UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
for the fiscal year ended DECEMBER 31, 2012
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
for the transition period from ___________ to___________
Commission file number 1-8339
NORFOLK SOUTHERN CORPORATION
(Exact name of registrant as specified in its charter)
Virginia
(State or other jurisdiction of incorporation)
Three Commercial Place
Norfolk, Virginia
(Address of principal executive offices)
(cid:53)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:87)(cid:72)(cid:79)(cid:72)(cid:83)(cid:75)(cid:82)(cid:81)(cid:72)(cid:3)(cid:81)(cid:88)(cid:80)(cid:69)(cid:72)(cid:85)(cid:15)(cid:3)(cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3)(cid:68)(cid:85)(cid:72)(cid:68)(cid:3)(cid:70)(cid:82)(cid:71)(cid:72)(cid:29)
52-1188014
(IRS Employer Identification No.)
23510-2191
Zip Code
(757) 629-2680
Securities registered pursuant to Section 12(b) of the Act:
Title of each Class
Name of each exchange on which registered
Norfolk Southern Corporation
Common Stock (Par Value $1.00)
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes (X) No ( )
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ( ) No (X)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes (X) No ( )
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulations S-T during the preceding 12 months. Yes (X) No ( )
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of the
Form 10-K or any amendment to this Form 10-K. (X)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer or smaller reporting
company. See definitions of (cid:179)(cid:79)(cid:68)(cid:85)(cid:74)(cid:72)(cid:3)(cid:68)(cid:70)(cid:70)(cid:72)(cid:79)(cid:72)(cid:85)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:73)(cid:76)(cid:79)(cid:72)(cid:85)(cid:15)(cid:180)(cid:3)(cid:179)(cid:68)(cid:70)(cid:70)(cid:72)(cid:79)(cid:72)(cid:85)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:73)(cid:76)(cid:79)(cid:72)(cid:85)(cid:15)(cid:180)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:179)(cid:86)(cid:80)(cid:68)(cid:79)(cid:79)(cid:72)(cid:85)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:180)(cid:3)(cid:76)(cid:81)(cid:3)(cid:53)(cid:88)(cid:79)(cid:72)(cid:3)(cid:20)(cid:21)(cid:69)-2 of the Exchange
Act.
Large accelerated filer (X) Accelerated filer ( ) Non-accelerated filer ( ) Smaller reporting company ( )
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ( ) No (X)
The aggregate market value of the voting common equity held by non-affiliates at June 30, 2012, was $22,858,970,932 (based on the
closing price as quoted on the New York Stock Exchange on that date).
(cid:55)(cid:75)(cid:72)(cid:3)(cid:81)(cid:88)(cid:80)(cid:69)(cid:72)(cid:85)(cid:3)(cid:82)(cid:73)(cid:3)(cid:86)(cid:75)(cid:68)(cid:85)(cid:72)(cid:86)(cid:3)(cid:82)(cid:88)(cid:87)(cid:86)(cid:87)(cid:68)(cid:81)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3)(cid:82)(cid:73)(cid:3)(cid:72)(cid:68)(cid:70)(cid:75)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:70)(cid:79)(cid:68)(cid:86)(cid:86)(cid:72)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:70)(cid:82)(cid:80)(cid:80)(cid:82)(cid:81)(cid:3)(cid:86)(cid:87)(cid:82)(cid:70)(cid:78)(cid:15)(cid:3)(cid:68)t January 31, 2013: 314,516,374 (excluding
20,320,777 shares held by the registrant's consolidated subsidiaries).
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of (cid:87)(cid:75)(cid:72)(cid:3)(cid:53)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:71)(cid:72)(cid:73)(cid:76)(cid:81)(cid:76)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:83)(cid:85)(cid:82)(cid:91)(cid:92)(cid:3)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)(cid:69)(cid:72)(cid:3)(cid:73)(cid:76)(cid:79)(cid:72)(cid:71)(cid:3)(cid:72)(cid:79)(cid:72)(cid:70)(cid:87)(cid:85)(cid:82)(cid:81)(cid:76)(cid:70)(cid:68)(cid:79)(cid:79)(cid:92)(cid:3)(cid:83)(cid:88)(cid:85)(cid:86)(cid:88)(cid:68)(cid:81)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:53)(cid:72)(cid:74)(cid:88)(cid:79)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:20)(cid:23)(cid:36)(cid:3)(cid:81)(cid:82)(cid:87)(cid:3)(cid:79)(cid:68)(cid:87)(cid:72)(cid:85)(cid:3)(cid:87)(cid:75)(cid:68)(cid:81)(cid:3)(cid:20)(cid:21)(cid:19)(cid:3)(cid:71)(cid:68)(cid:92)(cid:86)(cid:3)(cid:68)(cid:73)ter
the end of the fiscal year, are incorporated herein by reference in Part III.
TABLE OF CONTENTS
NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES
Part I.
Items 1 and 2. Business and Properties
Item 1A.
Item 1B.
Item 3.
Item 4.
Risk Factors
Unresolved Staff Comments
Legal Proceedings
Mine Safety Disclosures
Executive Officers of the Registrant
Part II.
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
(cid:48)(cid:68)(cid:85)(cid:78)(cid:72)(cid:87)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:53)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:38)(cid:82)(cid:80)(cid:80)(cid:82)(cid:81)(cid:3)(cid:40)(cid:84)(cid:88)(cid:76)(cid:87)(cid:92)(cid:15)(cid:3)(cid:53)(cid:72)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:54)(cid:87)(cid:82)(cid:70)(cid:78)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:3)(cid:48)(cid:68)(cid:87)(cid:87)(cid:72)(cid:85)(cid:86) and
Issuer Purchases of Equity Securities
Selected Financial Data
(cid:48)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:39)(cid:76)(cid:86)(cid:70)(cid:88)(cid:86)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:36)(cid:81)(cid:68)(cid:79)(cid:92)(cid:86)(cid:76)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:38)(cid:82)(cid:81)(cid:71)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:68)(cid:81)(cid:71)
Results of Operations
Quantitative and Qualitative Disclosures about Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Controls and Procedures
Other Information
Part III. Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Directors, Executive Officers, and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
Part IV. Item 15.
Exhibits and Financial Statements Schedules
Power of Attorney
Signatures
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Page
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K13
K16
K16
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K17
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K19
K20
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K38
K78
K78
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K99
PART I
NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES
Item 1. Business and Item 2. Properties
GENERAL (cid:177) Norfolk Southern Corporation is a Norfolk, Virginia based company that owns a major freight
railroad, Norfolk Southern Railway Company. Norfolk Southern Corporation was incorporated on July 23, 1980,
under the laws of the Commonwealth of Virginia. Our common stock (Common Stock) is listed on the New York
Stock Exchange (NYSE) unde(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:86)(cid:92)(cid:80)(cid:69)(cid:82)(cid:79)(cid:3)(cid:179)(cid:49)(cid:54)(cid:38)(cid:17)(cid:180)(cid:3)
Unless indicated otherwise, Norfolk Southern Corporation and its subsidiaries, including Norfolk Southern
Railway Company, are referred to collectively as NS, we, us, and our.
We are primarily engaged in the rail transportation of raw materials, intermediate products, and finished goods
primarily in the Southeast, East, and Midwest and, via interchange with rail carriers, to and from the rest of the
United States. We also transport overseas freight through several Atlantic and Gulf Coast ports. We provide
comprehensive logistics services and offer the most extensive intermodal network in the eastern half of the United
States.
We make available free of charge through our website, www.nscorp.com, our annual report on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports as soon as
reasonably practicable after such material is electronically filed with or furnished to the U.S. Securities and
Exchange Commission (SEC). In addition, the following documents are available on our website and in print to
any shareholder who requests them:
(cid:120) Corporate Governance Guidelines
(cid:120) Charters of the Committees of the Board of Directors
(cid:120) The Thoroughbred Code of Ethics
(cid:120) Code of Ethical Conduct for Senior Financial Officers
(cid:120) Categorical Independence Standards for Directors
K3
RAILROAD OPERATIONS (cid:177) At December 31, 2012, our railroads operated approximately 20,000 miles of
road in 22 states and the District of Columbia.
Our system reaches many individual industries, electric generating facilities, mines (in western Virginia, eastern
Kentucky, southern and northern West Virginia, and western Pennsylvania), distribution centers, transload
facilities, and other businesses located in our service area.
Corridors with heaviest freight volume:
(cid:120) New York City area to Chicago (via Allentown and Pittsburgh)
(cid:120) Chicago to Macon (via Cincinnati, Chattanooga, and Atlanta)
(cid:120) Appalachian coal fields of Virginia, West Virginia, and Kentucky to Norfolk, Virginia and Sandusky,
Ohio
(cid:120) Cleveland to Kansas City
(cid:120) Birmingham to Meridian
(cid:120) Memphis to Chattanooga
K4
The miles operated, which include major leased lines between Cincinnati, Ohio, and Chattanooga, Tennessee, and
an exclusive operating agreement for trackage rights over property owned by North Carolina Railroad Company,
were as follows:
Mileage Operated at December 31, 2012
Second
and
Other
Main
Track
Miles
of
Road
Passing
Track,
Crossovers Way and
and
Yard
Turnouts Switching
Total
Owned
Operated under lease, contract or trackage rights
Total
15,375
4,648
20,023
2,780
1,881
4,661
2,001
381
2,382
8,292
802
9,094
28,448
7,712
36,160
Triple Crown Operations - Triple Crown Services Company (Triple Crown), one of our subsidiaries, provides
bimodal truckload transportation service utilizing RoadRailer® trailers, a hybrid technology that facilitates both
over-the-road and on-the-rail transportation utilizing enclosed trailers that are pulled over the highways in tractor-
trailer configuration and over the rails by locomotives. In addition, Triple Crown utilizes conventional trailers
that are also moved on rail flatcars. Triple Crown provides service in the eastern United States as well as Ontario
and Quebec through a network of terminals strategically located in 13 cities.
The following table sets forth certain statistics relating to our (cid:85)(cid:68)(cid:76)(cid:79)(cid:85)(cid:82)(cid:68)(cid:71)(cid:86)(cid:182)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:83)(cid:68)(cid:86)(cid:87)(cid:3)(cid:24)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:86)(cid:29)
Years ended December 31,
2012 2011 2010 2009 2008
Revenue ton miles (billions)
Freight train miles traveled (millions)
Revenue per ton mile
Revenue ton miles per employee-hour worked
Ratio of railway operating expenses to railway operating revenues
182
72.6
192
75.7
186
76.3
195
80.0
$0.0595 $0.0582 $0.0523 $0.0503 $0.0546
3,075
3,218
3,153
71.7% 71.2% 71.9% 75.4% 71.1%
159
67.5
2,900
3,207
RAILWAY OPERATING REVENUES (cid:177) Total railway operating revenues were $11.0 billion in 2012.
Following is an overview of our three major market groups.
COAL (cid:177) Coal is our largest commodity group as measured by revenues. Revenues from coal accounted for about
26% of our total railway operating revenues in 2012. We handled a total of 156.1 million tons, or 1.4 million
carloads, in 2012, most of which originated on our lines from major eastern coal basins, with the balance from
major western coal basins via Memphis and Chicago gateways. Our coal franchise supports the electric
generation market, serving approximately 100 coal generation plants, as well as the export, metallurgical and
industrial markets primarily through direct rail and river, lake, and coastal facilities, including various terminals
on the Ohio River, (cid:47)(cid:68)(cid:80)(cid:69)(cid:72)(cid:85)(cid:87)(cid:182)(cid:86) Point in Norfolk, Virginia, the Port of Baltimore, and Lake Erie.
See the discussion of coal revenues and tonnage(cid:15)(cid:3)(cid:69)(cid:92)(cid:3)(cid:87)(cid:92)(cid:83)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:70)(cid:82)(cid:68)(cid:79)(cid:15)(cid:3)(cid:76)(cid:81)(cid:3)(cid:51)(cid:68)(cid:85)(cid:87)(cid:3)(cid:44)(cid:44)(cid:15)(cid:3)(cid:44)(cid:87)(cid:72)(cid:80)(cid:3)(cid:26)(cid:15)(cid:3)(cid:179)(cid:48)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:39)(cid:76)(cid:86)(cid:70)(cid:88)(cid:86)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3)
(cid:68)(cid:81)(cid:71)(cid:3)(cid:36)(cid:81)(cid:68)(cid:79)(cid:92)(cid:86)(cid:76)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:38)(cid:82)(cid:81)(cid:71)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:53)(cid:72)(cid:86)(cid:88)(cid:79)(cid:87)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:50)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:17)(cid:180)
K5
GENERAL MERCHANDISE (cid:177) Our general merchandise market group is composed of five major commodity
groupings: chemicals; agriculture, consumer products and government; metals and construction; automotive; and
paper, clay and forest products.
(cid:120) Chemicals includes sulfur and related chemicals, petroleum products, chlorine and bleaching compounds,
plastics, rubber, industrial chemicals, chemical wastes, and municipal wastes.
(cid:120) Agriculture, consumer products, and government includes soybeans, wheat, corn, fertilizer, livestock and
poultry feed, food oils, flour, beverages, canned goods, sweeteners, consumer products, ethanol, and
items for the military.
(cid:120) Metals and construction includes steel, aluminum products, machinery, scrap metals, cement, aggregates,
bricks, and minerals.
(cid:120) Automotive includes finished vehicles for BMW, Chrysler, Ford, General Motors, Honda, Hyundai,
Mercedes-Benz, Mitsubishi, Subaru, Toyota and Volkswagen, and auto parts for Chrysler, Ford, General
Motors, Honda, Mazda, Mitsubishi, Nissan, Subaru, and Toyota.
(cid:120) Paper, clay and forest products includes lumber and wood products, pulp board and paper products, wood
fibers, wood pulp, scrap paper, and clay.
In 2012, 119 million tons of general merchandise freight, or approximately 65% of total general merchandise
tonnage we handled, originated online. The balance of general merchandise freight was received from connecting
carriers at interterritorial gateways. Our principal interchange points for received freight included Chicago, New
Orleans, East St. Louis, Memphis, Buffalo, and Detroit. General merchandise carloads handled in 2012 were
2.3 million, the revenues from which accounted for 54% of our total railway operating revenues.
See the discussion of general merchandise revenues (cid:69)(cid:92)(cid:3)(cid:70)(cid:82)(cid:80)(cid:80)(cid:82)(cid:71)(cid:76)(cid:87)(cid:92)(cid:3)(cid:74)(cid:85)(cid:82)(cid:88)(cid:83)(cid:3)(cid:76)(cid:81)(cid:3)(cid:51)(cid:68)(cid:85)(cid:87)(cid:3)(cid:44)(cid:44)(cid:15)(cid:3)(cid:44)(cid:87)(cid:72)(cid:80)(cid:3)(cid:26)(cid:15)(cid:3)(cid:179)(cid:48)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)
(cid:39)(cid:76)(cid:86)(cid:70)(cid:88)(cid:86)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:36)(cid:81)(cid:68)(cid:79)(cid:92)(cid:86)(cid:76)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:38)(cid:82)(cid:81)(cid:71)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:53)(cid:72)(cid:86)(cid:88)(cid:79)(cid:87)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:50)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:17)(cid:180)
INTERMODAL (cid:177) Our intermodal market group consists of shipments moving in trailers, domestic and
international containers, and RoadRailer® equipment. These shipments are handled on behalf of intermodal
marketing companies, international steamship lines, truckers, and other shippers. Intermodal units handled in
2012 were 3.4 million, the revenues from which accounted for 20% of our total railway operating revenues.
See the discussion of intermodal revenues (cid:76)(cid:81)(cid:3)(cid:51)(cid:68)(cid:85)(cid:87)(cid:3)(cid:44)(cid:44)(cid:15)(cid:3)(cid:44)(cid:87)(cid:72)(cid:80)(cid:3)(cid:26)(cid:15)(cid:3)(cid:179)(cid:48)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:39)(cid:76)(cid:86)(cid:70)(cid:88)(cid:86)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:36)(cid:81)(cid:68)(cid:79)(cid:92)(cid:86)(cid:76)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)
(cid:38)(cid:82)(cid:81)(cid:71)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:53)(cid:72)(cid:86)(cid:88)(cid:79)(cid:87)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:50)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:17)(cid:180)
FREIGHT RATES (cid:177) In 2012, we continued our reliance on private contracts and exempt price quotes as the
predominant pricing mechanisms. Thus, a major portion of our freight business is not currently economically
regulated by the government. In general, market forces have been substituted for government regulation and now
are the primary determinant of rail service prices.
In 2012, our railroads were found by the Surface Transportation Board (STB), the regulatory board that has broad
jurisdiction over railroad practices, (cid:87)(cid:82)(cid:3)(cid:69)(cid:72)(cid:3)(cid:179)(cid:85)(cid:72)(cid:89)(cid:72)(cid:81)(cid:88)(cid:72)(cid:3)(cid:68)(cid:71)(cid:72)(cid:84)(cid:88)(cid:68)(cid:87)(cid:72)(cid:180)(cid:3)on an annual basis based on results for the year
2011. The STB has not made its revenue adequacy determination for the year 2012. (cid:36)(cid:3)(cid:85)(cid:68)(cid:76)(cid:79)(cid:85)(cid:82)(cid:68)(cid:71)(cid:3)(cid:76)(cid:86)(cid:3)(cid:179)(cid:85)(cid:72)(cid:89)(cid:72)(cid:81)(cid:88)(cid:72)(cid:3)
(cid:68)(cid:71)(cid:72)(cid:84)(cid:88)(cid:68)(cid:87)(cid:72)(cid:180)(cid:3)(cid:82)(cid:81)(cid:3)(cid:68)(cid:81)(cid:3)(cid:68)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:69)(cid:68)(cid:86)(cid:76)(cid:86)(cid:3)(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:68)(cid:83)(cid:83)(cid:79)(cid:76)(cid:70)able law when its return on net investment exceeds the rail
(cid:76)(cid:81)(cid:71)(cid:88)(cid:86)(cid:87)(cid:85)(cid:92)(cid:182)(cid:86)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:82)(cid:86)(cid:76)(cid:87)(cid:72)(cid:3)(cid:70)(cid:82)(cid:86)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:70)(cid:68)(cid:83)(cid:76)(cid:87)(cid:68)(cid:79)(cid:17) This determination is made pursuant to a statutory requirement.
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PASSENGER OPERATIONS (cid:177) Amtrak operates regularly scheduled passenger trains on our lines between the
following locations:
(cid:120) Alexandria and Lynchburg, Virginia
(cid:120) Alexandria and Orange, Virginia
(cid:120) Petersburg and Norfolk, Virginia
(cid:120) Raleigh and Charlotte, North Carolina
(cid:120) Selma and Charlotte, North Carolina
(cid:120) Chicago, Illinois, and Porter, Indiana
(cid:120) Chicago, Illinois, and Cleveland, Ohio
(cid:120) Chicago, Illinois, and Pittsburgh, Pennsylvania
(cid:120) Kalamazoo and Battle Creek, Michigan
(cid:120) Kalamazoo and Detroit, Michigan
(cid:120) Pittsburgh and Harrisburg, Pennsylvania
Two transportation commissions of the Commonwealth of Virginia operate commuter trains on our line between
Manassas and Alexandria.
We lease the Chicago to Manhattan, Illinois, line to the Commuter Rail Division of the Regional Transportation
Authority of Northeast Illinois (METRA).
We operate freight service over lines with significant ongoing Amtrak and commuter passenger operations, and
conduct freight operations over trackage owned or leased by:
(cid:120) Amtrak
(cid:120) New Jersey Transit
(cid:120) Southeastern Pennsylvania Transportation Authority
(cid:120) Metro-North Commuter Railroad Company
(cid:120) Maryland Department of Transportation
Amtrak and various commuter agencies conduct passenger operations over trackage owned by Conrail in the
Shared Assets Areas (Note 5 to the Consolidated Financial Statements).
NONCARRIER OPERATIONS (cid:177) Our noncarrier subsidiaries engage principally in the acquisition, leasing, and
management of coal, oil, gas and minerals; the development of commercial real estate; telecommunications; and
the leasing or sale of rail property and equipment. In 2012, no such noncarrier subsidiary or industry segment
grouping of noncarrier subsidiaries met the requirements for a reportable business segment under relevant
authoritative accounting guidance.
RAILWAY PROPERTY
Our railroad system extends across 22 states and the District of Columbia. The railroad infrastructure makes us
capital intensive with net property of approximately $26 billion on a historical cost basis.
Property Additions (cid:177) Property additions for the past five years were as follows (including capitalized leases):
2012
2011
2010
($ in millions)
2009
2008
Road and all other property
Equipment
Total
$
$
1,465 $
776
1,222 $
938
1,153 $
317
1,128 $
171
2,241 $
2,160 $
1,470 $
1,299 $
1,070
488
1,558
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Our capital spending and replacement programs are and have been designed to assure the ability to provide safe,
efficient, and reliable rail transportation services. For 2013, we have budgeted $2.0 billion of property additions.
We have invested and will continue to invest in various projects and corridor initiatives to expand our rail
network to increase capacity and improve transit times, while returning value to shareholders. Initiatives include
the following:
(cid:120) The MidAmerica Corridor is a proposed arrangement between us and Canadian National Railway (CN) to
share track between Chicago, St. Louis, Kentucky, and Mississippi in order to establish more efficient
routes for shipments moving between the Midwest and Southeast, including potential shipments from
CN-served Illinois Basin coal producers to southeastern utility plants we serve.
(cid:120) Pan Am Southern LLC, a joint venture with Pan Am Railways, Inc., is a 155-mile main line track that
runs between Mechanicville, New York and Ayer, Massachusetts, along with 281 miles of secondary and
branch lines, including trackage rights in New York, Connecticut, Massachusetts, New Hampshire, and
Vermont designed to increase intermodal and automotive capacity.
(cid:120) The Crescent Corridor consists of a program of projects for infrastructure and other facility improvements
geared toward creating seamless, high-capacity intermodal routes spanning 11 states from New Jersey to
Louisiana and offering truck-competitive service along several major interstate highway corridors,
including I-81, I-85, I-20, I-40, I-59, I-78, and I-75.
(cid:120) The Heartland Corridor, which opened in 2010, was a package of clearance improvements and other
facilities that created a seamless, high-capacity intermodal route across Virginia and West Virginia to
Midwest markets.
(cid:120) Meridian Speedway LLC, a joint venture with Kansas City Southern, is a 320-mile rail line between
Meridian, Mississippi and Shreveport, Louisiana designed to increase capacity and improve service.
(cid:120) The CREATE project is a public-private partnership to reduce rail and highway congestion and add
freight and passenger capacity in the metropolitan Chicago area. We and other railroads have agreed to
participate in CREATE.
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Equipment (cid:177) At December 31, 2012, we owned or leased the following units of equipment:
Locomotives:
Multiple purpose
Auxiliary units
Switching
Total locomotives
Freight cars:
Gondola
Hopper
Box
Covered hopper
Flat
Other
Total freight cars
Other:
Highway trailers and containers
RoadRailer®
Work equipment
Vehicles
Miscellaneous
Total other
Owned*
Leased**
Total
Capacity of
Equipment
(Horsepower)
3,763
122
110
3,995
33,820
15,234
12,356
10,558
2,506
4,608
79,082
8,199
6,378
4,525
4,011
12,765
35,878
79
-
-
79
3,842
122
110
4,074
13,606,600
-
165,250
13,771,850
(Tons)
4,098,830
1,737,636
1,151,821
1,182,466
335,196
225,067
8,731,016
3,839
521
1,470
158
1,133
87
7,208
8,179
27
313
-
9,031
17,550
37,659
15,755
13,826
10,716
3,639
4,695
86,290
16,378
6,405
4,838
4,011
21,796
53,428
*
Includes equipment leased to outside parties and equipment subject to equipment trusts, conditional sale
agreements, and capitalized leases.
