $ (287) $ 104 $ 279 $ 38 $ (27) $ 1,996

Diluted earnings $ 8.34 $ (1.27) $ 0.46 $ 1.23 $ 0.17 $ (0.12) $ 8.81

Railway operating 67.7 4.2 (1.7) (4.1) — — 66.1

ratio (percent)

In the table below, references to the results for the first nine months of 2025 and 2024 and related comparisons use the adjusted, non-GAAP results from the reconciliation in the tables above.

First Nine Months

Adjusted 2025

(non-GAAP) Adjusted 2024

(non-GAAP) Adjusted 2025

Adjusted 2024

($ in millions, except per share amounts) % change

Railway operating expenses $ 2,059 $ 2,032 1%

3 unchanged sentences

Railway operating ratio (percent) 68.7 67.9 1%

On an adjusted basis, income from railway operations increased in both periods.

Railway operating revenues were higher in both periods, driven by a combination of improved traffic mix, favorable pricing, and increased volume, which was partially offset by lower fuel surcharge revenue.

Adjusted railway operating expenses increased in the third quarter but decreased for the first nine months.

Both periods reflect higher expenses in compensation and benefits, equipment rents, claims, and materials, which were partially offset by higher gains from the sales of operating property in the current year.

The first nine months includes the impact of lower fuel prices, while the third quarter reflects higher fuel prices.

On an adjusted basis, income from railway operations decreased due to higher railway operating expenses.

The increase in adjusted railway operating expenses reflects inflation and higher fuel prices, partially offset by productivity savings and an increase in average revenue per unit, primarily driven by favorable mix.

DETAILED RESULTS OF OPERATIONS

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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

Revenues 2025 2024 % change 2025 2024 % change

First Quarter

Revenues 2026 2025 % change

Agriculture, forest and consumer products $ 625 $ 636 (2%)

23 unchanged sentences

Total 1,746 1,720 2%

Railway operating revenues increased $52 million and $107 million in the third quarter and first nine months, respectively.

Railway operating revenues increased $5 million compared with the same period last year.

The table below reflects the components of the revenue change by major commodity group ($ in millions).

Third Quarter First Nine Months

Merchandise Intermodal Coal Merchandise Intermodal Coal

First Quarter

Merchandise Intermodal Coal

Increase (Decrease)

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Approximately 95% of our revenue base is covered by contracts that include negotiated fuel surcharges.

Revenues associated with these surcharges totaled $208 million and $238 million in the third quarters of 2025 and 2024, respectively, and $613 million and $757 million for the first nine months of 2025 and 2024, respectively.

The decrease in fuel surcharge revenues is driven by lower fuel commodity prices.

Merchandise revenues increased in both periods due to higher volume and increased average revenue per unit, driven by increased pricing and favorable mix partially offset by lower fuel surcharge revenue.

Agriculture, forest and consumer products volume decreased in third quarter but was flat for the first nine months.

Corn shipments declined in the third quarter due to decreased demand for shipments to the southeast over the prior year.

Chemicals volume rose in both periods, primarily due to increased natural gas liquids and sand shipments, where the mix of traffic had an unfavorable impact on revenue per unit.

Natural gas liquids volume rose due to increased demand for product bound for export markets.

Revenues associated with these surcharges totaled $210 million and $202 million in the first quarters of 2026 and 2025, respectively.

Fuel surcharge revenues for the remainder of the year are expected to increase based on current fuel commodity prices.

Merchandise revenues increased primarily due to higher volume.

Agriculture, forest and consumer products volume declined primarily due to lower pulpboard and corn shipments, partially offset by higher feed and fertilizer volume.

Pulpboard volume decreased as a result of unplanned customer downtime resulting from severe winter weather.

Corn volume declined due to reduced demand for shipments to the southeast compared to the prior year.

These declines were partially offset by higher feed volume, reflecting gains in soymeal and corn germ meal shipments, and increased fertilizer volume driven by lower phosphate commodity prices early in the year.