** Includes short-term and long-term operating leases. Freight cars include 521 leased from Consolidated Rail
Corporation (CRC).
The following table indicates the number and year built for locomotives and freight cars owned at December 31,
2012:
2012
2011
2010
2009
2008
2003-
2007
1998- 1997&
2002
Before Total
60
2%
90
2%
42
1%
-
-%
40
1%
628
16%
648
16%
2,487
62%
3,995
100%
Locomotives:
No. of units
% of fleet
Freight cars:
No. of units
% of fleet
2,025
3%
3,840
5%
150
-%
514
1%
2,349
3%
1,691
2%
3,317
4%
65,196
82%
79,082
100%
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The following table shows the average age of our owned locomotive and freight car fleets at December 31, 2012,
and information regarding 2012 retirements:
Average age (cid:177) in service
Retirements
Average age (cid:177) retired
Locomotives
21.6 years
49 units
41.2 years
Freight Cars
30.2 years
2,482 cars
42.4 years
Our ongoing locomotive and freight car maintenance programs are intended to ensure the highest standards of
safety, reliability, customer satisfaction, and equipment availability. The locomotive bad order ratio includes all
units (owned and leased) out of service for required periodic inspections, unscheduled maintenance and program
work which includes such activity as overhauls.
Locomotives
Freight cars
Annual Average Bad Order Ratio
2010
6.7%
5.8%
2009
6.1%
4.5%
2011
7.3%
5.7%
2012
7.1%
5.3%
2008
5.8%
4.5%
Encumbrances (cid:177) Certain railroad equipment is subject to the prior lien of equipment financing obligations
totaling $34 million at December 31, 2012.
Track Maintenance (cid:177) Of the approximately 36,160 total miles of track we operate, we are responsible for
maintaining about 29,220 miles, with the remainder being operated under trackage rights from other parties
responsible for maintenance.
Over 81% of the main line trackage (including first, second, third, and branch main tracks, all excluding rail
operated pursuant to trackage rights) has rail ranging from 131 to 155 pounds per yard with the standard
installation currently at 136 pounds per yard. Approximately 42% of our lines, excluding rail operated pursuant
to trackage rights, carried 20 million or more gross tons per track mile during 2012.
The following table summarizes several measurements regarding our track roadway additions and replacements
during the past five years:
Track miles of rail installed
Miles of track surfaced
New crossties installed (millions)
2012
509
5,642
2.6
2011
484
5,441
2.7
2010
422
5,326
2.6
2009
434
5,568
2.7
2008
459
5,209
2.7
Microwave System (cid:177) Our microwave system, consisting of approximately 6,968 radio route miles, 421 core
stations, 30 secondary stations, and four passive repeater stations, provides communications between most
operating locations. We use the microwave system primarily for voice communications, VHF radio control
circuits, data and facsimile transmissions, traffic control operations, and AEI data transmissions.
Traffic Control (cid:177) Of the approximately 16,500 route miles we dispatch, about 11,025 miles are signalized,
including 8,150 miles of centralized traffic control (CTC) and 2,875 miles of automatic block signals. Of the
8,150 miles of CTC, approximately 5,100 miles are controlled by data radio originating at 340 base station radio
sites.
Computers (cid:177) A computer network consisting of a centralized production and backup data center near Atlanta,
Georgia, and various distributed computers throughout the company connects the yards, terminals, transportation
offices, rolling stock repair points, sales offices, and other key system locations. Operating and traffic data are
processed and stored to provide customers with information on their shipments throughout the system. Computer
systems provide current information on the location of every train and each car on line, as well as related waybill
and other train and car movement data. In addition, our computer systems assist us in the performance of a
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variety of functions and services including payroll, car and revenue accounting, billing, material management
activities and controls, and special studies.
ENVIRONMENTAL MATTERS (cid:177) Compliance with federal, state, and local laws and regulations relating to
the protection of the environment is a principal goal of ours. To date, such compliance has not had a material
effect on our financial position, results of operations, liquidity, or competitive position. (cid:54)(cid:72)(cid:72)(cid:3)(cid:179)(cid:47)(cid:72)(cid:74)(cid:68)(cid:79)(cid:3)(cid:51)(cid:85)(cid:82)(cid:70)(cid:72)(cid:72)(cid:71)(cid:76)(cid:81)(cid:74)(cid:86)(cid:15)(cid:180)(cid:3)
(cid:51)(cid:68)(cid:85)(cid:87)(cid:3)(cid:44)(cid:15)(cid:3)(cid:44)(cid:87)(cid:72)(cid:80)(cid:3)(cid:22)(cid:30)(cid:3)(cid:179)(cid:51)(cid:72)(cid:85)(cid:86)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3)(cid:44)(cid:81)(cid:77)(cid:88)(cid:85)(cid:92)(cid:15)(cid:3)(cid:40)(cid:81)(cid:89)(cid:76)(cid:85)(cid:82)(cid:81)(cid:80)(cid:72)(cid:81)(cid:87)(cid:68)(cid:79)(cid:15)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:47)(cid:72)(cid:74)(cid:68)(cid:79)(cid:3)(cid:47)(cid:76)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:180) (cid:76)(cid:81)(cid:3)(cid:51)(cid:68)(cid:85)(cid:87)(cid:3)(cid:44)(cid:44)(cid:15)(cid:3)(cid:44)(cid:87)(cid:72)(cid:80)(cid:3)(cid:26)(cid:15)(cid:3)(cid:179)(cid:48)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)
(cid:39)(cid:76)(cid:86)(cid:70)(cid:88)(cid:86)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:36)(cid:81)(cid:68)(cid:79)(cid:92)(cid:86)(cid:76)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:38)(cid:82)(cid:81)(cid:71)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:53)(cid:72)(cid:86)(cid:88)(cid:79)(cid:87)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:50)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:15)(cid:180)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:49)(cid:82)(cid:87)(cid:72)(cid:3)(cid:20)(cid:25)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:81)(cid:86)(cid:82)(cid:79)(cid:76)(cid:71)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)
Financial Statements.
EMPLOYEES (cid:177) The following table shows the average number of employees and the average cost per employee
for wages and benefits:
2008
Average number of employees
30,709
Average wage cost per employee $ 69,000 $ 71,000 $ 69,000 $ 63,000 $ 66,000
Average benefit cost per employee $ 38,000 $ 39,000 $ 37,000 $ 32,000 $ 31,000
2010
28,559
2009
28,593
2011
30,329
2012
30,943
More than 80% of our railroad employees are covered by collective bargaining agreements with various labor
(cid:88)(cid:81)(cid:76)(cid:82)(cid:81)(cid:86)(cid:17)(cid:3)(cid:54)(cid:72)(cid:72)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:71)(cid:76)(cid:86)(cid:70)(cid:88)(cid:86)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:179)(cid:47)(cid:68)(cid:69)(cid:82)(cid:85)(cid:3)(cid:36)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:180)(cid:3)(cid:76)(cid:81)(cid:3)(cid:51)(cid:68)(cid:85)(cid:87)(cid:3)(cid:44)(cid:44)(cid:15)(cid:3)(cid:44)(cid:87)(cid:72)(cid:80)(cid:3)(cid:26)(cid:15)(cid:3)(cid:179)(cid:48)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:39)(cid:76)(cid:86)(cid:70)(cid:88)(cid:86)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:36)(cid:81)(cid:68)(cid:79)(cid:92)(cid:86)(cid:76)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)
(cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:38)(cid:82)(cid:81)(cid:71)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:53)(cid:72)(cid:86)(cid:88)(cid:79)(cid:87)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:50)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:17)(cid:180)
GOVERNMENT REGULATION (cid:177) In addition to environmental, safety, securities, and other regulations
generally applicable to all business, our railroads are subject to regulation by the STB. The STB has jurisdiction
over some rates, routes, fuel surcharges, conditions of service, and the extension or abandonment of rail
lines. The STB also has jurisdiction over the consolidation, merger, or acquisition of control of and by rail
common carriers. The Federal Railroad Administration (FRA) regulates certain track and mechanical equipment
standards.
The relaxation of economic regulation of railroads, following the Staggers Rail Act of 1980, included exemption
from STB regulation of the rates and most service terms for intermodal business (trailer-on-flat-car, container-on-
flat-car), rail boxcar shipments, lumber, manufactured steel, automobiles, and certain bulk commodities such as
sand, gravel, pulpwood, and wood chips for paper manufacturing. Further, all shipments that we have under
contract are effectively removed from regulation for the duration of the contract. About 86% of our revenues
comes from either exempt shipments or shipments moving under transportation contracts; the remainder comes
from shipments moving under public tariff rates.
Efforts have been made over the past several years to re-subject the rail industry to increased federal economic
regulation, and such efforts are expected to continue in 2013. The Staggers Rail Act of 1980, which substantially
balanced such regulation, encouraged and enabled rail carriers to innovate, invest in their infrastructure, and
compete for business, thereby contributing to the economic health of the nation and to the revitalization of the
industry. Accordingly, we will continue to oppose efforts to reimpose increased economic regulation.
(cid:42)(cid:82)(cid:89)(cid:72)(cid:85)(cid:81)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:85)(cid:72)(cid:74)(cid:88)(cid:79)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:70)(cid:82)(cid:81)(cid:70)(cid:72)(cid:85)(cid:81)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:86)(cid:68)(cid:73)(cid:72)(cid:87)(cid:92)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:86)(cid:72)(cid:70)(cid:88)(cid:85)(cid:76)(cid:87)(cid:92)(cid:3)(cid:82)(cid:73)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:85)(cid:68)(cid:76)(cid:79)(cid:85)(cid:82)(cid:68)(cid:71)(cid:86)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:71)(cid:76)(cid:86)(cid:70)(cid:88)(cid:86)(cid:86)(cid:72)(cid:71)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:179)(cid:54)(cid:72)(cid:70)(cid:88)(cid:85)(cid:76)(cid:87)(cid:92)(cid:3)(cid:82)(cid:73)(cid:3)
(cid:50)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:180)(cid:3)(cid:86)(cid:72)(cid:70)tion contained herein.
COMPETITION (cid:177) There is continuing strong competition among rail, water, and highway carriers. Price is
usually only one factor of importance as shippers and receivers choose a transport mode and specific hauling
company. Inventory carrying costs, service reliability, ease of handling, and the desire to avoid loss and damage
during transit are also important considerations, especially for higher-valued finished goods, machinery, and
consumer products. Even for raw materials, semi-finished goods, and work-in-progress, users are increasingly
sensitive to transport arrangements that minimize problems at successive production stages.
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Our primary rail competitor is CSX Corporation; both railroads operate throughout much of the same
territory. Other railroads also operate in parts of the territory. We also compete with motor carriers, water
carriers, and with shippers who have the additional options of handling their own goods in private carriage,
sourcing products from different geographic areas, and using substitute products.
Certain marketing strategies among railroads and between railroads and motor carriers enable railroads to
compete more effectively in specific markets.
SECURITY OF OPERATIONS (cid:177) We have taken significant steps to provide enhanced security for our rail
system. In particular, we have developed and implemented a comprehensive security plan that is modeled on and
was developed in conjunction with the security plan prepared by the Association of American Railroads (AAR)
post September 11, 2001. The AAR Security Plan defines four Alert Levels and details the actions and
countermeasures that are being applied across the railroad industry as a terrorist threat increases or decreases. The
Alert Level actions include countermeasures that will be applied in three general areas: (1) operations (including
transportation, engineering, and mechanical); (2) information technology and communications; and, (3) railroad
police. Although security concerns preclude public disclosure of its contents, our System Security Plan outlines
the protocol within our company for all concerned to be notified of AAR Alert Level changes. All of our
Operations Division employees are advised by their supervisors or train dispatchers, as appropriate, of any change
in Alert Level and any additional responsibilities they may incur due to such change.
Our plan also effectively addresses and complies with U.S. Department of Transportation (DOT) security
regulations pertaining to training and security plans with respect to the transportation of hazardous materials. As
part of the plan, security awareness training is given to all railroad employees who directly affect hazardous
material transportation safety, and this training is integrated into recurring hazardous material training and re-
certification programs. Toward that end, we, working closely with the National Transit Institute at Rutgers
University, have developed a four-module uniform national training program. We have also worked with the
Transportation Security Administration (TSA) in developing other industry training programs. More in-depth
security training has been given to select employees of ours who have been given specific security
responsibilities, and additional, location-specific security plans have been developed for certain metropolitan
areas and each of the six port facilities we serve. With respect to the ports, each facility plan has been approved
by the applicable Captain of the Port and is subject to inspection by the U.S. Coast Guard.
Additionally, we engage in close and regular coordination with numerous federal and state agencies, including the
U.S. Department of Homeland Security (DHS), the TSA, the Federal Bureau of Investigation (FBI), the FRA, the
U.S. Coast Guard, U.S. Customs and Border Protection, and various state Homeland Security offices. As one
notable example, one of our Police Special Agents in Charge (SAC), under the auspices of the AAR, has been
assigned to the National Joint Terrorism Task Force (NJTTF) operated by the FBI, and located at the National
Counter Terrorism Center (NCTC) in Arlington, Virginia to represent and serve as liaison to the North American
rail industry. This arrangement improves logistical flow of vital security and law enforcement information with
respect to the rail industry as a whole, while having the post filled by one of our SACs has also served to foster a
strong working relationship between us and the FBI. We also have become a member of the Customs-Trade
Partnership Against Terrorism (C-TPAT) program sponsored by U.S. Customs. C-TPAT allows us to work
closely with U.S. Customs and our customers to develop measures that will help ensure the integrity of freight
shipments moving on our railroads, particularly those moving to or from a foreign country. Based on
participation in C-TPAT, we have ensured that our plan meets all current applicable security recommendations
made by U.S. Customs.
Similarly, we are guided in our operations by various supplemental security action items issued by DHS and
DOT, U.S. Coast Guard Maritime Security requirements, as well as voluntary security action items developed in
collaboration with TSA, DOT, and the freight railroads. Many of the action items are based on lessons learned
from DHS and DOT security assessments of rail corridors in High Threat Urban Areas (HTUA). Particular
attention is aimed at reducing risk in HTUA by: (1) the establishment of secure storage areas for rail cars carrying
toxic-by-inhalation (TIH) materials; (2) the expedited movement of trains transporting rail cars carrying TIH
materials; (3) the minimization of unattended loaded tank cars carrying TIH materials; and (4) cooperation with
K12
federal, state, local and tribal governments to identify, through risk assessments, those locations where security
risks are the highest. These action items and our compliance initiatives are outlined in the various departmental
sections of our System Security Plan. We have taken appropriate actions to be compliant with the TSA Final
Security Rule addressing Rail Security Sensitive Materials (RSSM) to ensure these shipments are properly
inspected and that positive chain-of-custody is maintained when required. We are in compliance with the Pipeline
and Hazardous Materials Safety Administration (PHMSA) rail-routing regulations outlined in Docket HM-
232E. We conduct ongoing route evaluations. In 2011, (cid:68)(cid:86)(cid:3)(cid:83)(cid:68)(cid:85)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:41)(cid:53)(cid:36)(cid:182)(cid:86)(cid:3)(cid:69)(cid:76)-annual review, this methodology
and selected routes were found to be compliant with the regulation. The next review by the FRA is expected mid-
year 2013.
In 2012, through participation in the Transportation Community Awareness and Emergency Response
(TRANSCAER) Program, we provided rail accident response training to approximately 5,087 emergency
responders, such as local police and fire personnel, representing over 19,023 hours of emergency response
training. We also conducted railroad operations classes for FBI agents and the railroad liaison agents from
NJTTF and participated in four drills for local, state, and federal agencies. We also have ongoing programs to
sponsor local emergency responders at the Security and Emergency Response Training Course conducted at the
AAR Transportation Technology Center in Pueblo, Colorado.
Improvements in equipment design also are expected to play a role in enhancing rail security. PHMSA, in
coordination with the FRA, has amended the Hazardous Materials Regulations to prescribe enhanced safety for
rail transportation of TIH materials, has provided interim design standards for railroad tank cars. The rule
mandates commodity-specific improvements in safety features and design standards for newly manufactured
DOT specification tank cars and an improved top fittings performance standard. The interim standards
established in this rule will enhance the accident survivability of TIH tank cars.
Item 1A. Risk Factors
We are subject to significant governmental legislation and regulation over commercial, operating and
environmental matters. Railroads are subject to the enactment of laws by Congress that could increase
economic regulation of the industry. Railroads presently are subject to commercial regulation by the STB, which
has jurisdiction over some rates, routes, fuel surcharges, conditions of service, and the extension or abandonment
of rail lines. The STB also has jurisdiction over the consolidation, merger, or acquisition of control of and by rail
common carriers. Additional economic regulation of the rail industry by Congress or the STB, whether under
new or existing laws, could have a significant negative impact on our ability to determine prices for rail services
and result in a material adverse effect in the future on our financial position, results of operations, or liquidity in a
particular year or quarter. This potential material adverse effect could also result in reduced capital spending on
our rail network or abandonment of lines.
Railroads are subject to safety and security regulation by DOT and DHS, which regulate most aspects of our
operations. Compliance with the Rail Safety Improvement Act of 2008 will result in additional operating costs
associated with the statutorily mandated implementation of positive train control by 2015. In addition to
increased capital expenditures, implementation may result in reduced operational efficiency and service levels, as
well as increased compensation and benefits expenses, and increased claims and litigation costs.
Our operations are subject to extensive federal and state environmental laws and regulations concerning, among
other things, emissions to the air; discharges to waterways or groundwater supplies; handling, storage,
transportation, and disposal of waste and other materials; and the cleanup of hazardous material or petroleum
releases. The risk of incurring environmental liability (cid:177) for acts and omissions, past, present, and future (cid:177) is
inherent in the railroad business. This risk includes property owned by us, whether currently or in the past, that is
or has been subject to a variety of uses, including our railroad operations and other industrial activity by past
owners or our past and present tenants.
Environmental problems that are latent or undisclosed may exist on these properties, and we could incur
environmental liabilities or costs, the amount and materiality of which cannot be estimated reliably at this time,
K13
with respect to one or more of these properties. Moreover, lawsuits and claims involving other unidentified
environmental sites and matters are likely to arise from time to time, and the resulting liabilities could have a
significant effect on our financial position, results of operations, or liquidity in a particular year or quarter.
As a common carrier by rail, we must offer to transport hazardous materials, regardless of risk.
Transportation of certain hazardous materials could create catastrophic losses in terms of personal injury and
property damage costs, and compromise critical parts of our rail network.
We may be affected by terrorism or war. Any terrorist attack, or other similar event, any government response
thereto, and war or risk of war could cause significant business interruption and may adversely affect our financial
position, results of operations, or liquidity in a particular year or quarter. Because we play a critical role in the
(cid:81)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:87)(cid:85)(cid:68)(cid:81)(cid:86)(cid:83)(cid:82)(cid:85)(cid:87)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:86)(cid:92)(cid:86)(cid:87)(cid:72)(cid:80)(cid:15)(cid:3)we could become the target of such an attack or have a significant role in the
(cid:74)(cid:82)(cid:89)(cid:72)(cid:85)(cid:81)(cid:80)(cid:72)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:83)(cid:85)(cid:72)(cid:72)(cid:80)(cid:83)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:68)(cid:83)(cid:83)(cid:85)(cid:82)(cid:68)(cid:70)(cid:75)(cid:3)(cid:82)(cid:85)(cid:3)(cid:85)(cid:72)(cid:86)(cid:83)(cid:82)(cid:81)(cid:86)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:68)(cid:81)(cid:3)(cid:68)(cid:87)(cid:87)(cid:68)(cid:70)(cid:78)(cid:3)(cid:82)(cid:85)(cid:3)(cid:90)(cid:68)(cid:85)(cid:17)
Although we currently maintain insurance coverage for third-party liability arising out of war and acts of
terrorism, we maintain only limited insurance coverage for first-party property damage and damage to property in
our care, custody, or control caused by certain acts of terrorism. In addition, premiums for some or all of our
current insurance programs covering these losses could increase dramatically, or insurance coverage for certain
losses could be unavailable to us in the future.
We may be affected by general economic conditions. Prolonged negative changes in domestic and global
economic conditions affecting the producers and consumers of the commodities we carry may have an adverse
effect on our financial position, results of operations, or liquidity in a particular year or quarter. Economic
conditions resulting in bankruptcies of one or more large customers could have a significant impact on our
financial position, results of operations, or liquidity in a particular year or quarter.
We may be affected by climate change legislation or regulation. Concern over climate change has led to
significant federal, state, and international legislative and regulatory efforts to limit greenhouse gas (GHG)
emissions. Moreover, even without such legislation or regulation, government incentives and adverse publicity
relating to GHGs could affect certain of our customers and the markets for certain of the commodities we
carry. Restrictions, caps, taxes, or other controls on GHG emissions, including diesel exhaust, could significantly
increase our operating costs, decrease the amount of traffic handled, and decrease the value of coal reserves we
own, and thus could have an adverse effect on our financial position, results of operations, or liquidity in a
particular year or quarter. Such restrictions could affect our customers that (1) use commodities that we carry to
produce energy, including coal, (2) use significant amounts of energy in producing or delivering the commodities
we carry, or (3) manufacture or produce goods that consume significant amounts of energy.
We face competition from other transportation providers. We are subject to competition from motor carriers,
railroads and, to a lesser extent, ships, barges, and pipelines, on the basis of transit time, pricing, and quality and
reliability of service. While we have used primarily internal resources to build or acquire and maintain our rail
system, trucks and barges have been able to use public rights-of-way maintained by public entities. Any future
improvements or expenditures materially increasing the quality or reducing the cost of alternative modes of
transportation in the regions in which we operate, or legislation granting materially greater latitude for motor
carriers with respect to size or weight limitations, could have a material adverse effect on our financial position,
results of operations, or liquidity in a particular year or quarter.
The operations of carriers with which we interchange may adversely affect our operations. Our ability to
provide rail service to customers in the U.S. and Canada depends in large part upon our ability to maintain
cooperative relationships with connecting carriers with respect to, among other matters, freight rates, revenue
division, car supply and locomotive availability, data exchange and communications, reciprocal switching,
interchange, and trackage rights. Deterioration in the operations of or service provided by connecting carriers, or
in our relationship with those connecting carriers, could result in our inability to meet our (cid:70)(cid:88)(cid:86)(cid:87)(cid:82)(cid:80)(cid:72)(cid:85)(cid:86)(cid:182)(cid:3)(cid:71)(cid:72)(cid:80)(cid:68)(cid:81)(cid:71)(cid:86)(cid:3)(cid:82)(cid:85)(cid:3)
require us to use alternate train routes, which could result in significant additional costs and network
inefficiencies.
K14
We rely on technology and technology improvements in our business operations. If we experience
significant disruption or failure of one or more of our information technology systems, including computer
hardware, software, and communications equipment, we could experience a service interruption, a security
breach, or other operational difficulties. Additionally, if we do not have sufficient capital to acquire new
technology or we are unable to implement new technology, we may suffer a competitive disadvantage within the
rail industry and with companies providing other modes of transportation service. Any of these factors could
have a material adverse effect on our financial position, results of operations, or liquidity in a particular year or
quarter.
The vast majority of our employees belong to labor unions, and labor agreements, strikes, or work
stoppages could adversely affect our operations. More than 80% of our railroad employees are covered by
collective bargaining agreements with various labor unions. If unionized workers were to engage in a strike, work
stoppage, or other slowdown, we could experience a significant disruption of our operations. Additionally, future
national labor agreements, or renegotiation of labor agreements or provisions of labor agreements, could
significantly increase our costs for healthcare, wages, and other benefits. Any of these factors could have a
material adverse impact on our financial position, results of operations, or liquidity in a particular year or quarter.
We may be subject to various claims and lawsuits that could result in significant expenditures. The nature
of our business exposes us to the potential for various claims and litigation related to labor and employment,
personal injury, commercial disputes, freight loss and other property damage, and other matters. Job-related
(cid:83)(cid:72)(cid:85)(cid:86)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3)(cid:76)(cid:81)(cid:77)(cid:88)(cid:85)(cid:92)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:82)(cid:70)(cid:70)(cid:88)(cid:83)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3)(cid:70)(cid:79)(cid:68)(cid:76)(cid:80)(cid:86)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:86)(cid:88)(cid:69)(cid:77)(cid:72)(cid:70)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:41)(cid:72)(cid:71)(cid:72)(cid:85)(cid:68)(cid:79)(cid:3)(cid:40)(cid:80)(cid:83)(cid:79)(cid:82)(cid:92)(cid:72)(cid:85)(cid:182)(cid:86)(cid:3)(cid:47)(cid:76)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:3)(cid:36)(cid:70)(cid:87)(cid:3)(cid:11)(cid:41)(cid:40)(cid:47)(cid:36)(cid:12)(cid:15)(cid:3)(cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3)(cid:76)(cid:86)(cid:3)
(cid:68)(cid:83)(cid:83)(cid:79)(cid:76)(cid:70)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:82)(cid:81)(cid:79)(cid:92)(cid:3)(cid:87)(cid:82)(cid:3)(cid:85)(cid:68)(cid:76)(cid:79)(cid:85)(cid:82)(cid:68)(cid:71)(cid:86)(cid:17)(cid:3)(cid:41)(cid:40)(cid:47)(cid:36)(cid:182)(cid:86)(cid:3)(cid:73)(cid:68)(cid:88)lt-based tort system produces results that are unpredictable and
inconsistent as compared with a no-(cid:73)(cid:68)(cid:88)(cid:79)(cid:87)(cid:3)(cid:90)(cid:82)(cid:85)(cid:78)(cid:72)(cid:85)(cid:182)(cid:86)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:72)(cid:81)(cid:86)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:86)(cid:92)(cid:86)(cid:87)(cid:72)(cid:80)(cid:17) The variability inherent in this system
could result in actual costs being very different from the liability recorded.
Any material changes to current litigation trends or a catastrophic rail accident involving any or all of freight loss
property damage, personal injury, and environmental liability could have a material adverse effect on our
financial position, results of operations, or liquidity to the extent not covered by insurance. We have obtained
insurance for potential losses for third-party liability and first-party property damages. Specified levels of risk are
retained on a self-insurance basis (currently up to $50 million and above $1 billion per occurrence for bodily
injury and property damage to third parties and up to $25 million and above $175 million per occurrence for
property owned by us or in our care, custody, or control). Insurance is available from a limited number of
insurers and may not continue to be available or, if available, may not be obtainable on terms acceptable to us.
Severe weather could result in significant business interruptions and expenditures. Severe weather
conditions and other natural phenomena, including hurricanes, floods, fires, and earthquakes, may cause
significant business interruptions and result in increased costs, increased liabilities, and decreased revenues,
which could have an adverse effect on our financial position, results of operations, or liquidity in a particular year
or quarter.
Unpredictability of demand for rail services resulting in the unavailability of qualified personnel could
adversely affect our operational efficiency and ability to meet demand. Workforce demographics, training
requirements, and the availability of qualified personnel, particularly engineers and trainmen, could each have a
negative impact on our ability to meet demand for rail service. Unpredictable increases in demand for rail
services may exacerbate such risks, which could have a negative impact on our operational efficiency and
otherwise have a material adverse effect on our financial position, results of operations, or liquidity in a particular
year or quarter.
We may be affected by supply constraints resulting from disruptions in the fuel markets or the nature of
some of our supplier markets. We consumed about 460 million gallons of diesel fuel in 2012. Fuel availability
could be affected by any limitation in the fuel supply or by any imposition of mandatory allocation or rationing
regulations. A severe fuel supply shortage arising from production curtailments, increased demand in existing or
emerging foreign markets, disruption of oil imports, disruption of domestic refinery production, damage to
K15
refinery or pipeline infrastructure, political unrest, war or other factors, could have a material adverse effect on
our financial position, results of operations, or liquidity in a particular year or quarter. Also, such an event could
impact us as well as our customers and other transportation companies.
Due to the capital intensive nature and industry-specific requirements of the rail industry, high barriers of entry
exist for potential new suppliers of core railroad items, such as locomotives and rolling stock equipment.
Additionally, we compete with other industries for available capacity and raw materials used in the production of
certain track materials, such as rail and ties. Changes in the competitive landscapes of these limited-supplier
markets could result in increased prices or significant shortages of materials that could have a material adverse
effect on our financial position, results of operations, or liquidity in a particular year or quarter.
The state of capital markets could adversely affect our liquidity. From time-to-time we rely on the capital
markets to provide some of our capital requirements, including the issuance of long-term debt instruments and
commercial paper, as well as the sale of certain receivables. Significant instability or disruptions of the capital
markets, including the credit markets, or deterioration of our financial condition due to internal or external factors
could restrict or eliminate our access to, and/or significantly increase the cost of, various financing sources,
including bank credit facilities and issuance of corporate bonds. Instability or disruptions of the capital markets
and deterioration of our financial condition, alone or in combination, could also result in a reduction in our credit
rating to below investment grade, which could prohibit or restrict us from accessing external sources of short- and
long-term debt financing and/or significantly increase the associated costs.
Item 1B. Unresolved Staff Comments
None.
Item 3. Legal Proceedings
On November 6, 2007, various antitrust class actions filed against us and other Class I railroads in various Federal
district courts regarding fuel surcharges were consolidated in the District of Columbia by the Judicial Panel on
Multidistrict Litigation. On June 21, 2012, the court certified the case as a class action. The defendant railroads
have appealed such certification, and a decision by the court to either reject the appeal outright or proceed with
ruling on its merits is pending. We believe the allegations in the complaints are without merit and intend to
vigorously defend the cases. We do not believe the outcome of these proceedings will have a material effect on
our financial position, results of operations, or liquidity. A lawsuit containing similar allegations against us and
four other major railroads that was filed on March 25, 2008, in the U.S. District Court for the District of
Minnesota was voluntarily dismissed by the plaintiff subject to a tolling agreement entered into in August 2008.
We received a Notice of Violation (NOV) issued by the Tennessee Department of Environmental Conservation
concerning soil runoff in connection with construction of the Memphis Regional Intermodal Facility in Rossville,
Tennessee. Although we will contest liability and the imposition of any penalties, this matter is described here
consistent with SEC rules and requirements concerning governmental proceedings with respect to environmental
laws and regulations. We do not believe that the outcome of this proceeding will have a material effect on our
financial position, results of operations, or liquidity.
Item 4. Mine Safety Disclosures
Not applicable.
K16
Executive Officers of the Registrant
Our executive officers generally are elected and designated annually by the Board of Directors at its first meeting
held after the annual meeting of stockholders, and they hold office until their successors are elected. Executive
officers also may be elected and designated throughout the year as the Board of Directors considers appropriate.
There are no family relationships among our officers, nor any arrangement or understanding between any officer
and any other person pursuant to which the officer was selected. The following table sets forth certain
information, at February 1, 2013, relating to our officers.
Name, Age, Present Position
Business Experience During Past Five Years
Charles W. Moorman, 60,
Chairman, President and
Chief Executive Officer
Deborah H. Butler, 58,
Executive Vice President (cid:177)
Planning and Chief
Information Officer
James A. Hixon, 59,
Executive Vice President (cid:177)
Law and Corporate Relations
Mark D. Manion, 60,
Executive Vice President and
Chief Operating Officer
Present position since February 1, 2006.
Present position since June 1, 2007.
Present position since October 1, 2005.
Present position since April 1, 2009.
Served as Executive Vice President (cid:177) Operations from
October 1, 2004 to April 1, 2009.
John P. Rathbone, 60,
Executive Vice President (cid:177)
Finance and Chief Financial Officer
Present position since August 1, 2012.
Served as Executive Vice President (cid:177) Administration from
October 1, 2004 to August 1, 2012.
Donald W. Seale, 60,
Executive Vice President and
Chief Marketing Officer
James A. Squires, 51,
Executive Vice President (cid:177)
Administration
Clyde H. Allison, Jr., 49,
Vice President and Controller
Present position since April 1, 2006.
Present position since August 1, 2012.
Served as Executive Vice President (cid:177) Finance and Chief
Financial Officer from July 1, 2007 to August 1, 2012.
Present position since April 1, 2009.
Served as Assistant Vice President Corporate Accounting
from February 1, 2008 to April 1, 2009.
K17
PART II
NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES
(cid:44)(cid:87)(cid:72)(cid:80)(cid:3)(cid:24)(cid:17)(cid:3)(cid:48)(cid:68)(cid:85)(cid:78)(cid:72)(cid:87)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:53)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:38)(cid:82)(cid:80)(cid:80)(cid:82)(cid:81)(cid:3)(cid:40)(cid:84)(cid:88)(cid:76)(cid:87)(cid:92)(cid:15)(cid:3)(cid:53)(cid:72)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:54)(cid:87)(cid:82)(cid:70)(cid:78)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:3)(cid:48)(cid:68)(cid:87)(cid:87)(cid:72)(cid:85)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:44)(cid:86)(cid:86)(cid:88)(cid:72)(cid:85)(cid:3)(cid:51)(cid:88)(cid:85)(cid:70)(cid:75)(cid:68)(cid:86)(cid:72)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)
Equity Securities
STOCK PRICE AND DIVIDEND INFORMATION
Common Stock is owned by 32,347 stockholders of record as of December 31, 2012 and is traded on the New
(cid:60)(cid:82)(cid:85)(cid:78)(cid:3)(cid:54)(cid:87)(cid:82)(cid:70)(cid:78)(cid:3)(cid:40)(cid:91)(cid:70)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)(cid:3)(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:86)(cid:92)(cid:80)(cid:69)(cid:82)(cid:79)(cid:3)(cid:179)(cid:49)(cid:54)(cid:38)(cid:17)(cid:180)(cid:3) The following table shows the high and low sales prices as
reported by Bloomberg L.P. on its internet-based service and dividends per share, by quarter, for 2012 and 2011.
2012
1st
2nd
3rd
4th
Quarter
Market Price
High
Low
Dividends per share
2011
Market Price
High
Low
Dividends per share
$
$
$
$
78.24
64.45
0.47
1st
69.56
60.38
0.40
$
74.41
63.67
0.47
75.10
63.63
0.50
2nd
3rd
$
74.93
66.27
0.40
76.99
60.44
0.43
$
$
67.71
56.34
0.50
4th
75.75
60.01
0.43
ISSUER PURCHASES OF EQUITY SECURITIES
Total Number
of Shares
(or Units)
Purchased
Period
(1)
Total
Number of
Shares (or Units)
Purchased as
Part of Publicly
Average
Price Paid
per Share Announced Plans
or Programs (2)
(or Unit)
October 1-31, 2012
November 1-30, 2012
December 1-31, 2012
310,189
2,029,148
2,917
$ 62.31
58.70
61.55
Total
2,342,254
307,000
2,029,148
-
2,336,148
Maximum Number
(or Approximate
Dollar Value)
of Shares (or Units)
that may yet be
Purchased under
the Plans or Programs
(2)
48,616,759
46,587,611
46,587,611
(1) Of this amount, 6,106 represents shares tendered by employees in connection with the exercise of stock options
under the stockholder-approved Long-Term Incentive Plan.
(2) Our Board of Directors authorized a share repurchase program, pursuant to which up to 125 million shares of
Common Stock could be purchased through December 31, 2014. On August 1, 2012, our Board of Directors
authorized the repurchase of up to an additional 50 million shares of Common Stock through December 31, 2017.
K18
FIVE-YEAR FINANCIAL REVIEW
Item 6. Selected Financial Data
RESULTS OF OPERATIONS
Railway operating revenues
Railway operating expenses
Income from railway operations
Other income (cid:177) net
Interest expense on debt
Income before income taxes
Provision for income taxes
Net income
PER SHARE DATA
Net income (cid:177) basic
(cid:177) diluted
Dividends
Stockholders' equity at year end
FINANCIAL POSITION
Total assets
Total debt
Stockholders' equity
OTHER
Property additions
Average number of shares outstanding (thousands)
Number of stockholders at year end
Average number of employees:
Rail
Nonrail
Total
2012
2011
2010
($ in millions, except per share amounts)
2009
2008
$ 11,040 $ 11,172 $
7,959
3,213
7,916
3,124
9,516 $
6,840
2,676
7,969 $ 10,661
6,007
7,577
1,962
3,084
129
495
2,758
160
455
2,918
153
462
2,367
127
467
1,622
110
444
2,750
1,009
1,002
871
588
1,034
$
1,749 $
1,916 $
1,496 $
1,034 $
1,716
$
5.42 $
5.37
1.94
31.08
5.52 $
5.45
1.66
30.00
4.06 $
4.00
1.40
29.85
2.79 $
2.76
1.36
28.06
4.58
4.52
1.22
26.23
$ 30,342 $ 28,538 $ 28,199 $ 27,369 $ 26,297
6,667
9,607
7,153
10,353
7,025
10,669
8,682
9,760
7,540
9,911
$
2,241 $
2,160 $
1,470 $
1,299 $
1,558
320,864 345,484 366,522 367,077 372,276
35,466
37,486
32,347
33,381
35,416
30,543
400
29,933
396
28,160
399
28,173
420
30,241
468
30,943
30,329
28,559
28,593
30,709
See accompanying consolidated financial statements and notes thereto.
K19
Item 7. (cid:48)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:39)(cid:76)(cid:86)(cid:70)(cid:88)(cid:86)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:36)(cid:81)(cid:68)(cid:79)(cid:92)(cid:86)(cid:76)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:38)(cid:82)(cid:81)(cid:71)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:53)(cid:72)(cid:86)(cid:88)(cid:79)(cid:87)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:50)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)
Norfolk Southern Corporation and Subsidiaries
(cid:48)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:39)(cid:76)(cid:86)(cid:70)(cid:88)(cid:86)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:36)(cid:81)(cid:68)(cid:79)(cid:92)(cid:86)(cid:76)(cid:86)(cid:3)(cid:82)(cid:73)
Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with the Consolidated Financial Statements
and Notes and the Selected Financial Data.
OVERVIEW
(cid:58)(cid:72)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:82)(cid:81)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:81)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:83)(cid:85)(cid:72)(cid:80)(cid:76)(cid:72)(cid:85)(cid:3)(cid:87)(cid:85)(cid:68)(cid:81)(cid:86)(cid:83)(cid:82)(cid:85)(cid:87)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:76)(cid:72)(cid:86)(cid:17)(cid:3)(cid:3)(cid:50)(cid:88)(cid:85)(cid:3)(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:53)(cid:68)(cid:76)(cid:79)(cid:90)(cid:68)(cid:92)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3)
subsidiary operates approximately 20,000 miles of road in 22 states and the District of Columbia, serves every
major container port in the eastern United States, and provides efficient connections to other rail carriers. We
operate the most extensive intermodal network in the East and are a major transporter of coal, automotive, and
industrial products. In 2012, as part of our Crescent Corridor initiative, we opened the new Memphis Regional
Intermodal Facility in Rossville, TN as well as the new Birmingham Regional Intermodal Facility in McCalla,
AL, in order to position ourselves to handle increased intermodal volumes faster and more reliably.
Financial results for 2012 were adversely affected as utility coal volumes declined, reflecting competition from
low natural gas prices and reduced electrical demand in NS-served regions. In addition, export coal average
revenue per unit dropped, a result of market-based pricing pressure. These decreases more than offset gains in our
intermodal and merchandise sectors, resulting in a 1% decline in railway operating revenues, which more than
offset the 1% reduction in railway operating expenses. As a result, the railway operating ratio (a measure of the
amount of operating revenues consumed by operating expenses) rose to 71.7%, as compared with 71.2% in 2011,
and net income declined 9%.
Cash provided by operating activities totaled $3.1 billion which, along with proceeds from borrowings and cash
on hand, allowed for property additions, share repurchases, dividend payments, and debt repayments. During
2012, we repurchased 18.8 million shares of Common Stock at a total cost of $1.3 billion. Since inception of our
stock repurchase program in 2006, we have repurchased and retired 128.4 million shares of Common Stock at a
total cost of $7.5 billion. At December 31, 2012, cash, cash equivalents, and short-term investments totaled
$668 million.
In 2013, we expect revenues to increase, reflecting higher volumes. We plan to continue to focus on safety, cost
control, increased productivity, improved serviced levels and operational efficiency, and an ongoing market-based
approach to pricing.
K20
SUMMARIZED RESULTS OF OPERATIONS
2012 Compared with 2011
Net income in 2012 was $1.7 billion, or $5.37 per diluted share, down $167 million, or 9%, compared with
$1.9 billion, or $5.45 per diluted share, in 2011. The decrease in net income was due to lower income from
railway operations, lower nonoperating income items, higher interest expense on debt, and a higher effective
income tax rate (Note 3). Railway operating revenues decreased modestly, $132 million, reflecting lower average
revenue per unit, including fuel surcharges. Railway operating expenses also decreased modestly, $43 million,
largely driven by the absence of the $58 million unfavorable arbitration ruling in 2011 and declines related to
network efficiency and productivity gains, offset by higher depreciation and intermodal volume-related expenses.
Oil prices affect our results of operations in a variety of ways and can have an overall favorable or unfavorable
impact in any particular period. In addition to the impact of oil prices on general economic conditions and traffic
volume, oil prices directly affect our revenues through market-based fuel surcharges and contract escalators (see
(cid:179)(cid:53)(cid:68)(cid:76)(cid:79)(cid:90)(cid:68)(cid:92)(cid:3)(cid:50)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:53)(cid:72)(cid:89)(cid:72)(cid:81)(cid:88)(cid:72)(cid:86)(cid:180)(cid:12)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:68)(cid:79)(cid:86)(cid:82)(cid:3)(cid:68)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87)(cid:3)(cid:73)(cid:88)(cid:72)(cid:79)(cid:3)(cid:70)(cid:82)(cid:86)(cid:87)(cid:86)(cid:3)(cid:11)(cid:86)(cid:72)(cid:72)(cid:3)(cid:179)(cid:53)(cid:68)(cid:76)(cid:79)(cid:90)(cid:68)(cid:92)(cid:3)(cid:50)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:40)(cid:91)(cid:83)(cid:72)(cid:81)(cid:86)(cid:72)(cid:86)(cid:180)(cid:12)(cid:17) For 2012,
excluding the impact of decreased consumption, the increase in fuel surcharge revenue was less than the increase
in fuel expense. Future changes in oil prices may cause volatility in operating results that could be material to a
particular year or quarter.
2011 Compared with 2010
Net income in 2011 was $1.9 billion, or $5.45 per diluted share, up $420 million, or 28%, compared with
$1.5 billion, or $4.00 per diluted share, in 2010. The increase in net income was primarily due to higher income
from railway operations and a lower effective tax rate (Note 3). Railway operating revenues increased
$1.7 billion, reflecting higher average revenue per unit, including fuel surcharges, and higher volumes. Railway
operating expenses increased $1.1 billion, primarily due to higher fuel prices and volume-related expenses.
DETAILED RESULTS OF OPERATIONS
Railway Operating Revenues
Railway operating revenues were $11.0 billion in 2012, $11.2 billion in 2011, and $9.5 billion in 2010. The
following table presents a three-year comparison of revenues, volumes, and average revenue per unit by market
group.
2012
Revenues
2011
($ in millions)
2010
2012
2010
2012
Units
2011
(in thousands)
Revenue per Unit
2011
($ per unit)
2010
Coal
General merchandise:
Chemicals
(cid:36)(cid:74)(cid:85)(cid:17)(cid:18)(cid:70)(cid:82)(cid:81)(cid:86)(cid:88)(cid:80)(cid:72)(cid:85)(cid:18)(cid:74)(cid:82)(cid:89)(cid:182)(cid:87)(cid:17)
Metals/construction
Automotive
Paper/clay/forest
General merchandise
Intermodal
Total
$ 2,879 $ 3,458 $ 2,719
1,414.1
1,619.6
1,556.7 $ 2,036 $ 2,135 $ 1,747
1,467
1,446
1,335
897
775
5,920
1,368
1,439
1,241
780
756
5,584
1,302
1,326
1,013
648
712
5,001
388.8
595.9
669.7
374.6
305.8
2,334.8
373.7
599.4
665.0
332.2
314.3
2,284.6
406.1
627.7
628.4
290.4
327.7
2,280.3
3,772
2,427
1,993
2,395
2,536
2,536
3,662
2,400
1,867
2,348
2,404
2,444
3,207
2,113
1,612
2,232
2,171
2,193
2,241
2,130
1,796
3,358.3
3,210.5
2,927.1
667
663
614
$ 11,040 $ 11,172 $ 9,516
7,107.2
7,114.7
6,764.1 $ 1,553 $ 1,570 $ 1,407
K21
Revenues decreased $132 million in 2012, but increased $1.7 billion in 2011. As reflected in the table below, the
decrease in 2012 was due to lower average revenue per unit (as the negative effects of changes in the mix of
traffic offset rate increases and slightly higher fuel surcharges) and slightly lower volume. The increase in 2011
was due to higher average revenue per unit (which was driven by rate increases and higher fuel surcharges, offset
in part by the effects of changes in the mix of business) and increased volumes. Fuel surcharge revenue increased
$23 million in 2012 and $531 million in 2011, and totaled $1.3 billion in both years. If fuel prices remain at or
near year-end 2012 levels, fuel surcharge revenue will be lower in 2013.
Many of our negotiated fuel surcharges for coal and general merchandise shipments are based on the monthly
average price of West Texas Intermediate Crude Oil (WTI Average Price). These surcharges are reset the first
day of each calendar month based on the WTI Average Price for the second preceding calendar month. This two-
month lag in applying WTI Average Price increased fuel surcharge revenue by approximately $39 million in
2012, but decreased fuel surcharge revenue by approximately $44 million in 2011 and $28 million in 2010.
Revenue Variance Analysis
Increase (Decrease)
2012 vs. 2011
2011 vs. 2010
($ in millions)
Revenue per unit
Traffic volume (units)
Total
$
$
(120)
(12)
$
(132)
$
1,163
493
1,656
For 2012, the unfavorable revenue per unit variance accounted for 91% of the total revenues decrease, reflecting
the negative effect of changes in the mix of business, offset in part by higher rates. The slightly unfavorable
volume variance was a reflection of lower coal, paper/clay/forest products, and agriculture/consumer
products/government shipments, which offset gains in the automotive, intermodal, chemicals, and
metals/construction commodity groups.
In 2011, the favorable revenue per unit variance accounted for 70% of the total revenues increase, reflecting
higher rates and increased fuel surcharges, offset in part by the effects of changes in mix. The favorable volume
variance reflected increases for all commodity groups, except chemicals, agriculture/consumer
products/government, and paper/clay/forest products, driven primarily by increased consumer demand.
One of our customers, DuPont, has a rate reasonableness complaint pending before the STB alleging that our
tariff rates for transportation of regulated movements are unreasonable. We dispute this allegation. Since June 1,
2009, we have been billing and collecting from DuPont amounts based on the challenged tariff rates. We
presently expect resolution of the DuPont case to occur in 2014 and believe the estimate of reasonably possible
loss will not have a material effect on our financial position, results of operations, or liquidity. With regard to rate
cases, we record adjustments to revenues in the periods, if and when, such adjustments are probable and
estimable.
COAL revenues decreased $579 million, or 17%, compared with 2011, reflecting a 13% decrease in carload
volume primarily due to fewer shipments of utility coal. Coal average revenue per unit was down 5%, the result
of lower pricing (mainly market-based export metallurgical coal) and decreased fuel surcharge revenue, partially
offset by the positive effect of changes in mix.
In 2011, coal revenues increased $739 million, or 27%, compared with 2010, reflecting higher average revenue
per unit and a 4% increase in volume principally due to a rise in domestic and global steel production. Coal
average revenue per unit was up 22% compared with 2010, reflecting improved pricing and increased fuel
surcharge revenue.