Chemicals volume rose primarily due to higher shipments of natural gas liquids, inorganic chemicals, crude oil, and sand.

Natural gas liquids volume rose due to increased domestic and export demand.

Inorganic chemical volume increased, driven by rock salt restocking resulting from severe winter weather.

Crude oil volume increased compared to the prior year, which was impacted by tariff-related uncertainty.

Sand volume increased due to strong demand to support natural gas drilling.

Metals and construction volume increased in the third quarter but was flat for the first nine months.

Scrap metal and iron and steel volume increased in both periods due to stronger demand.

Weather-related impacts earlier in the year negatively impacted shipments of aggregates.

Automotive volumes increased in both periods, driven by shippers increasing volume in anticipation of potential changes to tariffs, growth with existing customers and the absence of customer production issues seen in the prior year.

Intermodal revenues decreased in the third quarter but increased for the first nine months.

The third quarter decline was due to lower volume, partially offset by higher average revenue per unit, driven by increased pricing, partially offset by lower fuel surcharge revenue and adverse mix.

The increase in the first nine months was the result of higher volumes and flat average revenue per unit with increased pricing being offset by lower fuel surcharge revenue and adverse mix.

Metals and construction volume decreased primarily driven by lower aggregate shipments as a result of severe winter weather conditions.

Automotive volume increased driven by growth with existing customers, partially offset by production downtime and model discontinuations for certain manufacturers.

Intermodal revenues decreased due to lower volume, partially offset by higher average revenue per unit, driven by increased pricing.

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

Third Quarter First Nine Months

2025 2024 % change 2025 2024 % change

First Quarter

2026 2025 % change

Domestic 603.8 608.8 (1%)

1 unchanged sentence

Total 980.6 1,022.9 (4%)

Domestic volume decreased in both periods driven by reduced traffic originating on the West Coast and reduced premium shipments.

International volume was flat in the third quarter but increased for the first nine months primarily driven by increased volume during the first six months in anticipation of potential changes to tariffs.

Coal revenues declined in both periods due to lower average revenue per unit, driven by reduced pricing, adverse mix, and lower fuel surcharge revenue.

Volume decreased in the third quarter but increased for the first nine months.

Domestic volume decreased as a result of lower premium demand.

International volume declined in the current period as the prior year benefited from elevated volume related to anticipated tariff changes.

Coal revenues decreased due to lower average revenue per unit, driven by reduced pricing and adverse mix, partially offset by higher volumes.

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

Third Quarter First Nine Months

2025 2024 % change 2025 2024 % change

First Quarter

2026 2025 % change

Utility 9,317 7,312 27%

3 unchanged sentences

Total 20,172 18,517 9%

Utility tonnage increased in both periods due to higher electricity demand and higher natural gas prices.

Export tonnage decreased in both periods due to soft global demand and unfavorable seaborne coal pricing.

Domestic metallurgical tonnage decreased in the third quarter due to customer outages.

Industrial coal tonnage increased for the first nine months as a result of increased demand.

Utility tonnage increased due to higher electricity demand, higher natural gas prices, and restocking of customer inventories.

Export tonnage was flat as increased customer demand was offset by winter weather-related impacts.

Domestic metallurgical tonnage decreased due to idled facilities and winter weather impacts.

Industrial coal tonnage increased as a result of increased demand.

Railway Operating Expenses

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

Third Quarter First Nine Months

2025 2024 % change 2025 2024 % change

First Quarter

2026 2025 % change

Compensation and benefits $ 740 $ 739 —%

7 unchanged sentences

Merger-related expenses 52 —

Restructuring and other charges 12 60 (80%) 22 156 (86%)

Eastern Ohio incident 10 (185) 105%

Total $ 2,121 $ 1,847 15%

Compensation and benefits expense increased in both periods as follows:

• incentive and stock-based compensation (up $52 million for the quarter and $105 million for the first nine months),

• pay rates (up $17 million for the quarter and $60 million for the first nine months),

• health and welfare benefits (down $9 million for the quarter and $32 million for the first nine months),

• employee activity levels (down $8 million for the quarter and $76 million for the first nine months), and

• other (down $4 million for the quarter and $14 million for the first nine months).