K22
For 2013, coal revenues are expected to decrease due to lower average revenue per unit driven by continued
market-based pricing pressure in the export coal market. Coal carload volumes are also anticipated to be lower in
2013.
Coal represented 26% of our revenues in 2012 and 80% of shipments handled originated on our lines. As shown
in the following table, tonnage decreased in each coal market.
Coal Tonnage by Market
2012
2011
(tons in thousands)
2010
Utility
Export
Domestic metallurgical
Industrial
101,636
28,304
18,793
7,376
122,004
28,461
19,702
7,713
120,737
22,750
19,771
7,573
Total
156,109
177,880
170,831
Utility coal tonnage dropped 17% in 2012, reflecting competition from low natural gas prices and reduced
electrical demand in NS-served regions. Additional tonnage declines resulted from coal plant closures and plant
maintenance.
In 2011, utility coal tonnage improved a modest 1%, primarily a result of new business and the resumption in the
first quarter of shipments to electrical generation units that had been idled in 2009. These increases were
tempered by the effects of increased natural gas generation due to low natural gas prices, reduced electrical
demand in NS-served regions, and severe weather disruptions in 2011.
For 2013, we expect utility coal tonnage to decrease, reflecting the effects of plant closures, continued low natural
gas prices, and higher-than-normal utility stockpiles.
Export coal tonnage decreased 1% compared to 2011, a reflection of weaker global demand for metallurgical
coal used in steel production in NS-served markets, in addition to the negative impact of the return of Australian
supply, offset in part by increased thermal shipments. Tonnage handled through Norfolk was down 1.3 million
tons, or 6%, whereas tonnage through Baltimore increased 0.3 million tons, or 4%. Other export tonnage handled
increased 0.8 million tons.
In 2011, export coal tonnage increased 25% compared with 2010, reflecting increased global demand for coal
used in steel production and tightened supply from Australia due to flooding in the first half of 2011. Tonnage
handled through Norfolk was up 4.7 million tons, or 30%, and Baltimore tonnage handled increased 0.8 million
tons, or 11%.
For 2013, export coal tonnage is expected to decrease as a result of sluggish demand from Europe partially offset
by improvement in Asia beginning in the second half of 2013.
Domestic metallurgical coal tonnage was down 5% in 2012, compared with 2011, as declines in coke and iron
ore shipments (primarily due to a plant closure) offset improved domestic steel production experienced in the first
half of 2012.
Domestic metallurgical coal tonnage was flat in 2011, compared with 2010.
For 2013, domestic metallurgical coal tonnage is expected to decrease as domestic steel production continues to
decelerate.
K23
Industrial coal tonnage decreased 4% in 2012, compared with 2011, as weak industrial demand was partially
offset by new business.
In 2011, industrial coal tonnage increased 2% compared to 2010, as new business completely offset the impact of
tight coal supply and network delays experienced in the early part of the year.
For 2013, new business is expected to drive increases in industrial coal tonnage.
GENERAL MERCHANDISE revenues in 2012 increased $336 million, or 6%, compared with 2011, reflecting
a 4% rise in average revenue per unit as a result of higher rates and fuel surcharges. Carload volume increased
2%.
In 2011, general merchandise revenues increased $583 million, or 12%, compared with 2010, reflecting an 11%
rise in average revenue per unit as a result of higher rates and fuel surcharges. Overall, carload volume was
relatively flat.
Chemicals revenues in 2012 increased 7%, compared with 2011, reflecting 4% growth in volume and a 3%
increase in average revenue per unit that resulted from higher rates and fuel surcharges. The volume
improvement was primarily the result of more carloads of crude oil from the Bakken and Canadian oil fields.
Additionally, there were more carloads of liquefied petroleum gas, as well as higher shipments of plastics driven
by greater demand for plastic bottles. These increases were offset in part by fewer shipments of rock salt as a
mild winter resulted in higher inventory levels throughout 2012.
In 2011, chemicals revenues grew 5%, compared with 2010, as a 14% increase in average revenue per unit that
resulted from higher rates and fuel surcharges more than offset the effects of an 8% decrease in volume. The
decline in volume was primarily a result of reduced shipments of fly ash, due to the completion of the Tennessee
Valley Authority ash project in the fourth quarter of 2010.
For 2013, chemicals revenues are anticipated to increase as a result of higher shipments of crude oil, as well as
more carloads of plastics linked to the projected resurgence of the housing market and continued growth in the
automotive market. Additionally, average revenue per unit is expected to be higher.
Agriculture, consumer products, and government revenues were relatively flat in 2012, compared with 2011,
as higher average revenue per unit was offset by lower volume. The volume decline was driven by reduced corn
shipments (due to plant closures), fewer carloads of fertilizer (led by certain network classification changes), and
reduced shipments of wheat to the eastern U.S. (due to customer sourcing changes). These volume declines were
offset in part by more shipments of soybean and soybean meal due to a poor South American bean crop, as well
as higher shipments of corn-based feed to Texas.
In 2011, agriculture, consumer products, and government revenues increased 9%, compared with 2010, the result
of a 14% improvement in average revenue per unit, which reflected higher rates and fuel surcharges. Volume
declined 5% as a result of fewer shipments of fertilizer due to certain network classification changes and reduced
shipments of corn to the Midwest due to the impact of a healthier Midwest crop.
For 2013, agriculture, consumer products, and government revenues are expected to improve as a result of higher
average revenue per unit offset in part by a decrease in volume. The projected decline in volume is primarily due
to fewer shipments of feed and corn as a result of the negative impact of the 2012 Midwest drought, in addition to
fewer revenue movements of empty equipment, which is expected to be offset in part by more fertilizer carloads.
Metals and construction revenues increased 8% in 2012, compared with 2011. The revenue improvement
resulted from 7% higher average revenue per unit, which reflected higher rates and fuel surcharges. Volume
improved 1%, reflecting more coil steel shipments driven by increased automotive production. The mild winter
weather experienced in early and late 2012 led to more shipments of cement for construction projects. There were
also higher shipments of fractionating sand for natural gas drilling. These increases were partially offset by fewer
K24
aggregates carloads, primarily driven by weak market conditions in road/highway construction, and as lower coal
utility burn led to fewer shipments of scrubber stone.
In 2011, metals and construction revenues increased 23%, compared with 2010. The improvement resulted from
16% growth in average revenue per unit, which reflected higher rates and fuel surcharges. Volume improved 6%,
reflecting increased automotive production that led to more shipments of coil steel and more carloads of
fractionating sand for natural gas drilling.
For 2013, metals and construction revenues are expected to increase reflecting higher average revenue per unit
and a modest increase in volume due to more shipments of fractionating sand and other materials as a result of
expected growth in the natural gas drilling sector.
Automotive revenues rose 15%, compared to 2011, reflecting 13% growth in volume due to increased North
American light vehicle production at NS-served plants and a 2% improvement in average revenue per unit,
including fuel surcharges.
In 2011, automotive revenues rose 20%, compared to 2010, reflecting a 14% rise in volume due to increased
domestic production of North American light vehicles and a 5% improvement in average revenue per unit, driven
by pricing gains and higher fuel surcharges.
For 2013, automotive revenues are expected to grow as a result of volume gains driven by a continued increase in
domestic production of North American light vehicles at NS-served plants, in addition to slightly higher average
revenue per unit.
Paper, clay and forest products revenues increased 3% in 2012, compared with 2011, reflecting a 5%
improvement in average revenue per unit due to increased rates, which more than offset the effects of a 3%
volume decline. The lower volume was due to reduced shipments of miscellaneous wood driven by the loss of
business and fewer carloads of pulp as a result of declining export market demand.
In 2011, paper, clay, and forest products revenues increased 6%, compared with 2010, reflecting an 11%
improvement in average revenue per unit due to higher rates and fuel surcharges, which more than offset the
effects of a 4% volume decline. The lower volume was principally due to fewer shipments of wood chips as drier
weather in the Southeast prompted customer sourcing changes, in addition to the closure of a plant in the third
quarter of 2011. Reduced shipments of kaolin and newsprint associated with lower demand and the loss of some
lower-rated business also impacted the year.
For 2013, paper, clay, and forest products revenues are expected to increase reflecting higher volumes of lumber
as housing starts continue to improve, in addition to higher average revenue per unit.
INTERMODAL revenues increased $111 million, or 5%, compared with 2011, reflecting 5% growth in volume
largely due to increased domestic units resulting from continued highway-to-rail conversions. Average revenue
per unit improved 1% as a result of higher fuel surcharges, partially offset by lower pricing.
Domestic volume (which includes truckload and intermodal marketing companies) increased 11%, reflecting
continued highway conversions.
Premium business, which includes parcel and less-than-truckload (LTL) carriers, rose 1%, as a result of stronger
market demand and new business.
International traffic volume fell 1%, as the loss of business from a shipping line was partially offset by growth
across remaining international customers.
Triple Crown Services (Triple Crown), a service with rail-to-highway trailers, experienced a 1% volume decline,
reflecting the elimination of some lower-margin business.
K25
In 2011, intermodal revenues increased $334 million, or 19%, compared with 2010, reflecting 10% growth in
volume and an 8% improvement in average revenue per unit as a result of higher fuel surcharges and rates. In
2011, all intermodal segments experienced volume increases, reflecting a steadily improving economy as well as
tight truck capacity. Domestic volume increased 15%; international volume improved 5%; premium business
rose 9%; and Triple Crown grew 1%.
For 2013, intermodal revenues are expected to increase due to higher volume and average revenue per unit as a
result of stronger market demand due to continued highway conversions.
Railway Operating Expenses
Railway operating expenses in 2012 were $7.9 billion, down $43 million, or 1% compared to 2011. Expenses in
2011 were $8.0 billion, up $1.1 billion, or 16% compared to 2010. The decrease in 2012 reflected the absence of
(cid:79)(cid:68)(cid:86)(cid:87)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:182)(cid:86)(cid:3)(cid:7)(cid:24)(cid:27) million unfavorable arbitration ruling and lower equipment rents due to gains in network
efficiency. These favorable decreases were offset in part by higher depreciation expense, which resulted from an
increased capital base, in addition to higher purchased services. The increase in 2011 was primarily due to higher
fuel prices, increased volume-related expenses, and the unfavorable arbitration ruling.
The following table shows the changes in railway operating expenses summarized by major classifications.
Operating Expense Variances
Increase (Decrease)
2012 vs. 2011
2011 vs. 2010
($ in millions)
Materials and other
Compensation and benefits
Fuel
Purchased services and rents
Depreciation
Total
$
$
(65)
(14)
(12)
(6)
54
(43)
$
167
266
510
133
43
$
1,119
Materials and other expenses (including the estimates of costs related to personal injury, property damage, and
environmental matters) decreased $65 million, or 7%, in 2012, but increased $167 million, or 22%, in 2011, as
shown in the following table.
2012
2011
($ in millions)
2010
Materials
Casualties and other claims
Other
Total
$
$
408 $
130
321
859 $
408 $
216
300
924 $
346
142
269
757
The decrease in 2012 reflected the (cid:68)(cid:69)(cid:86)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:83)(cid:85)(cid:76)(cid:82)(cid:85)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:182)(cid:86)(cid:3)unfavorable arbitration ruling discussed below and
(cid:80)(cid:82)(cid:85)(cid:72)(cid:3)(cid:73)(cid:68)(cid:89)(cid:82)(cid:85)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:83)(cid:72)(cid:85)(cid:86)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3)(cid:76)(cid:81)(cid:77)(cid:88)(cid:85)(cid:92)(cid:3)(cid:70)(cid:79)(cid:68)(cid:76)(cid:80)(cid:86)(cid:3)(cid:71)(cid:72)(cid:89)(cid:72)(cid:79)(cid:82)(cid:83)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:83)(cid:85)(cid:76)(cid:82)(cid:85)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:86)(cid:182)(cid:3)(cid:70)(cid:79)(cid:68)(cid:76)(cid:80)(cid:86)(cid:3)(cid:11)(cid:7)(cid:22)(cid:23) million). These favorable items
were partially offset by higher costs associated with property taxes and environmental remediation.
K26
The increase in 2011 reflected the unfavorable arbitration ruling and higher costs associated with locomotive and
railcar materials, taxes (primarily sales and use, property, and excise), employee travel, and supply costs, as well
as less favorable personal injury claims development.
The Consolidated Balance Sheets reflect long-term receivables for estimated recoveries from our insurance
carriers for claims associated with the January 6, 2005, derailment in Graniteville, S.C. In the first quarter of
2011, we received an unfavorable ruling for an arbitration claim with an insurance carrier and were denied
recovery of the contested portion of the claim. As a result, we recorded a $43 million charge for the receivables
associated with the contested portion of the claim and a $15 million charge for other receivables affected by the
ruling for which recovery was no longer probable.
The largest component of casualties and other claims expense is personal injury costs. Cases involving
occupational injuries comprised about 40% of total employee injury cases resolved and about 25% of total
employee injury payments made. With our long-established commitment to safety, we continue to work actively
to eliminate all employee injuries and reduce the associated costs. With respect to occupational injuries, which
are not caused by a specific accident or event but allegedly result from a claimed exposure over time, the benefits
of any existing safety initiatives may not be realized immediately. The majority of these types of claims are being
asserted by former or retired employees, some of whom have not been actively employed in the rail industry for
decades. The rail industry remains uniquely susceptible to litigation involving job-related accidental injury and
(cid:82)(cid:70)(cid:70)(cid:88)(cid:83)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3)(cid:70)(cid:79)(cid:68)(cid:76)(cid:80)(cid:86)(cid:3)(cid:69)(cid:72)(cid:70)(cid:68)(cid:88)(cid:86)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:41)(cid:72)(cid:71)(cid:72)(cid:85)(cid:68)(cid:79)(cid:3)(cid:40)(cid:80)(cid:83)(cid:79)(cid:82)(cid:92)(cid:72)(cid:85)(cid:86)(cid:182)(cid:3)(cid:47)(cid:76)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:3)(cid:36)(cid:70)(cid:87)(cid:3)(cid:11)(cid:41)(cid:40)(cid:47)(cid:36)(cid:12)(cid:15)(cid:3)(cid:90)(cid:75)(cid:76)ch is applicable only to
railroads. (cid:41)(cid:40)(cid:47)(cid:36)(cid:182)(cid:86)(cid:3)(cid:73)(cid:68)(cid:88)(cid:79)(cid:87)-based system, which covers employee claims for job-related injuries, produces results
that are unpredictable and inconsistent as compared with a no-(cid:73)(cid:68)(cid:88)(cid:79)(cid:87)(cid:3)(cid:90)(cid:82)(cid:85)(cid:78)(cid:72)(cid:85)(cid:86)(cid:182)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:72)(cid:81)(cid:86)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:86)(cid:92)(cid:86)(cid:87)(cid:72)(cid:80)(cid:17)(cid:3)
We maintain substantial amounts of insurance for potential third-party liability and property damage claims. We
also retain reasonable levels of risk through self-insurance (Note 16).
Compensation and benefits, which represents 37% of total operating expenses, decreased $14 million in 2012,
reflecting changes in:
employee activity levels (down $40 million),
incentive and stock-based compensation (down $35 million),
(cid:120)
(cid:120)
(cid:120) pay rates (up $43 million), and
(cid:120) pension and postretirement benefit costs (up $16 million).
agreement employee activity levels associated with increased volumes (up $70 million),
In 2011, compensation and benefits increased $266 million, or 10%, compared with 2010, primarily due to
higher:
(cid:120)
(cid:120) health and welfare benefit costs for agreement employees (up $50 million),
(cid:120)
(cid:120) payroll taxes (up $37 million),
(cid:120) pension benefit costs (up $19 million), and
(cid:120) wage rates (up $16 million).
incentive compensation (up $39 million),
Our employment averaged 30,943 in 2012, compared with 30,329 in 2011, and 28,559 in 2010. The 2012
increase was a result of additional mechanical and maintenance of way personnel to support field operations.
Looking forward to 2013, we expect employment levels to be lower than 2012 as we continue to benefit from
productivity increases and operational efficiencies. We also expect increased compensation and benefits costs as
a result of higher wage rates.
Fuel expense, which includes the cost of locomotive fuel as well as other fuel used in railway operations,
decreased $12 million, or 1%, in 2012, but increased $510 million, or 47%, in 2011. The decline in 2012 was
principally the result of lower fuel consumption (locomotive fuel consumption declined 3%), which had an impact
of $52 million, offset in part by higher fuel prices (locomotive fuel prices rose 3%), which had an impact of
$40 million.
K27
The increase in 2011 reflected higher fuel prices (locomotive fuel prices increased 37%), which had an effect of
$431 million, as well as increased fuel consumption (locomotive fuel consumption rose 8%), which had an effect
of $79 million.
Purchased services and rents includes the costs of services purchased from outside contractors, including the net
costs of operating joint (or leased) facilities with other railroads and the net cost of equipment rentals. This
category of expenses decreased $6 million in 2012, but increased $133 million, or 9%, in 2011.
2012
2011
($ in millions)
2010
Purchased services
Equipment rents
Total
$
$
1,321 $
283
1,272 $
338
1,604 $
1,610 $
1,151
326
1,477
The increase in 2012 for purchased services costs reflected higher professional and consulting fees, intermodal
operations expenses, Conrail-related casualty costs ($15 million), and advertising expenses. These increases were
partially offset by lower haulage expenses. The increase in 2011 was principally driven by higher costs
associated with greater volumes.
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, decreased in 2012 as a result of increased
velocity and improved equipment utilization, whereas the increase in 2011 was principally due to higher traffic
volumes.
Depreciation expense grew $54 million, or 6%, in 2012, and $43 million, or 5%, in 2011. These increases reflect
our larger roadway and equipment capital base as we continue to invest in our infrastructure and rolling stock.
Other Income (cid:177) Net
Other income (cid:177) net was $129 million in 2012, $160 million in 2011, and $153 million in 2010 (Note 2). The
decline in 2012 reflected fewer gains on the sale of property, decreased coal royalties, and higher interest expense
(net) on uncertain tax positions offset in part by higher net returns from corporate-owned life insurance (COLI),
increased equity in the earnings of Conrail, and higher rental income. During the fourth quarter of 2012, we
closed on the sale of certain assets to the Michigan Department of Transportation. The associated gain on the sale
has been deferred until we cease to have ongoing obligations associated with the assets, which is expected to
occur within the next 12 months.
The increase in 2011 reflected reduced interest expense (net) on uncertain tax positions, higher net COLI returns,
and increased coal royalties. The increases were offset in part by fewer gains on the sale of property and
increased professional and legal fees associated with the third quarter debt exchange and the fourth quarter credit
facility renewal (up $7 million).
K28
Income Taxes
Income tax expense in 2012 was $1 billion, an effective rate of 37%, compared with 34% in 2011 and 37% in
2010. The increase in the rate for 2012 primarily (cid:85)(cid:72)(cid:73)(cid:79)(cid:72)(cid:70)(cid:87)(cid:86)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:68)(cid:69)(cid:86)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:83)(cid:85)(cid:76)(cid:82)(cid:85)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:182)(cid:86)(cid:3)(cid:73)(cid:68)(cid:89)(cid:82)(cid:85)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:85)(cid:72)(cid:86)(cid:82)(cid:79)(cid:88)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)
the Internal Revenue Service (IRS) examination of our 2008 return and review of certain claims for refund
($40 million) and the absence of a favorable reduction in deferred tax expense for state law changes ($28 million).
The decrease in the rate for 2011 was primarily due to the favorable adjustments discussed above and the absence
of a 2010 charge to deferred tax expense ($27 million) due to a change in the tax law impacting the Medicare Part
D retiree drug subsidy program. These decreases were offset in part by the absence of a 2010 $34 million benefit
resulting from a change in estimate for deferred taxes.
Fifty-percent bonus depreciation was allowed for federal income taxes for 2010. In December 2010, the Tax
Relief, Unemployment Insurance Reauthorization and Job Creation Act increased bonus depreciation to 100
percent for the period September 2010 through the end of 2011 and allowed fifty-percent bonus depreciation in
2012. The American Taxpayer Relief Act of 2012, which was signed into law on January 2, 2013, extended fifty-
percent bonus depreciation for an additional year. While bonus depreciation does not affect our total provision for
income taxes or effective rate, the absence of bonus depreciation after 2013 is expected to increase current income
tax expense and the related cash outflows for the payment of income taxes beginning in 2014. The American
Taxpayer Relief Act also reinstated certain business tax credits retroactively to January 1, 2012. The effects of
changes in tax laws, including retroactive changes, are recognized in the period in which the changes are enacted.
Accordingly, we expect to recognize approximately $9 million of income tax benefits in the first quarter of 2013
for these tax law changes.
IRS examinations have been completed for all years prior to 2011. We expect the IRS will begin auditing our
2011 and 2012 consolidated income tax returns in late 2013.
FINANCIAL CONDITION, LIQUIDITY, AND CAPITAL RESOURCES
Cash provided by operating activities, our principal source of liquidity, was $3.1 billion in 2012 compared with
$3.2 billion in 2011 and $2.7 billion in 2010. The decline in 2012 reflects increased tax payments driven by
reduced bonus depreciation, in addition to lower operating results. The increase in 2011 reflected better operating
results and lower income taxes paid due to additional bonus depreciation. We had working capital of $161 million
at December 31, 2012, compared with $50 million at December 31, 2011, primarily reflecting a higher cash
balance as a result of new debt issued and lower share repurchase activity in 2012. Cash, cash equivalents, and
short-term investment balances totaled $668 million and $301 million at December 31, 2012 and 2011,
respectively, and were invested in accordance with our corporate investment policy as approved by the Board of
Directors. The portfolio contains securities that are subject to market risk. There are no limits or restrictions on
our access to these assets. We expect cash on hand combined with cash provided by operating activities will be
sufficient to meet our ongoing obligations.
K29
Contractual obligations at December 31, 2012, were comprised of interest on fixed-rate long-term debt and capital
leases, long-term debt and capital leases (Note 8), operating leases (Note 9), unconditional purchase obligations
(Note 16), agreements with CRC and long-term advances from Conrail (Note 5), and unrecognized tax benefits
(Note 3):
Total
2013
2014 -
2015
2016 -
2017
($ in millions)
2018 and
Subsequent Other
Interest on fixed-rate long-term debt
and capital lease principal
Long-term debt and capital lease principal
Operating leases
Unconditional purchase obligations
Agreements with CRC
Long-term advances from Conrail
Unrecognized tax benefits*
$ 12,951 $
8,482
749
560
382
133
63
503 $
50
91
385
33
-
-
974 $
447
141
108
66
-
-
887 $
1,050
95
37
66
-
-
10,587 $
6,935
422
30
217
133
-
Total
$ 23,320 $ 1,062 $ 1,736 $ 2,135 $
18,324 $
-
-
-
-
-
-
63
63
* When the amount and timing of liabilities for unrecognized tax benefits can be reasonably estimated, the
amount is shown in the table under the appropriate period. When the year of settlement cannot be reasonably
estimated, the amount is shown in the Other column.
Off balance sheet arrangements consist of obligations related to operating leases, which are included in the
table of contractual obligations above and disclosed in Note 9.
Cash used in investing activities was $2.0 billion in 2012, compared with $1.8 billion in 2011, and $1.5 billion
in 2010. The increase in 2012 primarily reflects a decrease in investment sales, net of purchases, and increased
property additions that were offset in part by proceeds from property sales. The 2011 increase resulted from
higher property additions offset in part by a decrease in investment purchases.
Property additions account for most of the recurring spending in this category. The following tables show capital
spending (including capital leases) and track and equipment statistics for the past five years.