Average rail headcount for the quarter was down by approximately 510 compared with the third quarter of 2024.

Compensation and benefits expense increased slightly as follows:

• pay rates (up $21 million),

• health and welfare benefit rates (up $7 million),

• payroll taxes (up $6 million),

• incentive and stock-based compensation (down $24 million),

• employee activity levels (down $11 million), and

• other (up $2 million).

Average rail headcount for the quarter was down by approximately 320 compared with the first quarter of 2025.

Purchased services includes the costs of services purchased from external vendors and contractors, including the net costs of operating joint facilities with other railroads.

These expenses increased in the third quarter but decreased in the first nine months.

The third quarter increase was due to higher derailment-related and bridge repair expenses.

The decrease in the first nine months was driven by productivity initiatives, partially offset by higher intermodal lift costs and weather-related response costs.

Equipment rents , which includes our cost of using equipment (mostly freight cars) owned by other railroads or private owners less the rent paid to us for the use of our equipment, increased in both periods due to higher automotive equipment expense resulting from higher volumes.

Fuel expense, which includes the cost of locomotive fuel as well as other fuel used in railway operations increased in the third quarter, but decreased in the first nine months.

Locomotive fuel price increased 11% in the third quarter, but decreased 6% for the first nine months.

Locomotive fuel consumption decreased in both periods (down 1% in the third quarter and 2% for the first nine months).

Depreciation expense increased in both periods due to a higher asset base.

Materials expense increased in both periods due to higher expenses related to intermodal and engineering material consumption while the third quarter also reflected increased locomotive material consumption.

Expense increased primarily due to higher costs associated with severe winter weather and technology-related costs.

Equipment rents , which includes our cost of using equipment (mostly freight cars) owned by other railroads or private owners less the rent paid to us for the use of our equipment, increased due to higher automotive equipment expenses driven by higher volumes as well as lower earnings from our investment in TTX.

Fuel expense, which includes the cost of locomotive fuel as well as other fuel used in railway operations, increased due to higher locomotive fuel prices.

We expect fuel expense for the remainder of the year to increase based on current fuel commodity prices.

Depreciation expense increased due to a higher asset base.

Materials expense decreased due to lower freight car repairs and reduced engineering material consumption.

Claims expense includes costs related to personal injury, property damage, and environmental matters.

Claims expense was higher in both periods as a result of increased expenses associated with environmental matters unrelated to the Incident, personal injury case development, and insurance premiums.

Other expense increased in both periods primarily due to the absence of railway line sales in the current year.

In 2024, the sale of railway lines in the states of Virginia and North Carolina generated gains of $380 million.

Gains from the sales of operating property totaled $85 million and $20 million in the third quarters of 2025 and 2024, respectively, and $142 million and $45 million in the first nine months of 2025 and 2024, respectively.

The gains for the third quarter and first nine months of 2025 were largely driven by a significant land sale that we expect to result in additional traffic volumes in the future.

Merger-related expenses primarily relate to third-party advisor fees, legal fees, and costs associated with employee retention arrangements and were $15 million in the third quarter of 2025.

Restructuring and other charges in 2025 includes expenses associated with the rationalization of certain software development projects that had not been placed into service and the restructuring of certain technology functions, including severance costs for impacted employees.

Restructuring and other charges in 2024 includes expenses associated with our voluntary and involuntary separation programs that reduced our management workforce, expenses associated with the rationalization of certain software development projects that had not been placed into service, costs associated with the appointment of our new chief operating officer, and the disposition of an asset class.

We incurred expenses of $12 million and $60 million in the third quarters of 2025 and 2024, respectively, and $22 million and $156 million for the first nine months of 2025 and 2024, respectively.

Eastern Ohio incident activity during the third quarters of 2025 and 2024 pertained to insurance and other recoveries that exceeded additional Incident-related expenses by $11 million and $159 million, respectively.