Property Additions
2012
2011
2010
($ in millions)
2009
2008
Road and other property
Equipment
Total
$
$
$
1,465
776
$
1,222
938
$
1,153
317
$
1,128
171
2,241
$
2,160
$
1,470
$
1,299
$
1,070
488
1,558
Track Structure Statistics (Capital and Maintenance)
2012
2011
2010
2009
2008
Track miles of rail installed
Miles of track surfaced
New crossties installed (millions)
509
5,642
2.6
484
5,441
2.7
422
5,326
2.6
434
5,568
2.7
459
5,209
2.7
K30
Average Age of Owned Railway Equipment
2012
2011
2010
(years)
2009
2008
Freight cars
Locomotives
Retired locomotives
30.2
21.6
41.2
30.3
21.0
31.7
31.0
20.5
28.4
30.3
19.9
31.2
29.9
18.9
34.4
For 2013, we budgeted $2.0 billion for property additions. The anticipated spending includes $831 million for the
normalized replacement of rail, ties and ballast and the improvement or replacement of bridges. Planned
equipment spending of $420 million includes new and rebuilt locomotives, rebodying of coal cars, intermodal
containers and chassis, and multilevel automobile racks. Investments in facilities and terminals are anticipated to
be $203 million, and include intermodal terminals and equipment to add capacity to the intermodal network
(including the Crescent Corridor initiative), mechanical service shops and bulk transfer facilities. We budgeted
$229 million for the continued implementation of positive train control (PTC) and expect additional PTC-related
property additions of at least $674 million in 2014 and 2015. We also expect to spend $84 million on
infrastructure improvements to increase mainline capacity, accommodate business growth and provide our share
of funding for various public/private partnership investments such as Crescent Corridor and the Chicago
CREATE project. Technology investments of $57 million are planned for new or upgraded systems and
computers.
The Crescent Corridor consists of a program of projects for infrastructure and other facility improvements geared
toward creating a seamless, high-capacity intermodal route spanning 11 states from New Jersey to Louisiana and
offering truck-competitive service along several major interstate highway corridors, including I-81, I-85, I-20,
I-40, I-59, I-78, and I-75. Based on the public benefits that stand to be derived in the form of highway congestion
relief, we plan to implement certain elements of the Crescent Corridor through a series of public-private
partnerships. Currently, the Crescent Corridor has received or expects to receive a total of $295 million in public
capital funding commitments from the Commonwealths of Pennsylvania and Virginia, the State of Tennessee, the
federal TIGER Stimulus Program and other federal funding sources related to projects in Alabama, Pennsylvania,
Tennessee, and North Carolina. With respect to the private funding component, we currently anticipate spending
up to $300 million for the substantial completion of work on these projects, which is expected in 2014. Planned
2013 investments for the Crescent Corridor approximate $42 million.
Cash used in financing activities was $694 million in 2012, compared with $2.0 billion in 2011, and
$1.4 billion in 2010. The change in 2012 reflects lower share repurchases, increased proceeds from borrowings,
reduced debt repayments and maturities, offset in part by higher dividends. The change in 2011 reflected
increased share repurchases, offset in part by higher proceeds from borrowing, net of debt repayments.
Share repurchases totaled $1.3 billion in 2012, $2.1 billion in 2011, and $863 million in 2010 for the purchase and
retirement of 18.8 million, 30.2 million, and 14.7 million shares, respectively. On August 1, 2012, our Board of
Directors authorized the repurchase of up to an additional 50 million shares of Common Stock through
December 31, 2017. The timing and volume of future share repurchases will be guided by our assessment of
market conditions and other pertinent factors. Any near-term purchases under the program are expected to be
made with internally generated cash, cash on hand, or proceeds from borrowings. As of December 31, 2012, we
had remaining authority from our Board of Directors to repurchase 46.6 million shares through December 31,
2017.
K31
During 2012, we issued:
(cid:120) $600 million of 3.00% senior notes due 2022,
(cid:120) $600 million of 3.95% senior notes due 2042, and
(cid:120) $600 million of 2.90% senior notes due 2023 and paid $115 million of premium in cash in
exchange for $521 million of previously issued notes ($156 million at 7.25% due 2031,
$140 million at 5.64% due 2029, $115 million at 5.59% due 2025, $72 million at 7.80% due
2027, and $38 million at 7.05% due 2037). The exchange premium was reflected as a
reduction of debt (cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:21)(cid:19)(cid:20)(cid:21)(cid:3)(cid:38)(cid:82)(cid:81)(cid:86)(cid:82)(cid:79)(cid:76)(cid:71)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:37)(cid:68)(cid:79)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:54)(cid:75)(cid:72)(cid:72)(cid:87)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:85)(cid:72)(cid:73)(cid:79)(cid:72)(cid:70)(cid:87)(cid:72)(cid:71)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:76)(cid:81)(cid:3)(cid:179)(cid:39)(cid:72)(cid:69)(cid:87)(cid:3)
(cid:85)(cid:72)(cid:83)(cid:68)(cid:92)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:180)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:21)(cid:19)(cid:20)(cid:21)(cid:3)(cid:54)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:38)(cid:68)(cid:86)(cid:75)(cid:3)(cid:41)(cid:79)(cid:82)(cid:90)(cid:86)(cid:15)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:90)(cid:76)(cid:79)(cid:79)(cid:3)(cid:69)(cid:72)(cid:3)(cid:68)(cid:80)(cid:82)(cid:85)(cid:87)(cid:76)(cid:93)(cid:72)(cid:71)(cid:3)(cid:68)(cid:86)(cid:3)(cid:68)(cid:71)(cid:71)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3)
interest expense over the term of the new debt.
Our debt-to-total capitalization ratio was 47.1% at December 31, 2012, compared with 43.2% at December 31,
2011.
As of December 31, 2012, we had authority from our Board of Directors to issue an additional $600 million of
debt or equity securities through public or private sale. We have on file with the SEC a Form S-3 automatic shelf
registration statement for well-known seasoned issuers under which securities may be issued pursuant to this
authority.
We also have in place and available a $750 million, five-year credit agreement expiring in 2016, which provides
for borrowings at prevailing rates and includes covenants. We had no amounts outstanding under this facility at
December 31, 2012 and are in compliance with all of its covenants. In October 2012, we renewed our
$350 million accounts receivable securitization program with a 364-day term to run until October 2013. There
was $300 million outstanding under this program at December 31, 2012 and $200 million outstanding at
December 31, 2011 (Note 8).
Upcoming annual debt maturities are relatively modest (Note 8). Overall, our goal is to maintain a capital
structure with appropriate leverage to support our business strategy and provide flexibility through business
cycles.
APPLICATION OF CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements in accordance with U.S. Generally Accepted Accounting Principles
(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 significant
judgment about matters that are inherently uncertain, and future events are likely to occur that may require us to
make changes to these estimates and assumptions. Accordingly, we regularly review these estimates and
assumptions based on historical experience, changes in the business environment, and other factors we believe to
be reasonable under the circumstances. We regularly discuss the development, selection, and disclosures
concerning critical accounting estimates with the Audit Committee of the Board of Directors.
Pensions and Other Postretirement Benefits
Accounting for pensions and other postretirement benefit plans requires us to make several estimates and
assumptions (Note 11). (cid:55)(cid:75)(cid:72)(cid:86)(cid:72)(cid:3)(cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:72)(cid:91)(cid:83)(cid:72)(cid:70)(cid:87)(cid:72)(cid:71)(cid:3)(cid:85)(cid:68)(cid:87)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:85)(cid:72)(cid:87)(cid:88)(cid:85)(cid:81)(cid:3)(cid:73)(cid:85)(cid:82)(cid:80)(cid:3)(cid:76)(cid:81)(cid:89)(cid:72)(cid:86)(cid:87)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:83)(cid:79)(cid:68)(cid:81)(cid:86)(cid:182)(cid:3)(cid:68)(cid:86)(cid:86)(cid:72)(cid:87)(cid:86)(cid:15)(cid:3)(cid:83)(cid:85)(cid:82)(cid:77)(cid:72)(cid:70)(cid:87)(cid:72)(cid:71)(cid:3)
increases in medical costs, and the expected retirement age of employees as well as their projected earnings and
mortality. In addition, the amounts recorded are affected by changes in the interest rate environment because the
associated liabilities are discounted to their present value. We make these estimates based on our historical
experience and other information that we deem pertinent under the circumstances (for example, expectations of
future stock market performance). We (cid:88)(cid:87)(cid:76)(cid:79)(cid:76)(cid:93)(cid:72)(cid:3)(cid:68)(cid:81)(cid:3)(cid:76)(cid:81)(cid:71)(cid:72)(cid:83)(cid:72)(cid:81)(cid:71)(cid:72)(cid:81)(cid:87)(cid:3)(cid:68)(cid:70)(cid:87)(cid:88)(cid:68)(cid:85)(cid:76)(cid:68)(cid:79)(cid:3)(cid:70)(cid:82)(cid:81)(cid:86)(cid:88)(cid:79)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:73)(cid:76)(cid:85)(cid:80)(cid:182)(cid:86)(cid:3)(cid:86)(cid:87)(cid:88)(cid:71)(cid:76)(cid:72)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)(cid:68)(cid:86)(cid:86)(cid:76)(cid:86)(cid:87)(cid:3)us in
selecting appropriate assumptions and valuing related liabilities.
K32
(cid:49)(cid:72)(cid:87)(cid:3)(cid:83)(cid:72)(cid:81)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3)(cid:72)(cid:91)(cid:83)(cid:72)(cid:81)(cid:86)(cid:72)(cid:15)(cid:3)(cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3)(cid:76)(cid:86)(cid:3)(cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:179)(cid:38)(cid:82)(cid:80)(cid:83)(cid:72)(cid:81)(cid:86)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:69)(cid:72)(cid:81)(cid:72)(cid:73)(cid:76)(cid:87)(cid:86)(cid:180)(cid:3)(cid:76)(cid:81)(cid:3)the Consolidated Statements of
Income, was $60 million for 2012. In recording this amount, we assumed a long-term investment rate of return of
8.25%, which was supported by the long-term total rate of return on plan assets since inception. A one percentage
point change to this rate of return assumption would result in a $17 million change in pension expense and, as a
(cid:85)(cid:72)(cid:86)(cid:88)(cid:79)(cid:87)(cid:15)(cid:3)(cid:68)(cid:81)(cid:3)(cid:72)(cid:84)(cid:88)(cid:68)(cid:79)(cid:3)(cid:70)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)(cid:3)(cid:76)(cid:81)(cid:3)(cid:179)(cid:38)(cid:82)(cid:80)(cid:83)(cid:72)(cid:81)(cid:86)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:69)(cid:72)(cid:81)(cid:72)(cid:73)(cid:76)(cid:87)(cid:86)(cid:180)(cid:3)(cid:72)(cid:91)(cid:83)(cid:72)(cid:81)(cid:86)(cid:72)(cid:17) Changes that are reasonably likely to occur in
assumptions concerning retirement age, projected earnings, and mortality would not be expected to have a
material effect on our net pension expense or net pension liability in the future. The net pension liability is
recorded at net present value using a discount rate that is based on the current interest rate environment in light of
the timing of expected benefit payments. We utilize analyses in which the projected annual cash flows from the
pension and postretirement benefit plans are matched with yield curves based on an appropriate universe of high-
quality corporate bonds. We use the results of the yield curve analyses to select the discount rates that match the
payment streams of the benefits in these plans.
(cid:49)(cid:72)(cid:87)(cid:3)(cid:70)(cid:82)(cid:86)(cid:87)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:82)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:83)(cid:82)(cid:86)(cid:87)(cid:85)(cid:72)(cid:87)(cid:76)(cid:85)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:69)(cid:72)(cid:81)(cid:72)(cid:73)(cid:76)(cid:87)(cid:86)(cid:15)(cid:3)(cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3)(cid:76)(cid:86)(cid:3)(cid:68)(cid:79)(cid:86)(cid:82)(cid:3)(cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:179)(cid:38)(cid:82)(cid:80)(cid:83)(cid:72)(cid:81)(cid:86)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:69)(cid:72)(cid:81)(cid:72)(cid:73)(cid:76)(cid:87)(cid:86)(cid:15)(cid:180)(cid:3)(cid:90)(cid:68)(cid:86)(cid:3)
$107 million for 2012. In recording this expense and valuing the net liability for other postretirement benefits, we
estimated future increases in healthcare costs. These assumptions, along with the effect of a one-percentage point
change in them, are described in Note 11.
Properties and Depreciation
Most of our total assets are long-lived railway properties (Note 6). As disclosed in Note 1, properties are
depreciated using group depreciation. The primary depreciation method for our asset base is group life. Units of
production is the principal method of depreciation for rail in high density corridors and for depletion of natural
resources. Remaining properties are depreciated generally using the straight-line method over the lesser of
estimated service or lease lives.
Depreciation expense is based on assumptions concerning expected service lives of properties as well as the
expected net salvage that will be received upon their retirement. In developing these assumptions, we utilize
periodic depreciation studies that are performed by an independent outside firm of consulting engineers and
approved by the STB. Depreciation studies are conducted about every three years for equipment and every six
years for track assets and other roadway property. The frequency of these studies correlates with guidelines
established by the STB.
Key factors which are considered in developing average service life and salvage estimates include:
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
statistical analyses of historical retirement data and surviving asset records;
review of historical salvage received and current market rates;
review of our operations including expected changes in technology, customer demand, maintenance
practices and asset management strategies;
review of accounting policies and assumptions; and
industry review and analysis.
The units of production depreciation rate for rail in high density corridors is derived based on consideration of
annual gross ton miles as compared to the total or ultimate capacity of rail in these corridors. Our experience has
shown that traffic density is a leading factor in determination of the expected service life of rail in high density
corridors. In developing the respective depreciation rate, consideration is also given to several rail characteristics
including age, weight, condition (new or second hand) and type (curve or straight). As a result, a composite
depreciation rate is developed which is applied to the depreciable base.
Recent experience with these studies has been that while they do result in changes in depreciation rates, these
changes have not caused a significant effect to annual depreciation expense. Changes in rates as a result of
depreciation studies are implemented prospectively. These studies may also indicate that the recorded amount of
accumulated depreciation is deficient (or in excess) of the amount indicated by the study. Any such deficiency (or
excess) is amortized as a component of depreciation expense over the remaining service lives of the affected class
K33
of property, as determined by the study. Depreciation expense for 2012 totaled $916 million. Our composite
depreciation rates for 2012 are disclosed in Note 6; a one-tenth percentage point increase (or decrease) in these
rates would have resulted in a $33 million increase (or decrease) to depreciation expense. For 2012, roadway
depreciation rates ranged from 0.83% to 33.3% and equipment depreciation rates ranged from 1.32% to 37.84%.
When properties other than land and nonrail assets are sold or retired in the ordinary course of business, the cost
of the assets, net of sale proceeds or salvage, is charged to accumulated depreciation, and no gain or loss is
recognized in earnings. Actual historical cost values are retired when available, such as with equipment
assets. The use of estimates in recording the retirement of certain roadway assets is necessary based on the
impracticality of tracking individual asset costs. When retiring rail, ties, and ballast, we use statistical curves that
indicate the relative distribution of the age of the assets retired. The historical cost of other roadway assets is
estimated using a combination of inflation indices specific to the rail industry and those published by the U.S.
Bureau of Labor Statistics. The indices are applied to the replacement value based on the age of the retired
assets. These indices are used because they closely correlate with the costs of roadway assets. Gains and losses
on di(cid:86)(cid:83)(cid:82)(cid:86)(cid:68)(cid:79)(cid:3)(cid:82)(cid:73)(cid:3)(cid:79)(cid:68)(cid:81)(cid:71)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:81)(cid:82)(cid:81)(cid:85)(cid:68)(cid:76)(cid:79)(cid:3)(cid:68)(cid:86)(cid:86)(cid:72)(cid:87)(cid:86)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:179)(cid:50)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:76)(cid:81)(cid:70)(cid:82)(cid:80)(cid:72)(cid:3)(cid:177) (cid:81)(cid:72)(cid:87)(cid:180)(cid:3)(cid:11)(cid:49)(cid:82)(cid:87)(cid:72)(cid:3)(cid:21)(cid:12)(cid:3)(cid:86)(cid:76)(cid:81)(cid:70)(cid:72)(cid:3)(cid:86)(cid:88)(cid:70)(cid:75)(cid:3)(cid:76)(cid:81)(cid:70)(cid:82)(cid:80)(cid:72)(cid:3)(cid:76)(cid:86)(cid:3)(cid:81)(cid:82)(cid:87)(cid:3)(cid:68)(cid:3)
product of our railroad operations.
A retirement is considered abnormal if it does not occur in the normal course of business, if it relates to
disposition of a large segment of an asset class and if the retirement varies significantly from the retirement
profile identified through our depreciation studies, which inherently consider the impact of normal retirements on
expected service lives and depreciation rates. Gains or losses from abnormal retirements would be recognized in
earnings; however, there were no such gains or losses in 2012, 2011, or 2010.
We review the carrying amount of properties whenever events or changes in circumstances indicate that such
carrying amount may not be recoverable based on future undiscounted cash flow. Assets that are deemed
impaired as a result of such review would be recorded at the lesser of carrying amount or fair value; however,
there were no such impairments in 2012, 2011, or 2010.
Personal Injury, Environmental, and Legal Liabilities
Casualties and other claims expense(cid:15)(cid:3)(cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:179)(cid:48)(cid:68)(cid:87)(cid:72)(cid:85)(cid:76)(cid:68)(cid:79)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:82)(cid:87)(cid:75)(cid:72)(cid:85)(cid:15)(cid:180)(cid:3)totaled $130 million in 2012. Typically,
most of this expense relates to our accrual for personal injury liabilities. Job-related personal injury and
occupational claims are subject to FELA, which is applicable only to railroads. (cid:41)(cid:40)(cid:47)(cid:36)(cid:182)(cid:86)(cid:3)(cid:73)(cid:68)(cid:88)(cid:79)(cid:87)-based tort system
produces results that are unpredictable and inconsistent as compared with a no-(cid:73)(cid:68)(cid:88)(cid:79)(cid:87)(cid:3)(cid:90)(cid:82)(cid:85)(cid:78)(cid:72)(cid:85)(cid:182)(cid:86)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:72)(cid:81)(cid:86)ation
system. The variability inherent in this system could result in actual costs being very different from the liability
recorded. In all cases, we record a liability when the expected loss for the claim is both probable and estimable.
To aid in valuing personal injury liability and determining the amount to accrue during each period, we utilize
studies prepared by an independent consulting actuarial firm. For employee personal injury cases, the actuarial
firm studies our historical patterns of reserving for claims and subsequent settlements, taking into account
relevant outside influences. We estimate the ultimate amount of the liability, which includes amounts for incurred
but unasserted claims, based on the results of this analysis. For occupational injury claims, the actuarial firm
studies our history of claim filings, severity, payments and other relevant facts. Additionally, our estimate of the
ultimate loss for occupational injuries includes a provision for those claims that have been incurred but not
reported by projecting our experience into the future as far as can be reasonably determined. We have recorded
this actuarially determined liability. The liability is dependent upon many individual judgments made as to the
specific case reserves, as well as our and the (cid:68)(cid:70)(cid:87)(cid:88)(cid:68)(cid:85)(cid:76)(cid:68)(cid:79)(cid:3)(cid:73)(cid:76)(cid:85)(cid:80)(cid:182)(cid:86) judgments in the periodic studies. Accordingly, there
could be significant changes in the liability, which we would recognize when such a change became known.
While the liability recorded is supported by the most recent study, it is possible that the ultimate liability could be
higher or lower. The operating expenses for personal injury claims totaled $54 million in 2012, $88 million in
2011, and $75 million in 2010.
We are (cid:86)(cid:88)(cid:69)(cid:77)(cid:72)(cid:70)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:89)(cid:68)(cid:85)(cid:76)(cid:82)(cid:88)(cid:86)(cid:3)(cid:77)(cid:88)(cid:85)(cid:76)(cid:86)(cid:71)(cid:76)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:182)(cid:3)(cid:72)(cid:81)(cid:89)(cid:76)(cid:85)(cid:82)(cid:81)(cid:80)(cid:72)(cid:81)(cid:87)(cid:68)(cid:79)(cid:3)laws and regulations. We record a liability where such
liability or loss is probable and its amount can be estimated reasonably (Note 16). Claims, if any, against third
K34
parties for recovery of cleanup costs (cid:90)(cid:72)(cid:182)(cid:89)(cid:72)(cid:3)incurred, are reflected as receivables (when collection is probable) in
the Consolidated Balance Sheets and are not netted against the associated liability. Environmental engineers
regularly participate in ongoing evaluations of all known sites and in determining any necessary adjustments to
liability estimates. We have an Environmental Policy Council, composed of senior managers, to oversee and
interpret our environmental policy.
Operating expenses for environmental matters totaled $40 million in 2012, $32 million in 2011, and $26 million
in 2010, and property additions for environmental matters totaled $6 million in 2012, $7 million in 2011, and
$8 million in 2010. Property additions for environmental matters in 2013 are expected to be about $8 million.
Our Consolidated Balance Sheets include liabilities for environmental exposures of $42 million at December 31,
2012, and $35 million at December 31, 2011 (of which $12 million is classified as a current liability at the end of
each period). At December 31, 2012, the liability represents our estimate of the probable cleanup and remediation
costs based on available information at 146 known locations and projects. As of that date, nine sites accounted
for $23 million of the liability, and no individual site was considered to be material. We anticipate that much of
this liability will be paid out over five years; however, some costs will be paid out over a longer period.
At 22 locations, one or more of our subsidiaries in conjunction with a number of other parties, have been
identified as potentially responsible parties under the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, or comparable state statutes that impose joint and several liability for cleanup
costs. We calculate our estimated liability for these sites based on facts and legal defenses applicable to each site
and not solely on the basis of the potential for joint liability.
With respect to known environmental sites (whether identified by us or by the EPA or comparable state
authorities), estimates of our ultimate potential financial exposure for a given site or in the aggregate for all such
sites are necessarily imprecise because of the widely varying costs of currently available cleanup techniques,
unpredictable contaminant recovery and reduction rates associated with available cleanup technologies, the likely
development of new cleanup technologies, the difficulty of determining in advance the nature and full extent of
(cid:70)(cid:82)(cid:81)(cid:87)(cid:68)(cid:80)(cid:76)(cid:81)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:72)(cid:68)(cid:70)(cid:75)(cid:3)(cid:83)(cid:82)(cid:87)(cid:72)(cid:81)(cid:87)(cid:76)(cid:68)(cid:79)(cid:3)(cid:83)(cid:68)(cid:85)(cid:87)(cid:76)(cid:70)(cid:76)(cid:83)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:86)(cid:75)(cid:68)(cid:85)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:68)(cid:81)(cid:92)(cid:3)(cid:72)(cid:86)(cid:87)(cid:76)(cid:80)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:79)(cid:82)(cid:86)(cid:86)(cid:3)(cid:11)(cid:68)(cid:81)(cid:71)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:83)(cid:68)(cid:85)(cid:87)(cid:76)(cid:70)(cid:76)(cid:83)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:3)(cid:87)(cid:82) bear it),
and evolving statutory and regulatory standards governing liability. We estimate our environmental remediation
liability on a site-by-site basis, using assumptions and judgments we deem appropriate for each site. As a result,
it is not practical to quantitatively describe the effects of changes in these many assumptions and judgments. We
have consistently applied our methodology of estimating our environmental liabilities.
Based on the assessment of facts and circumstances now known, we believe we have recorded the probable and
reasonably estimable costs for dealing with those environmental matters of which we are aware. Further, we
believe that it is unlikely that any known matters, either individually or in the aggregate, will have a material
adverse effect on our financial position, results of operations, or liquidity.
We and/or certain subsidiaries are defendants in numerous lawsuits and other claims relating principally to
railroad operations. When we conclude that it is probable that a liability has been incurred and the amount of the
liability can be reasonably estimated, it is accrued through a charge to earnings. While the ultimate amount of
liability incurred in any of these lawsuits and claims is dependent on future developments, in our opinion, the
recorded liability is adequate to cover the future payment of such liability and claims. However, the final
outcome of any of these lawsuits and claims cannot be predicted with certainty, and unfavorable or unexpected
outcomes could result in additional accruals that could be significant to results of operations in a particular year or
quarter. Any adjustments to the recorded liability will be reflected in earnings in the periods in which such
adjustments are known.
K35
Income Taxes
Our net long-term deferred tax liability totaled $7.8 billion at December 31, 2012 (Note 3). This liability is
estimated based on the expected future tax consequences of items recognized in the financial statements. After
application of the federal statutory tax rate to book income, judgment is required with respect to the timing and
deductibility of expenses in the corporate income tax returns. For state income and other taxes, judgment is also
required with respect to the apportionment among the various jurisdictions. A valuation allowance is recorded if
we expect that it is more likely than not that deferred tax assets will not be realized. We had a $19 million
valuation allowance on $1.0 billion of deferred tax assets as of December 31, 2012, reflecting the expectation that
almost all of these assets will be realized.
In addition, we have a recorded liability for our estimate of uncertain tax positions taken or expected to be taken
in a tax return. Judgment is required in evaluating the application of federal and state tax laws and assessing
whether it is more likely than not that a tax position will be sustained on examination and, if so, judgment is also
required as to the measurement of the amount of tax benefit that will be realized upon settlement with the taxing
authority. We believe this liability for uncertain tax positions to be adequate. Income tax expense is adjusted in
the period in which new information about a tax position becomes available or the final outcome differs from the
amounts recorded. For every one half percent change in the 2012 effective tax rate, net income would have
changed by $14 million.
OTHER MATTERS
Labor Agreements
More than 80% of our railroad employees are covered by collective bargaining agreements with various labor
unions. These agreements remain in effect until changed pursuant to the Railway Labor Act (RLA). We largely
bargain nationally in concert with other major railroads, represented by the National Carriers Conference
Committee (NCCC). Moratorium provisions in the labor agreements govern when the railroads and unions may
propose changes.
The NCCC has concluded the round of bargaining that began in November 2009 and reached national agreements
with all applicable labor unions. Although we previously concluded separate agreements with each of the
Brotherhood of Locomotive Engineers and Trainmen (BLET) and the American Train Dispatchers Association
(ATDA) that extend through December 31, 2014, the health and welfare provisions from the national agreements
apply to the BLET and ATDA. We bargain separately with our Ashtabula (Ohio) Docks longshoremen, who are
r(cid:72)(cid:83)(cid:85)(cid:72)(cid:86)(cid:72)(cid:81)(cid:87)(cid:72)(cid:71)(cid:3)(cid:69)(cid:92)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:44)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3)(cid:47)(cid:82)(cid:81)(cid:74)(cid:86)(cid:75)(cid:82)(cid:85)(cid:72)(cid:80)(cid:72)(cid:81)(cid:182)(cid:86)(cid:3)(cid:36)(cid:86)(cid:86)(cid:82)(cid:70)(cid:76)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:11)(cid:44)(cid:47)(cid:36)(cid:12)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:71)(cid:82)(cid:3)(cid:81)(cid:82)(cid:87)(cid:3)(cid:83)(cid:68)(cid:85)(cid:87)(cid:76)(cid:70)(cid:76)(cid:83)(cid:68)(cid:87)(cid:72)(cid:3)(cid:76)(cid:81)(cid:3)(cid:81)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3)(cid:69)(cid:68)(cid:85)(cid:74)(cid:68)(cid:76)(cid:81)(cid:76)(cid:81)(cid:74)(cid:17)(cid:3)(cid:3)
We and the ILA have also reached agreement with moratorium provisions consistent with the moratorium
provisions of the national agreements.
Market Risks
We manage overall exposure to fluctuations in interest rates by issuing both fixed- and floating-rate debt
instruments. At December 31, 2012, debt subject to interest rate fluctuations totaled $300 million. A one-
percentage point increase in interest rates would increase total annual interest expense related to all variable debt
by approximately $3 million. We consider it unlikely that interest rate fluctuations applicable to these instruments
will result in a material adverse effect on our financial position, results of operations, or liquidity.
Inflation
In preparing financial statements, GAAP requires the use of historical cost that disregards the effects of inflation
on the replacement cost of property. As a capital-intensive company, we have most of our capital invested in such
property. 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.
K36
FORWARD-LOOKING STATEMENTS
(cid:55)(cid:75)(cid:76)(cid:86)(cid:3)(cid:48)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:39)(cid:76)(cid:86)(cid:70)(cid:88)(cid:86)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:36)(cid:81)(cid:68)(cid:79)(cid:92)(cid:86)(cid:76)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:38)(cid:82)(cid:81)(cid:71)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:53)(cid:72)(cid:86)(cid:88)(cid:79)(cid:87)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:50)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:68)(cid:76)(cid:81)(cid:86)(cid:3)(cid:73)(cid:82)(cid:85)(cid:90)(cid:68)(cid:85)(cid:71)-
(cid:79)(cid:82)(cid:82)(cid:78)(cid:76)(cid:81)(cid:74)(cid:3)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:80)(cid:68)(cid:92)(cid:3)(cid:69)(cid:72)(cid:3)(cid:76)(cid:71)(cid:72)(cid:81)(cid:87)(cid:76)(cid:73)(cid:76)(cid:72)(cid:71)(cid:3)(cid:69)(cid:92)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:88)(cid:86)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:90)(cid:82)(cid:85)(cid:71)(cid:86)(cid:3)(cid:79)(cid:76)(cid:78)(cid:72)(cid:3)(cid:179)(cid:69)(cid:72)(cid:79)(cid:76)(cid:72)(cid:89)(cid:72)(cid:15)(cid:180)(cid:3)(cid:179)(cid:72)(cid:91)(cid:83)(cid:72)(cid:70)(cid:87)(cid:15)(cid:180)(cid:3)(cid:179)(cid:68)(cid:81)(cid:87)(cid:76)(cid:70)(cid:76)(cid:83)(cid:68)(cid:87)(cid:72)(cid:15)(cid:180)(cid:3)(cid:179)(cid:72)(cid:86)(cid:87)(cid:76)(cid:80)(cid:68)(cid:87)(cid:72)(cid:15)(cid:180)(cid:3)
(cid:179)(cid:83)(cid:79)(cid:68)(cid:81)(cid:15)(cid:180)(cid:3)(cid:179)(cid:70)(cid:82)(cid:81)(cid:86)(cid:76)(cid:71)(cid:72)(cid:85)(cid:15)(cid:180)(cid:3)(cid:179)(cid:83)(cid:85)(cid:82)(cid:77)(cid:72)(cid:70)(cid:87)(cid:15)(cid:180) and similar references to the future. Forward-looking statements reflect our good-
faith evaluation of information currently available.
However, such statements are dependent on and, therefore, can be influenced by, a number of external variables
over which we have little or no control, including: transportation of hazardous materials as a common carrier by
rail; acts of terrorism or war; general economic conditions including, but not limited to, fluctuation and
competition within the industries of our customers; competition and consolidation within the transportation
industry; the operations of carriers with which we interchange; disruptions to our technology infrastructure,
including computer systems; labor difficulties, including strikes and work stoppages; commercial, operating,
environmental, and climate change legislative and regulatory developments; results of litigation; natural events
such as severe weather, hurricanes, and floods; unpredictable demand for rail services; fluctuation in supplies and
prices of key materials, in particular diesel fuel; and changes in securities and capital markets. For additional
discussion of significant risk factors applicable to our business(cid:15)(cid:3)(cid:86)(cid:72)(cid:72)(cid:3)(cid:51)(cid:68)(cid:85)(cid:87)(cid:3)(cid:44)(cid:44)(cid:15)(cid:3)(cid:44)(cid:87)(cid:72)(cid:80)(cid:3)(cid:20)(cid:36)(cid:3)(cid:179)(cid:53)(cid:76)(cid:86)(cid:78)(cid:3)(cid:41)(cid:68)(cid:70)(cid:87)(cid:82)(cid:85)(cid:86)(cid:17)(cid:180) Forward-
looking statements are not, and should not be relied upon as, a guarantee of future performance or results, nor will
they necessarily prove to be accurate indications of the times at or by which any such performance or results will
be achieved. As a result, actual outcomes and results may differ materially from those expressed in forward-
looking statements. We undertake no obligation to update or revise forward-looking statements.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
(cid:55)(cid:75)(cid:72)(cid:3)(cid:76)(cid:81)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:85)(cid:72)(cid:84)(cid:88)(cid:76)(cid:85)(cid:72)(cid:71)(cid:3)(cid:69)(cid:92)(cid:3)(cid:87)(cid:75)(cid:76)(cid:86)(cid:3)(cid:76)(cid:87)(cid:72)(cid:80)(cid:3)(cid:76)(cid:86)(cid:3)(cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:51)(cid:68)(cid:85)(cid:87)(cid:3)(cid:44)(cid:44)(cid:15)(cid:3)(cid:44)(cid:87)(cid:72)(cid:80)(cid:3)(cid:26)(cid:15)(cid:3)(cid:179)(cid:48)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:39)(cid:76)(cid:86)(cid:70)(cid:88)(cid:86)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:36)(cid:81)(cid:68)(cid:79)(cid:92)(cid:86)(cid:76)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)
Financial Condition a(cid:81)(cid:71)(cid:3)(cid:53)(cid:72)(cid:86)(cid:88)(cid:79)(cid:87)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:50)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:180)(cid:3)(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:75)(cid:72)(cid:68)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3)(cid:179)(cid:48)(cid:68)(cid:85)(cid:78)(cid:72)(cid:87)(cid:3)(cid:53)(cid:76)(cid:86)(cid:78)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:43)(cid:72)(cid:71)(cid:74)(cid:76)(cid:81)(cid:74)(cid:3)(cid:36)(cid:70)(cid:87)(cid:76)(cid:89)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:17)(cid:180)
K37
Item 8. Financial Statements and Supplementary Data
INDEX TO FINANCIAL STATEMENTS
Report of Management
Reports of Independent Registered Public Accounting Firm
Consolidated Statements of Income
Years ended December 31, 2012, 2011, and 2010
Consolidated Statements of Comprehensive Income
Years ended December 31, 2012, 2011, and 2010
Consolidated Balance Sheets
At December 31, 2012 and 2011
Consolidated Statements of Cash Flows
Years ended December 31, 2012, 2011, and 2010
(cid:38)(cid:82)(cid:81)(cid:86)(cid:82)(cid:79)(cid:76)(cid:71)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:54)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:38)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)(cid:54)(cid:87)(cid:82)(cid:70)(cid:78)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)(cid:182)(cid:3)(cid:40)(cid:84)(cid:88)(cid:76)(cid:87)(cid:92)
Years ended December 31, 2012, 2011, and 2010
Notes to Consolidated Financial Statements
The Index to Consolidated Financial Statement Schedule in Item 15
Page
K39
K40
K42
K43
K44
K45
K46
K47
K84
K38
Report of Management
February 15, 2013
To the Stockholders
Norfolk Southern Corporation
Management is responsible for establishing and maintaining adequate internal control over financial reporting. In
order to ensure (cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:79)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:82)(cid:79)(cid:3)(cid:82)(cid:89)(cid:72)(cid:85)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:76)(cid:86)(cid:3)(cid:72)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87)(cid:76)(cid:89)(cid:72)(cid:15)(cid:3)(cid:80)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:85)(cid:72)(cid:74)(cid:88)(cid:79)(cid:68)(cid:85)(cid:79)(cid:92)(cid:3)
assesses such controls and did so most recently for its financial reporting as of December 31, 2012. This
assessment was based on criteria for effective internal control over financial reporting described in Internal
Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission. Based on this assessment, management has concluded that the Corporation maintained effective
internal control over financial reporting as of December 31, 2012.
(cid:46)(cid:51)(cid:48)(cid:42)(cid:3)(cid:47)(cid:47)(cid:51)(cid:15)(cid:3)(cid:76)(cid:81)(cid:71)(cid:72)(cid:83)(cid:72)(cid:81)(cid:71)(cid:72)(cid:81)(cid:87)(cid:3)(cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:72)(cid:85)(cid:72)(cid:71)(cid:3)(cid:83)(cid:88)(cid:69)(cid:79)(cid:76)(cid:70)(cid:3)(cid:68)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:73)(cid:76)(cid:85)(cid:80)(cid:15)(cid:3)(cid:75)(cid:68)(cid:86)(cid:3)(cid:68)(cid:88)(cid:71)(cid:76)(cid:87)(cid:72)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)
and issued an attestatio(cid:81)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:82)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:79)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:82)(cid:79)(cid:3)(cid:82)(cid:89)(cid:72)(cid:85)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:68)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:39)(cid:72)(cid:70)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85)(cid:3)(cid:22)(cid:20)(cid:15)(cid:3)
2012.
/s/Charles W. Moorman
Charles W. Moorman
Chairman, President and
Chief Executive Officer
/s/John P. Rathbone
John P. Rathbone
Executive Vice President Finance and
Chief Financial Officer
/s/Clyde H. Allison, Jr.
Clyde H. Allison, Jr.
Vice President and
Controller
K39
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Norfolk Southern Corporation:
(cid:58)(cid:72)(cid:3)(cid:75)(cid:68)(cid:89)(cid:72)(cid:3)(cid:68)(cid:88)(cid:71)(cid:76)(cid:87)(cid:72)(cid:71)(cid:3)(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:79)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:82)(cid:79)(cid:3)(cid:82)(cid:89)(cid:72)(cid:85)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:68)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:39)(cid:72)(cid:70)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85)(cid:3)(cid:22)(cid:20)(cid:15)(cid:3)
2012, based on criteria established in Internal Control (cid:177) Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). (cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:80)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)
is responsible for maintaining effective internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting, included in the accompanying Report of
Management. (cid:50)(cid:88)(cid:85)(cid:3)(cid:85)(cid:72)(cid:86)(cid:83)(cid:82)(cid:81)(cid:86)(cid:76)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:3)(cid:76)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)(cid:72)(cid:91)(cid:83)(cid:85)(cid:72)(cid:86)(cid:86)(cid:3)(cid:68)(cid:81)(cid:3)(cid:82)(cid:83)(cid:76)(cid:81)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:79)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:82)(cid:79)(cid:3)(cid:82)(cid:89)(cid:72)(cid:85)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)
reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether effective internal control over financial reporting was maintained in all material respects. Our audit
included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk. Our audit also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our opinion.
(cid:36)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:79)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:82)(cid:79)(cid:3)(cid:82)(cid:89)(cid:72)(cid:85)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:76)(cid:86)(cid:3)(cid:68)(cid:3)(cid:83)(cid:85)(cid:82)(cid:70)(cid:72)(cid:86)(cid:86)(cid:3)(cid:71)(cid:72)(cid:86)(cid:76)(cid:74)(cid:81)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:83)(cid:85)(cid:82)(cid:89)(cid:76)(cid:71)(cid:72)(cid:3)(cid:85)(cid:72)(cid:68)(cid:86)(cid:82)(cid:81)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:68)(cid:86)(cid:86)(cid:88)(cid:85)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. (cid:36)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:79)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:82)(cid:79)(cid:3)(cid:82)(cid:89)(cid:72)(cid:85)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
(cid:70)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
In our opinion, Norfolk Southern Corporation maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2012, based on criteria established in Internal Control (cid:177) Integrated
Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the consolidated balance sheets of Norfolk Southern Corporation and subsidiaries as of December
31, 2012 and 2011, and the related consolidated statements of income, comprehensive income, changes in
stockh(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)(cid:182)(cid:3)(cid:72)(cid:84)(cid:88)(cid:76)(cid:87)(cid:92)(cid:15)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:70)(cid:68)(cid:86)(cid:75)(cid:3)(cid:73)(cid:79)(cid:82)(cid:90)(cid:86)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:72)(cid:68)(cid:70)(cid:75)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:87)(cid:75)(cid:85)(cid:72)(cid:72)-year period ended December 31, 2012, and
our report dated February 15, 2013 expressed an unqualified opinion on those consolidated financial statements.
/s/KPMG LLP
KPMG LLP
Norfolk, Virginia
February 15, 2013
K40
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Norfolk Southern Corporation:
We have audited the accompanying consolidated balance sheets of Norfolk Southern Corporation and subsidiaries
as of December 31, 2012 and 2011, and the related consolidated statements of income, comprehensive income,
(cid:70)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)(cid:86)(cid:87)(cid:82)(cid:70)(cid:78)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)(cid:182)(cid:3)(cid:72)(cid:84)(cid:88)(cid:76)(cid:87)(cid:92)(cid:15)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:70)(cid:68)(cid:86)(cid:75)(cid:3)(cid:73)(cid:79)(cid:82)(cid:90)(cid:86)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:72)(cid:68)(cid:70)(cid:75)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:87)(cid:75)(cid:85)(cid:72)(cid:72)-year period ended December 31,
2012. In connection with our audits of the consolidated financial statements, we also have audited the financial
statement schedule as listed in Item 15(A)2. These consolidated financial statements and financial statement
(cid:86)(cid:70)(cid:75)(cid:72)(cid:71)(cid:88)(cid:79)(cid:72)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:86)(cid:83)(cid:82)(cid:81)(cid:86)(cid:76)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:80)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)ent. Our responsibility is to express an opinion on
these consolidated financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
financial position of Norfolk Southern Corporation and subsidiaries as of December 31, 2012 and 2011, and the
results of their operations and their cash flows for each of the years in the three-year period ended December 31,
2012, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related financial
statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(cid:11)(cid:56)(cid:81)(cid:76)(cid:87)(cid:72)(cid:71)(cid:3)(cid:54)(cid:87)(cid:68)(cid:87)(cid:72)(cid:86)(cid:12)(cid:15)(cid:3)(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:79)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:82)(cid:79)(cid:3)(cid:82)(cid:89)(cid:72)(cid:85)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:68)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:39)ecember 31,
2012, based on criteria established in Internal Control (cid:177) Integrated Framework, issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 15, 2013
(cid:72)(cid:91)(cid:83)(cid:85)(cid:72)(cid:86)(cid:86)(cid:72)(cid:71)(cid:3)(cid:68)(cid:81)(cid:3)(cid:88)(cid:81)(cid:84)(cid:88)(cid:68)(cid:79)(cid:76)(cid:73)(cid:76)(cid:72)(cid:71)(cid:3)(cid:82)(cid:83)(cid:76)(cid:81)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:72)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87)(cid:76)(cid:89)(cid:72)(cid:81)(cid:72)(cid:86)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:79)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:82)(cid:79)(cid:3)(cid:82)(cid:89)(cid:72)(cid:85)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:81)(cid:74)(cid:17)
/s/KPMG LLP
KPMG LLP
Norfolk, Virginia
February 15, 2013
K41
Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Income
Years ended December 31,
2012
2010
2011
($ in millions, except per share amounts)
Railway operating revenues
$
11,040
$
11,172
$
9,516
Railway operating expenses:
Compensation and benefits
Purchased services and rents
Fuel
Depreciation
Materials and other
Total railway operating expenses
Income from railway operations
Other income (cid:177) net
Interest expense on debt
Income before income taxes
Provision for income taxes
Net income
Per share amounts:
Net income
Basic
Diluted
2,960
1,604
1,577
916
859
7,916
3,124
129
495
2,758
1,009
2,974
1,610
1,589
862
924
7,959
3,213
160
455
2,918
1,002
2,708
1,477
1,079
819
757
6,840
2,676
153
462
2,367
871
$
1,749
$
1,916
$
1,496
$
$
5.42
5.37
$
5.52
5.45
4.06
4.00
See accompanying notes to consolidated financial statements.
K42
Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Comprehensive Income
Net income
Other comprehensive income (loss), before tax:
Pension and other postretirement benefits
Other comprehensive income (loss) of equity investees
Other comprehensive income (loss), before tax
Income tax benefit (expense) related to items of
other comprehensive income (loss)
Other comprehensive income (loss), net of tax
2012
Years ended December 31,
2011
($ in millions)
2010
$
1,749
$
1,916
$
1,496
(114)
(13)
(127)
44
(83)
(325)
(21)
(346)
125
(221)
61
11
72
(24)
48
Total comprehensive income
$
1,666
$
1,695
$
1,544
See accompanying notes to consolidated financial statements.
K43
Norfolk Southern Corporation and Subsidiaries
Consolidated Balance Sheets
Assets
Current assets:
Cash and cash equivalents
Short-term investments
Accounts receivable - net
Materials and supplies
Deferred income taxes
Other current assets
Total current assets
Investments
Properties less accumulated depreciation of $9,922 and
$9,464, respectively
Other assets
Total assets
(cid:47)(cid:76)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:86)(cid:87)(cid:82)(cid:70)(cid:78)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)(cid:1932)(cid:3)(cid:72)(cid:84)(cid:88)(cid:76)(cid:87)(cid:92)
Current liabilities:
Accounts payable
Short-term debt
Income and other taxes
Other current liabilities
Current maturities of long-term debt
Total current liabilities
Long-term debt
Other liabilities
Deferred income taxes
Total liabilities
(cid:54)(cid:87)(cid:82)(cid:70)(cid:78)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)(cid:1932)(cid:3)(cid:72)(cid:84)(cid:88)(cid:76)(cid:87)(cid:92)(cid:29)
Common Stock $1.00 per share par value, 1,350,000,000 shares
authorized; outstanding 314,034,174 and 330,386,089 shares,
respectively, net of treasury shares
Additional paid-in capital
Accumulated other comprehensive loss
Retained income
(cid:55)(cid:82)(cid:87)(cid:68)(cid:79)(cid:3)(cid:86)(cid:87)(cid:82)(cid:70)(cid:78)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)(cid:1932)(cid:3)(cid:72)(cid:84)(cid:88)(cid:76)(cid:87)(cid:92)
At December 31,
2012
2011
($ in millions)
$
653 $
15
1,109
216
167
82
2,242
2,300
276
25
1,022
209
143
76
1,751
2,234
25,736
64
24,469
84
$
30,342 $
28,538
$
1,362 $
200
206
263
50
2,081
8,432
2,237
7,832
20,582
1,092
100
207
252
50
1,701
7,390
2,050
7,486
18,627
315
1,911
(1,109)
8,643
9,760
332
1,912
(1,026)
8,693
9,911
Total liabilities (cid:68)(cid:81)(cid:71)(cid:3)(cid:86)(cid:87)(cid:82)(cid:70)(cid:78)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)(cid:1932)(cid:3)(cid:72)(cid:84)(cid:88)(cid:76)(cid:87)(cid:92)
$
30,342
$
28,538
See accompanying notes to consolidated financial statements.
K44
Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Cash Flows
2012
Years ended December 31,
2011
($ in millions)
2010
Cash flows from operating activities:
Net income
Reconciliation of net income to net cash
provided by operating activities:
Depreciation
Deferred income taxes
Gains and losses on properties and investments
Changes in assets and liabilities affecting operations:
Accounts receivable
Materials and supplies
Other current assets
Current liabilities other than debt
Other (cid:177) net
Net cash provided by operating activities
Cash flows from investing activities:
Property additions
Property sales and other transactions
Investments, including short-term
Investment sales and other transactions
Net cash used in investing activities
Cash flows from financing activities:
Dividends
Common Stock issued (cid:177) net
Purchase and retirement of Common Stock
Proceeds from borrowings (cid:177) net
Debt repayments
Net cash used in financing activities
$
1,749 $
1,916 $
1,496
922
366
(6)
(64)
(7)
(6)
82
29
3,065
(2,241)
192
(23)
78
(1,994)
(624)
89
(1,288)
1,491
(362)
(694)
869
527
(32)
(215)
(40)
14
68
120
3,227
(2,160)
84
(135)
439
(1,772)
(576)
120
(2,051)
1,101
(600)
(2,006)
826
312
(42)
(41)
(5)
(1)
126
43
2,714
(1,470)
97
(504)
421
(1,456)
(514)
89
(863)
350
(489)
(1,427)
Net increase (decrease) in cash and cash equivalents
377
(551)
(169)
Cash and cash equivalents:
At beginning of year
At end of year
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest (net of amounts capitalized)
Income taxes (net of refunds)
276
827
$
653 $
276 $
996
827
$
$
473
618
435 $
289
453
602
See accompanying notes to consolidated financial statements.