For the first nine months of 2025, our recoveries exceeded additional Incident-related expenses by $243 million whereas we incurred expenses of $368 million for costs associated with the Incident, net of recoveries, for the same period last year.

Recoveries collected exceeded incremental cash expenditures by $227 million for the first nine months of 2025, while cash expenditures attributable to the Incident, net of recovery proceeds, were $32 million for the first nine months of 2024, which are presented in “Net cash provided by operating activities” on the Consolidated Statements of Cash Flows.

For further details regarding the Incident, see Note 15 in the Notes to Consolidated Financial Statements.

Claims expense decreased primarily due to lower personal injury expense and reduced costs related to environmental matters unrelated to the Incident.

Other expense increased primarily due to lower gains from operating property sales.

Gains from the sales of operating property totaled $17 million and $23 million in the first quarter of 2026 and 2025, respectively.

Merger-related expenses primarily relate to costs associated with employee retention agreements, third-party advisor fees, and legal fees and were $52 million in the first quarter.

Eastern Ohio incident expenses were $10 million in the first quarter of 2026.

In the first quarter of 2025, insurance and other recoveries exceeded additional Incident-related expenses by $185 million.

Cash payments attributable to the Incident were $300 million during the first three months of 2026, while insurance recoveries collected exceeded payments by $58 million during the first three months of 2025, which are presented in “Net cash provided by operating activities” on the Consolidated Statements of Cash Flows.

For further details regarding the Incident, see Note 12.

Other income – net

Other income – net decreased $11 million in the third quarter, but increased $9 million for the first nine months.

Both periods were impacted by lower returns on COLI and higher pension and postretirement benefits expense, partially offset by higher interest income.

The first nine months also reflect the absence of costs associated with shareholder matters incurred in 2024 and a $20 million curtailment gain on our other postretirement benefit plan in 2024.

The effective tax rate for both the third quarter and first nine months of 2025 was 23.1% compared with 23.0% and 21.3% for the same periods last year.

The rate for the first nine months of 2024 reflects a $13 million deferred income tax benefit due to a change in state corporate income tax rate and a $27 million deferred income tax benefit from subsidiary restructuring.

On July 4, 2025, OBBBA was signed into law.

The OBBBA makes permanent or introduces certain changes to the Internal Revenue Code, including 100% bonus depreciation, the deductibility of business interest expense, and expensing of domestic research costs.

FASB ASC 740 “ Income Taxes ” requires that the effect of changes in tax rates and laws be recognized in the period in which the legislation is enacted.

The primary effect of OBBBA was a reclassification from current to deferred taxes.

Other income – net increased $4 million primarily due to higher pension and postretirement benefits and higher interest income, partially offset by lower returns on COLI.

The effective tax rate for the first three months of 2026 was 23.5% compared with 23.3% for the same period last year.

FINANCIAL CONDITION AND LIQUIDITY

Cash provided by operating activities, our principal source of liquidity, was $3.3 billion for the first nine months of 2025, compared with $3.1 billion for the same period of 2024.

The increase reflects improved operating results.

We had negative working capital of $488 million and $357 million at September 30, 2025 and December 31, 2024, respectively.

Our negative working capital position improved as compared to June 30, 2025, and we expect to accumulate cash and cash equivalents throughout the period in which the Merger is subject to review and approval.

Cash and cash equivalents totaled $1.4 billion at September 30, 2025.

Cash used in investing activities was $1.9 billion for the first nine months of 2025, compared with $2.8 billion for the same period last year.

The decrease was driven by the prior year acquisition of the assets of the Cincinnati Southern Railway (CSR) and lower property additions in the current year, which was partially offset by lower proceeds from property sales and other transactions and increased COLI loan repayments.

Cash used in financing activities was $1.6 billion for the first nine months of 2025, compared with $903 million for the same period last year.

The increase reflects increased repurchases of Common Stock and lower proceeds from borrowing, partially offset by lower debt repayments.