K45
Norfolk Southern Corporation and Subsidiaries
(cid:38)(cid:82)(cid:81)(cid:86)(cid:82)(cid:79)(cid:76)(cid:71)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:54)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:38)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)(cid:54)(cid:87)(cid:82)(cid:70)(cid:78)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)(cid:182)(cid:3)(cid:40)(cid:84)(cid:88)(cid:76)(cid:87)(cid:92)
Additional Accum. Other
Common
Stock
Capital
Paid-in Comprehensive Retained
Income
Loss
($ in millions, except per share amounts)
Total
Balance at December 31, 2009
$
370 $
1,809 $
(853) $
9,027 $
10,353
Comprehensive income:
Net income
Other comprehensive income
Total comprehensive income
Dividends on Common Stock,
$1.40 per share
Share repurchases
Stock-based compensation,
including tax benefit of $33
Other
(15)
3
(72)
149
6
48
1,496
(514)
(776)
(8)
(1)
1,496
48
1,544
(514)
(863)
144
5
Balance at December 31, 2010
358
1,892
(805)
9,224
10,669
Comprehensive income:
Net income
Other comprehensive loss
Total comprehensive income
Dividends on Common Stock,
$1.66 per share
Share repurchases
Stock-based compensation,
including tax benefit of $45
Balance at December 31, 2011
Comprehensive income:
Net income
Other comprehensive loss
Total comprehensive income
Dividends on Common Stock,
$1.94 per share
Share repurchases
Stock-based compensation,
including tax benefit of $42
(221)
(1,026)
(83)
1,916
(576)
(1,862)
(9)
8,693
1,749
(624)
(1,165)
(10)
1,916
(221)
1,695
(576)
(2,051)
174
9,911
1,749
(83)
1,666
(624)
(1,288)
95
(30)
4
332
(159)
179
1,912
(19)
2
(104)
103
Balance at December 31, 2012
$
315 $
1,911 $
(1,109) $
8,643 $
9,760
See accompanying notes to consolidated financial statements.
K46
Norfolk Southern Corporation and Subsidiaries
Notes to Consolidated Financial Statements
The following Notes are an integral part of the Consolidated Financial Statements.
1. Summary of Significant Accounting Policies
Description of Business
Norfolk Southern Corporation is a Virginia-based holding company engaged principally in the rail transportation
business, operating approximately 20,000 miles of road primarily in the East and Midwest. These consolidated
financial statements include Norfolk Southern Corporation (Norfolk Southern) and its majority-owned and
controlled subsidiaries (collectively, NS, we, us, and our). (cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:182)(cid:86) major subsidiary is Norfolk
Southern Railway Company (NSR). All significant intercompany balances and transactions have been eliminated
in consolidation.
NSR and its railroad subsidiaries transport raw materials, intermediate products and finished goods classified in
the following commodity groups (percent of total railway operating revenues in 2012): coal (26%); intermodal
(20%); chemicals (14%); agriculture/consumer products/government (13%); metals/construction (12%);
automotive (8%); and, paper/clay/forest products (7%). Although most of our customers are domestic, ultimate
points of origination or destination for some of the products transported (particularly coal bound for export and
some intermodal containers) may be outside the U.S. More than 80% of our railroad employees are covered by
collective bargaining agreements with various labor unions.
Use of Estimates
The preparation of financial statements in accordance with U.S. Generally Accepted Accounting Principles
(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 revenues and expenses during the reporting period. We periodically review our estimates, including those
related to the recoverability and useful lives of assets, as well as liabilities for litigation, environmental
remediation, casualty claims, income taxes and pension and other postretirement benefits. Changes in facts and
circumstances may result in revised estimates.
Revenue Recognition
Transportation revenue is recognized proportionally as a shipment moves from origin to destination and related
expenses are recognized as incurred. Refunds (which are primarily volume-based incentives) are recorded as a
(cid:85)(cid:72)(cid:71)(cid:88)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:87)(cid:82)(cid:3)(cid:85)(cid:72)(cid:89)(cid:72)(cid:81)(cid:88)(cid:72)(cid:86)(cid:3)(cid:82)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:69)(cid:68)(cid:86)(cid:76)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:80)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:69)(cid:72)(cid:86)(cid:87)(cid:3)(cid:72)(cid:86)(cid:87)(cid:76)(cid:80)(cid:68)(cid:87)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:83)(cid:85)(cid:82)(cid:77)(cid:72)(cid:70)(cid:87)(cid:72)(cid:71)(cid:3)(cid:79)(cid:76)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:15)(cid:3)(cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3)(cid:76)(cid:86)(cid:3)(cid:69)(cid:68)(cid:86)(cid:72)(cid:71)(cid:3)(cid:82)(cid:81)(cid:3)
historical activity, current shipment counts and the expectation of future activity. We regularly monitor our
contract refund liability and, historically, the estimates have not differed significantly from the amounts ultimately
refunded. Switching, demurrage and other incidental service revenues are recognized when the services are
performed.
Cash Equivalents
(cid:179)(cid:38)(cid:68)(cid:86)(cid:75)(cid:3)(cid:72)(cid:84)(cid:88)(cid:76)(cid:89)(cid:68)(cid:79)(cid:72)(cid:81)(cid:87)(cid:86)(cid:180)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:75)(cid:76)(cid:74)(cid:75)(cid:79)(cid:92)(cid:3)(cid:79)(cid:76)(cid:84)(cid:88)(cid:76)(cid:71)(cid:3)(cid:76)(cid:81)(cid:89)(cid:72)(cid:86)(cid:87)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:83)(cid:88)(cid:85)(cid:70)(cid:75)(cid:68)(cid:86)(cid:72)(cid:71)(cid:3)(cid:87)(cid:75)(cid:85)(cid:72)(cid:72)(cid:3)(cid:80)(cid:82)(cid:81)(cid:87)(cid:75)(cid:86)(cid:3)(cid:82)(cid:85)(cid:3)(cid:79)(cid:72)(cid:86)(cid:86)(cid:3)(cid:73)(cid:85)(cid:82)(cid:80)(cid:3)(cid:80)(cid:68)(cid:87)(cid:88)(cid:85)(cid:76)(cid:87)(cid:92)(cid:17)
K47
Allowance for Doubtful Accounts
Our allowance for doubtful accounts was $3 million at December 31, 2012 and $4 million at December 31,
2011. To determine our allowance for doubtful accounts, we evaluate historical loss experience (which has not
been significant), the characteristics of current accounts, and general economic conditions and trends.
Materials and Supplies
(cid:179)(cid:48)(cid:68)(cid:87)(cid:72)(cid:85)(cid:76)(cid:68)(cid:79)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:86)(cid:88)(cid:83)(cid:83)(cid:79)(cid:76)(cid:72)(cid:86)(cid:15)(cid:180)(cid:3)(cid:70)(cid:82)(cid:81)(cid:86)(cid:76)(cid:86)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:80)(cid:68)(cid:76)(cid:81)(cid:79)(cid:92)(cid:3)(cid:82)(cid:73)(cid:3)(cid:73)(cid:88)(cid:72)(cid:79)(cid:3)(cid:82)(cid:76)(cid:79)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:76)(cid:87)(cid:72)(cid:80)(cid:86)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:80)(cid:68)(cid:76)(cid:81)(cid:87)(cid:72)(cid:81)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:83)(cid:85)(cid:82)(cid:83)(cid:72)(cid:85)(cid:87)(cid:92)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:72)(cid:84)(cid:88)(cid:76)(cid:83)(cid:80)ent, are
stated at the lower of average cost or market. The cost of materials and supplies expected to be used in property
(cid:68)(cid:71)(cid:71)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:82)(cid:85)(cid:3)(cid:76)(cid:80)(cid:83)(cid:85)(cid:82)(cid:89)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:76)(cid:86)(cid:3)(cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:179)(cid:51)(cid:85)(cid:82)(cid:83)(cid:72)(cid:85)(cid:87)(cid:76)(cid:72)(cid:86)(cid:17)(cid:180)
Investments
(cid:39)(cid:72)(cid:69)(cid:87)(cid:3)(cid:86)(cid:72)(cid:70)(cid:88)(cid:85)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:3)(cid:70)(cid:79)(cid:68)(cid:86)(cid:86)(cid:76)(cid:73)(cid:76)(cid:72)(cid:71)(cid:3)(cid:68)(cid:86)(cid:3)(cid:179)(cid:75)(cid:72)(cid:79)(cid:71)-to-(cid:80)(cid:68)(cid:87)(cid:88)(cid:85)(cid:76)(cid:87)(cid:92)(cid:180)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:72)(cid:71)(cid:3)at amortized cost.
Investments where we have the ability to exercise significant influence over but do not control the entity are
accounted for using the equity method, whereby the investment is carried at the cost of the acquisition plus our
equity in undistributed earnings or losses since acquisition.
Properties
(cid:179)(cid:51)(cid:85)(cid:82)(cid:83)(cid:72)(cid:85)(cid:87)(cid:76)(cid:72)(cid:86)(cid:180)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:83)(cid:85)(cid:76)(cid:81)(cid:70)(cid:76)(cid:83)(cid:68)(cid:79)(cid:79)(cid:92)(cid:3)(cid:68)(cid:87)(cid:3)(cid:70)(cid:82)(cid:86)(cid:87)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:71)(cid:72)(cid:83)reciated using the group method whereby assets with similar
characteristics, use, and expected lives are grouped together in asset classes and depreciated using a composite
depreciation rate. This methodology treats each asset class as a pool of resources, not as singular items. We use
more than 60 depreciable asset classes. The primary depreciation method for our asset base is group life. Units
of production is the principal method of depreciation for rail in high density corridors and for depletion of natural
resources (Note 2). Remaining properties are depreciated generally using the straight-line method over the lesser
of estimated service or lease lives. Depreciation in the Consolidated Statements of Cash Flows includes both
depreciation and depletion.
Depreciation expense is based on our assumptions concerning expected service lives of our properties as well as
the expected net salvage that will be received upon their retirement. In developing these assumptions, we utilize
periodic depreciation studies that are performed by an independent outside firm of consulting engineers and
approved by the Surface Transportation Board (STB). Our depreciation studies are conducted about every three
years for equipment and every six years for track assets and other roadway property. The frequency of these
studies is consistent with guidelines established by the STB. Key factors which are considered in developing
average service life and salvage estimates include:
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
statistical analysis of historical retirement data and surviving asset records;
review of historical salvage received and current market rates;
review of our operations including expected changes in technology, customer demand, maintenance
practices and asset management strategies;
review of accounting policies and assumptions; and
industry review and analysis.
The units of production depreciation rate for rail in high density corridors is derived based on consideration of
annual gross ton miles as compared to the total or ultimate capacity of rail in these corridors. Our experience has
shown that traffic density is a leading factor in determination of the expected service life of rail in high density
corridors. In developing the respective depreciation rate, consideration is also given to several rail characteristics
including age, weight, condition (new or second hand) and type (curve or straight). As a result, a composite
depreciation rate is developed which is applied to the depreciable base.
K48
Our recent experience with these studies has been that while they do result in changes in the rates used to
depreciate our properties, these changes have not caused a significant effect to annual depreciation
expense. Changes in rates as a result of depreciation studies are implemented prospectively. The studies may
also indicate that the recorded amount of accumulated depreciation is deficient (or in excess) of the amount
indicated by the study. Any such deficiency (or excess) is amortized as a component of depreciation expense over
the remaining service lives of the affected class of property, as determined by the study. For 2012, roadway
depreciation rates ranged from 0.83% to 33.3% and equipment depreciation rates ranged from 1.32% to 37.84%.
We capitalize interest on major projects during the period of their construction. Expenditures, including those on
leased assets, that extend an asset(cid:182)s useful life or increase its utility, are capitalized. Expenditures capitalized
include those that are directly related to a capital project and may include materials, labor and equipment, in
addition to an allocable portion of indirect costs that clearly relate to a particular project. Due to the capital
intensive nature of the railroad industry, a significant portion of annual capital spending relates to the replacement
of self-constructed assets. Because removal activities occur in conjunction with replacement, removal costs are
estimated based on an average percentage of time employees replacing assets spend on removal functions. Costs
(cid:85)(cid:72)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:85)(cid:72)(cid:83)(cid:68)(cid:76)(cid:85)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:80)(cid:68)(cid:76)(cid:81)(cid:87)(cid:72)(cid:81)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:68)(cid:70)(cid:87)(cid:76)(cid:89)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:71)(cid:82)(cid:3)(cid:81)(cid:82)(cid:87)(cid:3)(cid:72)(cid:91)(cid:87)(cid:72)(cid:81)(cid:71)(cid:3)(cid:68)(cid:81)(cid:3)(cid:68)(cid:86)(cid:86)(cid:72)(cid:87)(cid:182)(cid:86)(cid:3)(cid:88)(cid:86)(cid:72)(cid:73)(cid:88)(cid:79)(cid:3)(cid:79)(cid:76)(cid:73)(cid:72)(cid:3)(cid:82)(cid:85)(cid:3)(cid:76)(cid:81)(cid:70)(cid:85)(cid:72)(cid:68)(cid:86)(cid:72)(cid:3)(cid:76)(cid:87)(cid:86)(cid:3)(cid:88)(cid:87)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)
expensed when such repairs are performed.
When properties other than land and nonrail assets are sold or retired in the ordinary course of business, the cost
of the assets, net of sale proceeds or salvage, is charged to accumulated depreciation, and no gain or loss is
recognized in earnings. Actual historical cost values are retired when available, such as with equipment
assets. The use of estimates in recording the retirement of certain roadway assets is necessary based on the
impracticality of tracking individual asset costs. When retiring rail, ties and ballast, we use statistical curves that
indicate the relative distribution of the age of the assets retired. The historical cost of other roadway assets is
estimated using a combination of inflation indices specific to the rail industry and those published by the U.S.
Bureau of Labor Statistics. The indices are applied to the replacement value based on the age of the retired
assets. These indices are used because they closely correlate with the costs of roadway assets. Gains and losses
on disposal of land and no(cid:81)(cid:85)(cid:68)(cid:76)(cid:79)(cid:3)(cid:68)(cid:86)(cid:86)(cid:72)(cid:87)(cid:86)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:179)(cid:50)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:76)(cid:81)(cid:70)(cid:82)(cid:80)(cid:72)(cid:3)(cid:177) (cid:81)(cid:72)(cid:87)(cid:180) (Note 2) since such income is not a
product of our railroad operations.
A retirement is considered abnormal if it does not occur in the normal course of business, if it relates to
disposition of a large segment of an asset class and if the retirement varies significantly from the retirement
profile identified through our depreciation studies, which inherently consider the impact of normal retirements on
expected service lives and depreciation rates. Gains or losses from abnormal retirements are recognized in
earnings.
We review the carrying amount of properties whenever events or changes in circumstances indicate that such
carrying amount may not be recoverable based on future undiscounted cash flows. Assets that are deemed
impaired as a result of such review are recorded at the lower of carrying amount or fair value.
Required Accounting Changes
In the first quarter of 2012, we adopted Accounting Standards Update (ASU) No. 2011-05, (cid:179)Comprehensive
(cid:44)(cid:81)(cid:70)(cid:82)(cid:80)(cid:72)(cid:3)(cid:11)(cid:55)(cid:82)(cid:83)(cid:76)(cid:70)(cid:3)(cid:21)(cid:21)(cid:19)(cid:12)(cid:29)(cid:3)(cid:51)(cid:85)(cid:72)(cid:86)(cid:72)(cid:81)(cid:87)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:85)(cid:72)(cid:75)(cid:72)(cid:81)(cid:86)(cid:76)(cid:89)(cid:72)(cid:3)(cid:44)(cid:81)(cid:70)(cid:82)(cid:80)(cid:72)(cid:17)(cid:180)(cid:3)(cid:3)This update requires that the total of
comprehensive income, the components of net income, and the components of other comprehensive income be
presented in either a single continuous statement of comprehensive income or in two separate but consecutive
statements. This update does not change what items are reported in other comprehensive income or the
requirement to report reclassification of items from other comprehensive income to net income.
In the first quarter of 2012, we adopted ASU No. 2011-04, (cid:179)Fair Value Measurements (Topic 820): Amendments
(cid:87)(cid:82)(cid:3)(cid:68)(cid:70)(cid:75)(cid:76)(cid:72)(cid:89)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:80)(cid:82)(cid:81)(cid:3)(cid:41)(cid:68)(cid:76)(cid:85)(cid:3)(cid:57)(cid:68)(cid:79)(cid:88)(cid:72)(cid:3)(cid:48)(cid:72)(cid:68)(cid:86)(cid:88)(cid:85)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:39)(cid:76)(cid:86)(cid:70)(cid:79)(cid:82)(cid:86)(cid:88)(cid:85)(cid:72)(cid:3)(cid:53)(cid:72)(cid:84)(cid:88)(cid:76)(cid:85)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)(cid:56)(cid:17)(cid:54)(cid:17)(cid:3)(cid:42)(cid:36)(cid:36)(cid:51)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:44)(cid:41)(cid:53)(cid:54)(cid:86)(cid:17)(cid:180)(cid:3)(cid:3)This
update provides clarification about the application of existing fair value measurements and disclosure
requirements, and expands certain other disclosure requirements.
K49
2. Other Income (cid:177) Net
Income from natural resources:
Royalties from coal
Nonoperating depletion and depreciation
Subtotal
Rental income
Equity in earnings of Conrail Inc. (Note 5)
Corporate-owned life insurance (cid:177) net
Interest income
Gains and losses from sale of properties
Other interest expense (cid:177) net
Taxes on nonoperating property
Other
2012
2011
($ in millions)
2010
$
72 $
(6)
66
86 $
(7)
79
54
34
13
8
5
(9)
(10)
(32)
51
31
8
9
32
(3)
(9)
(38)
80
(7)
73
47
26
1
12
41
(16)
(10)
(21)
Total
$
129 $
160 $
153
(cid:179)(cid:50)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:76)(cid:81)(cid:70)(cid:82)(cid:80)(cid:72)(cid:3)(cid:177) (cid:81)(cid:72)(cid:87)(cid:180)(cid:3)(cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:86)(cid:3)(cid:76)(cid:81)(cid:70)(cid:82)(cid:80)(cid:72)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:70)(cid:82)(cid:86)(cid:87)(cid:86)(cid:3)(cid:81)(cid:82)(cid:87)(cid:3)(cid:83)(cid:68)(cid:85)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:85)(cid:68)(cid:76)(cid:79)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:76)(cid:81)(cid:70)(cid:82)(cid:80)(cid:72)(cid:3)(cid:74)(cid:72)(cid:81)(cid:72)(cid:85)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:69)(cid:92)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)
activities of our noncarrier subsidiaries as well as the costs incurred by those subsidiaries in their operations.
3. Income Taxes
Provisions for Income Taxes
Current:
Federal
State
Total current taxes
Deferred:
Federal
State
Total deferred taxes
Provision for income taxes
2012
2011
($ in millions)
2010
$
569 $
74
643
432 $
43
475
339
27
366
506
21
527
$
1,009 $
1,002 $
492
67
559
281
31
312
871
K50
Reconciliation of Statutory Rate to Effective Rate
(cid:55)(cid:75)(cid:72)(cid:3)(cid:179)(cid:51)(cid:85)(cid:82)(cid:89)(cid:76)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:76)(cid:81)(cid:70)(cid:82)(cid:80)(cid:72)(cid:3)(cid:87)(cid:68)(cid:91)(cid:72)(cid:86)(cid:180)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:81)(cid:86)(cid:82)(cid:79)(cid:76)(cid:71)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:54)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:44)(cid:81)(cid:70)(cid:82)(cid:80)(cid:72)(cid:3)(cid:71)(cid:76)(cid:73)(cid:73)(cid:72)(cid:85)(cid:86)(cid:3)(cid:73)(cid:85)(cid:82)(cid:80)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:68)(cid:80)(cid:82)(cid:88)(cid:81)(cid:87)(cid:86) computed
by applying the statutory federal corporate tax rate as follows:
2012
Amount %
2011
2010
Amount %
($ in millions)
Amount %
Federal income tax at statutory rate
State income taxes, net of federal tax effect
Deferred tax estimate
Medicare Part D
State tax law changes, net of federal tax effect
Internal Revenue Service audit, settlement
Other, net
$
$
965 35
3
69
-
-
-
-
-
(3)
-
(6)
(1)
(16)
$ 1,021 35
2
69
-
-
-
-
(1)
(28)
(1)
(40)
(1)
(20)
828 35
3
62
(1)
(34)
1
27
-
-
-
-
(1)
(12)
Provision for income taxes
$ 1,009 37
$ 1,002 34
$
871 37
During 2010, we performed a review and re-evaluation of our estimates for deferred tax assets and liabilities,
resulting in a reduction of income tax expense of $34 million. In addition, provisions of the health care legislation
enacted during 2010 eliminate, after 2012, the tax deduction available for reimbursed prescription drug expenses
under the Medicare Part D retiree drug subsidy program. As required by the Financial Accounting Standards
Board (FASB) Accounting Standards Codification (ASC) 740, (cid:179)(cid:44)(cid:81)(cid:70)(cid:82)(cid:80)(cid:72)(cid:3)(cid:55)(cid:68)(cid:91)(cid:72)(cid:86)(cid:15)(cid:180) we recorded a $27 million
charge to deferred tax expense in 2010.
Deferred Tax Assets and Liabilities
Certain items are reported in different periods for financial reporting and income tax purposes. Deferred tax
assets and liabilities are recorded in recognition of these differences. The tax effects of temporary differences that
give rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows:
Deferred tax assets:
Compensation and benefits, including postretirement
Accruals, including casualty and other claims
Other
Total gross deferred tax assets
Less valuation allowance
Net deferred tax asset
Deferred tax liabilities:
Property
Other
Total gross deferred tax liabilities
Net deferred tax liability
Net current deferred tax asset
Net long-term deferred tax liability
K51
December 31,
2012
2011
($ in millions)
$
834 $
139
41
1,014
(19)
995
(8,188)
(472)
(8,660)
(7,665)
167
771
145
41
957
(19)
938
(7,894)
(387)
(8,281)
(7,343)
143
$
(7,832) $
(7,486)
Except for amounts for which a valuation allowance has been provided, we believe that it is more likely than not
that the results of future operations will generate sufficient taxable income to realize the deferred tax assets. The
valuation allowance at the end of each year primarily relates to subsidiary state income tax net operating losses
that may not be utilized prior to their expiration. The total valuation allowance remained unchanged in 2012 and
decreased $2 million in 2011.
Uncertain Tax Positions
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
December 31,
2012
2011
($ in millions)
$
105 $
152
6
-
(20)
(23)
(5)
40
26
(78)
(22)
(13)
105
Balance at beginning of year
Additions based on tax positions related to the current year
Additions for tax positions of prior years
Reductions for tax positions of prior years
Settlements with taxing authorities
Lapse of statutes of limitations
Balance at end of year
$
63 $
Included in the balance of unrecognized tax benefits at December 31, 2012, are potential benefits of $20 million
that would affect the effective tax rate if recognized. Unrecognized tax benefits are adjusted in the period in
which new information about a tax position becomes available or the final outcome differs from the amount
recorded.