We repurchased $534 million of Common Stock, inclusive of excise taxes paid, during the first nine months of 2025, while we did not repurchase any Common Stock during the same period last year.

As of September 30, 2025, $6.3 billion remains authorized by our Board of Directors for future repurchase activity.

Cash provided by operating activities, our principal source of liquidity, was $344 million for the first three months of 2026, compared with $950 million for the same period of 2025.

The decrease was driven by higher cash payments related to the Incident and higher cash paid for income taxes.

We had negative working capital of $311 million and $577 million at March 31, 2026 and December 31, 2025, respectively.

Cash and cash equivalents totaled $1.3 billion and $1.5 billion at March 31, 2026 and December 31, 2025, respectively.

Cash used in investing activities was $213 million for the first three months of 2026, compared with $1.0 billion for the same period last year.

The decrease was driven by the absence of COLI loan repayments and lower property additions, partially offset by higher proceeds from property sales and other transactions.

Cash used in financing activities was $320 million for the first three months of 2026, compared with $564 million for the same period last year.

The decrease reflects lower repurchases of Common Stock.

We did not repurchase any Common Stock during the first three months of 2026, while we repurchased $248 million during the same period last year.

As of March 31, 2026, $6.3 billion remains authorized by our Board of Directors for repurchase.

With limited exceptions, the Merger Agreement prohibits the Company from repurchasing shares of its common stock without approval by Union Pacific.

As a result, the Company has suspended share repurchase activities.

In May 2025, we issued $400 million of 5.10% senior notes due 2035.

In May 2025, we renewed our accounts receivable securitization program with a maximum borrowing capacity of $400 million.

We have in place an $800 million credit agreement.

The 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, 2026 or December 31, 2025, and we are in compliance with all of its covenants.

We have 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 both March 31, 2026 and December 31, 2025, we had no outstanding commercial paper.

We have in place an 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.

The term of our accounts receivable securitization program expires in May 2026.

We had no amounts outstanding under this program and our available borrowing capacity was $400 million at both September 30, 2025 and December 31, 2024.

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 both September 30, 2025 and December 31, 2024, we had no outstanding commercial paper.

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 September 30, 2025 or December 31, 2024, and we are in compliance with all of its covenants.

We had no amounts outstanding under this program and our available borrowing capacity was $400 million at March 31, 2026 and $397 million at December 31, 2025.

In addition, we have investments in general purpose COLI policies and have the ability to borrow against these policies.

We had no amounts borrowed against these policies at September 30, 2025 and $605 million borrowed at December 31, 2024.

Our remaining borrowing capacity was approximately $600 million and $40 million at September 30, 2025 and December 31, 2024, respectively.

Our debt-to-total capitalization ratio was 53.0% at September 30, 2025 and 54.6% at December 31, 2024.

We had no amounts borrowed against these policies at March 31, 2026 and December 31, 2025.

Our remaining borrowing capacity was approximately $590 million and $595 million at March 31, 2026 and December 31, 2025, respectively.

Our debt-to-total capitalization ratio was 52.0% at March 31, 2026 and 52.4% at December 31, 2025.

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 decrease shareholder distributions provide additional flexibility to meet our ongoing obligations, subject to certain restrictions on the incurrence of additional indebtedness under the Merger Agreement.

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, 2024, with the exception of additional senior notes (see Note 12) and over $600 million of additional unconditional purchase obligations, which extend through 2030.

In addition, we believe our currently-available borrowing capacity, access to additional financing, ability to reduce shareholder distributions, and ability to moderate or defer property additions provide additional flexibility to meet our ongoing obligations in the short- and long-term, subject to certain restrictions on incurring additional indebtedness under the Merger Agreement.

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, 2025, with the exception of approximately $300 million of additional unconditional purchase obligations, which extend through 2030.

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.

8 unchanged sentences

Under moratorium provisions from the last round of negotiations, neither party was permitted to serve notice to compel a new round of mandatory collective bargaining until November 1, 2024.

In the months prior to the opening of the current national bargaining round, we engaged in voluntary local discussions with our labor unions and, as a result, reached local tentative agreements with ten of our thirteen unions.

A majority of those tentative agreements were subsequently ratified by union membership and became effective January 1, 2025, foreclosing the parties from serving new notices to compel mandatory bargaining until November 1, 2029.

For those unions with whom we had not yet reached a ratified agreement, the NCCC, on behalf of Norfolk Southern, sent bargaining notices on November 1, 2024, to commence mandatory direct negotiations as prescribed under the RLA.

Since then, the NCCC has reached several additional agreements on behalf of Norfolk Southern and other members of the bargaining coalition.

For unions where bargaining currently remains open, even if the parties are unable to reach a voluntary ratified agreement during this first phase of RLA bargaining, 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 RLA, including federal mediation, are exhausted.

Since that date, Norfolk Southern, or the NCCC acting on behalf of Norfolk Southern, has engaged in discussions and reached ratified agreements with all of our labor unions.

Moratorium clauses in these new ratified agreements foreclose the parties from serving further notices to compel mandatory bargaining until November 1, 2029.

During this period, self-help against Norfolk Southern (e.g., a strike or other work stoppage) related to the mandatory collective-bargaining process is prohibited by law.

In preparing financial statements, GAAP requires the use of historical cost that disregards the effects of inflation on the replacement cost of property.

As a capital-intensive company, we have most of our capital invested in long-

lived assets.

As a capital-intensive company, we have most of our capital invested in long-lived assets.

The replacement cost of these assets, as well as the related depreciation expense, would be substantially greater than the amounts reported on the basis of historical cost.

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• the outcome of claims, litigation, governmental proceedings, and investigations involving the Company, including but not limited to the Incident Proceedings;

• the nature and extent of the Company's environmental remediation obligations with respect to the Incident;

• new or additional governmental regulation and/or operational changes resulting from or related to the Incident or the Incident Proceedings;

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• the occurrence of any event, change or other circumstance that could give rise to the right of one or both of the Company or Union Pacific to terminate the Merger Agreement;

• the possibility that the Mergers do not close when expected or at all because required Surface Transportation Board review and approval, shareholder or other approvals and other conditions to closing are not received or satisfied on a timely basis or at all (and the risk that such approvals may result in the imposition of conditions that could adversely affect the combined company or the expected benefits of the Mergers);

• the possibility that the Mergers do not close when expected or at all because required Surface Transportation Board review and approval, or other approvals and other conditions to close are not received or satisfied on a timely basis or at all (and the risk that such approvals may result in the imposition of conditions that could adversely affect the combined company or the expected benefits of the Mergers);

• the risk that the combined company will not realize expected benefits, cost savings, accretion, synergies and/or growth from the Mergers, or that such benefits may take longer to realize or be more costly to achieve than expected;

• disruption to the Company’s business as a result of the announcement and pendency of the Mergers;

• the costs associated with the anticipated length of time of the pendency of the Mergers, including the restrictions contained in the Merger Agreement on the ability of the Company to operate its business outside the ordinary course during the pendency of the Mergers;

• the diversion of the Company’s management’s attention and time from ongoing business operations and opportunities on Merger-related matters;

• disruption to the Company’s business as a result of the announcement and pendency of the Mergers, including the restrictions contained in the Merger Agreement on the ability of the Company to operate its business outside the ordinary course during the pendency of the Mergers;

• the diversion of the Company’s management’s attention and time from ongoing business operations and opportunities on Merger-related items;

• the possibility that the Mergers may be more expensive to complete than anticipated, including as a result of unexpected factors or events;

• the reputational risk and adverse reactions of customers, suppliers, employees, labor unions or other business partners, including those resulting from the announcement or completion of the Mergers.

• the reputational risk and adverse reactions of customers (certain of whom have and may continue to diversify their distribution networks, including in response to actions by our competitors), suppliers, employees, labor unions or other business partners, including those resulting from the announcement or completion of the Mergers.

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.

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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 2. Management’s Discussion and Analysis