Internal Revenue Service (IRS) examinations have been completed for all years prior to 2011. We expect the IRS
to begin auditing our 2011 and 2012 consolidated income tax returns in late 2013. State income tax returns
generally are subject to examination for a period of three to four years after filing of the return. In addition, we
are generally obligated to report changes in taxable income arising from federal income tax examinations to the
states within a period of up to two years from the date the federal examination is final. We have various state
income tax returns either under examination, administrative appeals, or litigation. We expect that the total
amount of unrecognized tax benefits at December 31, 2012, will decrease by approximately $12 million in 2013
due to tax positions for which there was an uncertainty about the timing of deductibility in earlier years, but
deductibility may become certain by the close of 2013. We do not expect that the aforementioned potential
change in unrecognized tax benefits will have a material effect on our financial position, results of operations, or
liquidity.
(cid:44)(cid:81)(cid:87)(cid:72)(cid:85)(cid:72)(cid:86)(cid:87)(cid:3)(cid:85)(cid:72)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:88)(cid:81)(cid:85)(cid:72)(cid:70)(cid:82)(cid:74)(cid:81)(cid:76)(cid:93)(cid:72)(cid:71)(cid:3)(cid:87)(cid:68)(cid:91)(cid:3)(cid:69)(cid:72)(cid:81)(cid:72)(cid:73)(cid:76)(cid:87)(cid:86)(cid:15)(cid:3)(cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3)(cid:76)(cid:86)(cid:3)(cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:179)(cid:50)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:76)(cid:81)(cid:70)(cid:82)(cid:80)(cid:72) (cid:177) (cid:81)(cid:72)(cid:87)(cid:15)(cid:180)(cid:3)totaled $1 million of
income in 2012, $10 million of income in 2011, and $1 million of expense in 2010. There were no penalties
related to tax matters in 2012, 2011, and 2010. We have recorded a liability of $3 million at December 31, 2012,
and $4 million at December 31, 2011, for the payment of interest on unrecognized tax benefits. We have no
liability recorded at December 31, 2012 and 2011, for the payment of penalties on unrecognized tax benefits.
K52
4. Fair Value
Fair Value Measurements
ASC 820-10, (cid:179)(cid:41)(cid:68)(cid:76)(cid:85)(cid:3)(cid:57)(cid:68)(cid:79)(cid:88)(cid:72)(cid:3)(cid:48)(cid:72)(cid:68)(cid:86)(cid:88)(cid:85)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:15)(cid:180) established a framework for measuring fair value and a fair value
hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels, as
follows:
Level 1
Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities
in active markets that we have the ability to access.
Level 2
Inputs to the valuation methodology include:
(cid:120) Quoted prices for similar assets or liabilities in active markets;
(cid:120) Quoted prices for identical or similar assets or liabilities in inactive markets;
(cid:120)
Inputs other than quoted prices that are observable for the asset or liability;
(cid:120)
Inputs that are derived principally from or corroborated by observable market data by
correlation or other means.
If the asset or liability has a specified (contractual) term, the Level 2 input must be observable
for substantially the full term of the asset or liability.
Level 3
Inputs to the valuation methodology are unobservable and significant to the fair value
measurement.
(cid:55)(cid:75)(cid:72)(cid:3)(cid:68)(cid:86)(cid:86)(cid:72)(cid:87)(cid:182)(cid:86)(cid:3)(cid:82)(cid:85)(cid:3)(cid:79)(cid:76)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:182)(cid:86)(cid:3)(cid:73)(cid:68)(cid:76)(cid:85)(cid:3)(cid:89)(cid:68)(cid:79)(cid:88)(cid:72)(cid:3)(cid:80)(cid:72)(cid:68)(cid:86)(cid:88)(cid:85)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:79)(cid:72)(cid:89)(cid:72)(cid:79)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:75)(cid:76)(cid:72)(cid:85)(cid:68)(cid:85)(cid:70)(cid:75)(cid:92)(cid:3)(cid:76)(cid:86)(cid:3)(cid:69)(cid:68)(cid:86)(cid:72)(cid:71)(cid:3)(cid:82)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:79)(cid:82)(cid:90)(cid:72)(cid:86)(cid:87)(cid:3)(cid:79)(cid:72)(cid:89)(cid:72)(cid:79)(cid:3)(cid:82)(cid:73)(cid:3)(cid:68)(cid:81)(cid:92)(cid:3)
input that is significant to the fair value measurement. Other than those assets and liabilities described below that
approximate fair value, there were no assets or liabilities measured at fair value on a recurring basis at December
31, 2012 or 2011.
Fair Values of Financial Instruments
We have evaluated the fair values of financial instruments and methods used to determine those fair values. The
(cid:73)(cid:68)(cid:76)(cid:85)(cid:3)(cid:89)(cid:68)(cid:79)(cid:88)(cid:72)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:179)(cid:38)(cid:68)(cid:86)(cid:75)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:70)(cid:68)(cid:86)(cid:75)(cid:3)(cid:72)(cid:84)(cid:88)(cid:76)(cid:89)(cid:68)(cid:79)(cid:72)(cid:81)(cid:87)(cid:86)(cid:15)(cid:180)(cid:3)(cid:179)(cid:54)(cid:75)(cid:82)(cid:85)(cid:87)-(cid:87)(cid:72)(cid:85)(cid:80)(cid:3)(cid:76)(cid:81)(cid:89)(cid:72)(cid:86)(cid:87)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:15)(cid:180)(cid:3)(cid:179)(cid:36)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:86)(cid:3)(cid:85)(cid:72)(cid:70)(cid:72)(cid:76)(cid:89)(cid:68)(cid:69)(cid:79)(cid:72)(cid:15)(cid:180)(cid:3)(cid:179)(cid:36)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:86)(cid:3)
(cid:83)(cid:68)(cid:92)(cid:68)(cid:69)(cid:79)(cid:72)(cid:15)(cid:180)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:179)(cid:54)(cid:75)(cid:82)(cid:85)(cid:87)-(cid:87)(cid:72)(cid:85)(cid:80)(cid:3)(cid:71)(cid:72)(cid:69)(cid:87)(cid:180)(cid:3)(cid:68)(cid:83)(cid:83)(cid:85)(cid:82)(cid:91)(cid:76)(cid:80)(cid:68)(cid:87)(cid:72)(cid:3)(cid:70)(cid:68)(cid:85)(cid:85)(cid:92)(cid:76)(cid:81)(cid:74)(cid:3)(cid:89)(cid:68)(cid:79)(cid:88)(cid:72)(cid:86)(cid:3)(cid:69)(cid:72)(cid:70)(cid:68)(cid:88)(cid:86)(cid:72) of the short maturity of these financial
instruments. The carrying value of corporate-owned life insurance is recorded at cash surrender value and,
accordingly, approximates fair value. The carrying amounts and estimated fair values for the remaining financial
instruments, excluding investments accounted for under the equity method, consisted of the following at
December 31:
2012
2011
Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
($ in millions)
Long-term investments
Long-term debt, including current maturities
$
139 $
(8,482)
174
(10,734)
$
151
(7,440)
$
186
(9,469)
Underlying net assets were used to estimate the fair value of investments with the exception of notes receivable,
which are based on future discounted cash flows. The fair values of long-term debt were estimated based on
quoted market prices or discounted cash flows using current interest rates for debt with similar terms, company
rating, and remaining maturity.
K53
The following table sets forth the fair value of long-term investment and long-term debt balances disclosed above
by valuation technique level, within the fair value hierarchy (there were no level 3 valued assets or liabilities).
Level 1
December 31, 2012
Level 2
($ in millions)
Total
Long-term investments
Long-term debt, including current maturities
$
41 $
(10,450)
133 $
(284)
174
(10,734)
Sales of available-for-sale securities were zero for the year ended December 31, 2012, $81 million for the year
ended December 31, 2011, and $225 million for the year ended December 31, 2010 (which included maturities).
5. Investments
Short-term investments:
Federal government bonds, held-to-maturity, with average
maturities of 5 and 1 months, respectively
Long-term investments:
Equity method investments:
Conrail Inc.
TTX Company
Meridian Speedway LLC
Pan Am Southern LLC
Other
Total equity method investments
Company-owned life insurance at net cash surrender value
Corporate bonds, held-to-maturity, with average maturities
of 17 months
Other investments
$
$
December 31,
2012
2011
($ in millions)
15 $
25
996 $
383
281
155
82
1,897
264
-
139
969
376
275
151
82
1,853
230
15
136
Total long-term investments
$
2,300 $
2,234
Investment in Conrail
Through a limited liability company, we and CSX Corporation (CSX) jointly own Conrail Inc. (Conrail), whose
primary subsidiary is Consolidated Rail Corporation (CRC). We have a 58% economic and 50% voting interest
in the jointly owned entity, and CSX has the remainder of the economic and voting interests. We are amortizing
(cid:87)(cid:75)(cid:72)(cid:3)(cid:72)(cid:91)(cid:70)(cid:72)(cid:86)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:83)(cid:88)(cid:85)(cid:70)(cid:75)(cid:68)(cid:86)(cid:72)(cid:3)(cid:83)(cid:85)(cid:76)(cid:70)(cid:72)(cid:3)(cid:82)(cid:89)(cid:72)(cid:85)(cid:3)(cid:38)(cid:82)(cid:81)(cid:85)(cid:68)(cid:76)(cid:79)(cid:182)(cid:86)(cid:3)(cid:81)(cid:72)(cid:87) equity using the principles of purchase accounting, based
(cid:83)(cid:85)(cid:76)(cid:80)(cid:68)(cid:85)(cid:76)(cid:79)(cid:92)(cid:3)(cid:82)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:72)(cid:86)(cid:87)(cid:76)(cid:80)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:88)(cid:86)(cid:72)(cid:73)(cid:88)(cid:79)(cid:3)(cid:79)(cid:76)(cid:89)(cid:72)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:38)(cid:82)(cid:81)(cid:85)(cid:68)(cid:76)(cid:79)(cid:182)(cid:86)(cid:3)(cid:71)(cid:72)(cid:83)(cid:85)(cid:72)(cid:70)(cid:76)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:83)(cid:85)(cid:82)(cid:83)(cid:72)(cid:85)(cid:87)(cid:92)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:72)(cid:84)(cid:88)(cid:76)(cid:83)(cid:80)(cid:72)(cid:81)(cid:87)(cid:15)(cid:3)(cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)
deferred tax effect of the differences in book and tax accounting bases for such assets, as all of the purchase price
(cid:68)(cid:87)(cid:3)(cid:68)(cid:70)(cid:84)(cid:88)(cid:76)(cid:86)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:90)(cid:68)(cid:86)(cid:3)(cid:68)(cid:79)(cid:79)(cid:82)(cid:70)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:38)(cid:82)(cid:81)(cid:85)(cid:68)(cid:76)(cid:79)(cid:182)(cid:86)(cid:3)(cid:87)(cid:68)(cid:81)(cid:74)(cid:76)(cid:69)(cid:79)(cid:72)(cid:3)(cid:68)(cid:86)(cid:86)(cid:72)(cid:87)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:79)(cid:76)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:17)
At December 31, 2012, based on the funded stat(cid:88)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:38)(cid:82)(cid:81)(cid:85)(cid:68)(cid:76)(cid:79)(cid:182)(cid:86)(cid:3)(cid:83)(cid:72)(cid:81)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3)(cid:83)(cid:79)(cid:68)(cid:81)(cid:86)(cid:15)(cid:3)(cid:90)(cid:72) decreased our proportional
investment in Conrail by $7 million. This resulted in a loss of $6 (cid:80)(cid:76)(cid:79)(cid:79)(cid:76)(cid:82)(cid:81)(cid:3)(cid:85)(cid:72)(cid:70)(cid:82)(cid:85)(cid:71)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:179)(cid:50)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:85)(cid:72)(cid:75)(cid:72)(cid:81)(cid:86)(cid:76)(cid:89)(cid:72)(cid:3)(cid:79)(cid:82)(cid:86)(cid:86)(cid:180)(cid:3)
and a combined federal and state deferred tax asset of $1 million.
K54
At December 31, 2011(cid:15)(cid:3)(cid:69)(cid:68)(cid:86)(cid:72)(cid:71)(cid:3)(cid:82)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:73)(cid:88)(cid:81)(cid:71)(cid:72)(cid:71)(cid:3)(cid:86)(cid:87)(cid:68)(cid:87)(cid:88)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:38)(cid:82)(cid:81)(cid:85)(cid:68)(cid:76)(cid:79)(cid:182)(cid:86)(cid:3)(cid:83)(cid:72)(cid:81)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3)(cid:83)(cid:79)(cid:68)(cid:81)(cid:86)(cid:15)(cid:3)we decreased our proportional
investment in Conrail by $21 million. This resulted in a loss of $19 (cid:80)(cid:76)(cid:79)(cid:79)(cid:76)(cid:82)(cid:81)(cid:3)(cid:85)(cid:72)(cid:70)(cid:82)(cid:85)(cid:71)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:179)(cid:50)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:85)(cid:72)(cid:75)(cid:72)(cid:81)(cid:86)(cid:76)(cid:89)(cid:72)(cid:3)
(cid:79)(cid:82)(cid:86)(cid:86)(cid:180)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:68)(cid:3)(cid:70)(cid:82)(cid:80)(cid:69)(cid:76)(cid:81)(cid:72)(cid:71)(cid:3)(cid:73)(cid:72)(cid:71)(cid:72)(cid:85)(cid:68)(cid:79)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:3)(cid:71)(cid:72)(cid:73)(cid:72)(cid:85)(cid:85)(cid:72)(cid:71)(cid:3)(cid:87)(cid:68)(cid:91)(cid:3)asset of $2 million.
At December 31, 2012, the difference between our investment in Conrail and our (cid:86)(cid:75)(cid:68)(cid:85)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:38)(cid:82)(cid:81)(cid:85)(cid:68)(cid:76)(cid:79)(cid:182)(cid:86)(cid:3)(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:79)(cid:92)(cid:76)(cid:81)(cid:74)(cid:3)
net equity was $540 million. Our equity in the earnings o(cid:73)(cid:3)(cid:38)(cid:82)(cid:81)(cid:85)(cid:68)(cid:76)(cid:79)(cid:15)(cid:3)(cid:81)(cid:72)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:68)(cid:80)(cid:82)(cid:85)(cid:87)(cid:76)(cid:93)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:15)(cid:3)(cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:179)(cid:50)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)
income (cid:177) (cid:81)(cid:72)(cid:87)(cid:180)(cid:3)(cid:90)(cid:68)(cid:86)(cid:3)(cid:7)34 million, $31 million, and $26 million in 2012, 2011, and 2010, respectively.
CRC owns and operates certain properties (the Shared Assets Areas) for the joint and exclusive benefit of NSR
and CSX Transportation, Inc. (CSXT). The costs of operating the Shared Assets Areas are borne by NSR and
CSXT based on usage. In addition, NSR and CSXT pay CRC a fee for access to the Shared Assets Areas.
(cid:179)(cid:51)(cid:88)(cid:85)(cid:70)(cid:75)(cid:68)(cid:86)(cid:72)(cid:71)(cid:3)(cid:86)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:85)(cid:72)(cid:81)(cid:87)(cid:86)(cid:180)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:179)(cid:41)(cid:88)(cid:72)(cid:79)(cid:180)(cid:3)(cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:3)(cid:72)(cid:91)(cid:83)(cid:72)(cid:81)(cid:86)(cid:72)(cid:86)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:68)(cid:80)(cid:82)(cid:88)(cid:81)(cid:87)(cid:86)(cid:3)(cid:71)(cid:88)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:38)(cid:53)(cid:38)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:54)(cid:75)(cid:68)(cid:85)(cid:72)(cid:71)(cid:3)
Assets Areas totaling $147 million in 2012, $131 million in 2011, and $118 million in 2010. Future minimum
lease payments due to CRC under the Shared Assets Areas agreements are as follows: $33 million in each of
2013 through 2017 and $217 million thereafter. We provide certain general and administrative support functions
to Conrail, the fees for which are billed in accordance with several service-provider arrangements and
approximate $7 million annually.
(cid:179)(cid:36)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:86)(cid:3)(cid:83)(cid:68)(cid:92)(cid:68)(cid:69)(cid:79)(cid:72)(cid:180)(cid:3)(cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:86)(cid:3)(cid:7)178 million at December 31, 2012, and $160 million at December 31, 2011, due to
Conrail for the operation of the Shared Assets Areas. (cid:44)(cid:81)(cid:3)(cid:68)(cid:71)(cid:71)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:15)(cid:3)(cid:179)(cid:50)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:79)(cid:76)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:180)(cid:3)(cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:86)(cid:3)(cid:7)133 million at both
December 31, 2012 and 2011, for long-term advances from Conrail, maturing 2035, that bear interest at an
average rate of 4.4%.
6. Properties
At December 31, 2012
Land
Roadway:
Rail and other track material
Ties
Ballast
Construction in process
Other roadway
Total roadway
Equipment:
Locomotives
Freight cars
Computers
Construction in process
Other equipment
Total equipment
Other property
Cost
Accumulated Net Book
Depreciation
Value
Depreciation
Rate
(a)
($ in millions)
$
2,240 $
- $
2,240
-
5,699
4,255
2,128
378
11,223
23,683
4,576
3,214
480
177
817
9,264
471
(1,707)
(1,027)
(437)
-
(2,636)
(5,807)
(1,798)
(1,502)
(270)
-
(282)
(3,852)
3,992
3,228
1,691
378
8,587
17,876
2,778
1,712
210
177
535
5,412
2.39%
3.29%
2.61%
-
2.68%
3.05%
2.27%
12.27%
-
5.49%
(263)
208
1.31%
Total properties
$
35,658 $
(9,922) $
25,736
K55
At December 31, 2011
Land
Roadway:
Rail and other track material
Ties
Ballast
Construction in process
Other roadway
Total roadway
Equipment:
Locomotives
Freight cars
Computers
Construction in process
Other equipment
Total equipment
Other property
Cost
Accumulated Net Book
Depreciation
Value
Depreciation
Rate
(a)
($ in millions)
$
2,209 $
- $
2,209
-
5,490
4,015
2,010
302
10,779
22,596
4,287
3,008
408
224
732
8,659
469
(1,643)
(973)
(418)
-
(2,486)
(5,520)
(1,692)
(1,466)
(277)
-
(252)
(3,687)
(257)
3,847
3,042
1,592
302
8,293
17,076
2,595
1,542
131
224
480
4,972
2.44%
3.33%
2.66%
-
2.71%
3.05%
2.27%
11.21%
-
4.85%
212
1.43%
Total properties
$
33,933 $
(9,464) $
24,469
(a) Composite annual depreciation rate for the underlying assets.
Roadway and equipment property includes $9 million at December 31, 2012, and $93 million at December 31,
2011, of assets recorded pursuant to capital leases with accumulated amortization of $3 million and $38 million at
December 31, 2012 and 2011, respectively. Other property includes the costs of obtaining rights to natural
resources of $336 million at both December 31, 2012 and 2011, with accumulated depletion of $192 million and
$190 million, respectively.
Capitalized Interest
Total interest cost incurred on debt was $515 million in 2012, $474 million in 2011, and $477 million in 2010, of
which $20 million, $19 million, and $15 million, respectively, was capitalized.
K56
7. Current Liabilities
Accounts payable:
Accounts and wages payable
Casualty and other claims (Note 16)
Due to Conrail (Note 5)
Vacation liability
Other
Total
December 31,
2012
2011
($ in millions)
$
777 $
183
178
129
95
499
201
160
123
109
$
1,362 $
1,092
Other current liabilities:
Interest payable
Postretirement and pension benefit obligations (Note 11)
Other
$
112 $
70
81
Total
8. Debt
$
263 $
106
68
78
252
Debt with weighted average interest rates and maturities is presented below:
Notes and debentures:
6.34% maturing to 2017
5.82% maturing 2018 to 2019
5.04% maturing 2020 to 2022
5.90% maturing 2023 to 2031
5.22% maturing 2037 to 2043
6.39% maturing 2097 to 2111
Securitization borrowings, 1.28%
Other debt, 7.05%, maturing to 2024
Discounts and premiums, net
Total debt
Less current maturities and short-term debt
$
December 31,
2012
2011
($ in millions)
1,482 $
1,100
1,497
1,746
1,590
1,328
300
151
(512)
8,682
(250)
1,481
1,100
897
1,629
1,029
1,328
200
199
(323)
7,540
(150)
Long-term debt excluding current maturities and short-term debt
$
8,432 $
7,390
Long-term debt maturities subsequent to 2013 are as follows:
2014
2015
2016
2017
2018 and subsequent years
Total
$
$
446
1
500
550
6,935
8,432
K57
During the third quarter of 2012, we issued $600 million of senior notes at 2.90% due 2023 and paid $115 million
of premium in exchange for $521 million of our previously issued notes ($156 million at 7.25% due 2031, $140
million at 5.64% due 2029, $115 million at 5.59% due 2025, $72 million at 7.80% due 2027, and $38 million at
7.05% due 2037). The premium is reflected as a reduction of debt in the 2012 Consolidated Balance Sheet and
(cid:90)(cid:76)(cid:87)(cid:75)(cid:76)(cid:81)(cid:3)(cid:179)(cid:39)(cid:72)(cid:69)(cid:87)(cid:3)(cid:85)(cid:72)(cid:83)(cid:68)(cid:92)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:180)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:21)(cid:19)(cid:20)(cid:21)(cid:3)Statement of Cash Flows and will be amortized as additional interest
expense over the term of the new debt. No gain or loss was recognized as a result of the debt exchange. Also
during the third quarter of 2012, we issued $600 million of 3.95% senior notes due 2042.
During the first quarter of 2012, we issued $600 million of 3.00% senior notes due 2022.
During the fourth quarter of 2011, we issued $500 million of 3.25% senior notes due 2021 and an additional
$100 million of 6.00% senior notes due 2111.
During the third quarter of 2011, we issued $600 million of unsecured notes ($596 million at 4.84% due 2041 and
$4 million at 6.00% due 2111) and paid $146 million of premium in exchange for $526 million of its previously
issued unsecured notes ($422 million at 7.05% due 2037, $77 million at 7.90% due 2097, and $27 million at
7.25% due 2031). The premium is reflected as a reduction of debt in the Consolidated Balance Sheets and within
(cid:179)(cid:39)(cid:72)(cid:69)(cid:87)(cid:3)(cid:85)(cid:72)(cid:83)(cid:68)(cid:92)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:180)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:21)(cid:19)(cid:20)(cid:20)(cid:3)Statement of Cash Flows and will be amortized as additional interest expense over
the terms of the new debt. No gain or loss was recognized as a result of the debt exchange.
During the second quarter of 2011, we issued $400 million of 6.00% senior notes due 2111.
We have in place a $350 million receivables securitization facility under which NSR sells substantially all of its
eligible third-party receivables to a subsidiary, which in turn may transfer beneficial interests in the receivables to
various commercial paper vehicles. Amounts received under the facility are accounted for as borrowings. Under
this facility, we received $300 million and repaid $200 million in 2012.
At December 31, 2012 and 2011, respectively, the amounts outstanding under the receivables securitization
facility were $300 million at an average variable interest rate of 1.28% and $200 million at an average variable
interest rate of 1.35%. Our intent is to refinance $100 million of these borrowings on a long-term basis, which is
supported by our $750 million credit agreement (see below). Accordingly, these amounts outstanding are
(cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:79)(cid:76)(cid:81)(cid:72)(cid:3)(cid:76)(cid:87)(cid:72)(cid:80)(cid:3)(cid:179)(cid:47)(cid:82)(cid:81)(cid:74)-term (cid:71)(cid:72)(cid:69)(cid:87)(cid:180)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:80)(cid:68)(cid:76)(cid:81)(cid:76)(cid:81)(cid:74)(cid:3)(cid:7)200 million outstanding at December 31, 2012 and
$100 million outstanding at December 31, 2011, are included in the lin(cid:72)(cid:3)(cid:76)(cid:87)(cid:72)(cid:80)(cid:3)(cid:179)(cid:54)(cid:75)(cid:82)(cid:85)(cid:87)-(cid:87)(cid:72)(cid:85)(cid:80)(cid:3)(cid:71)(cid:72)(cid:69)(cid:87)(cid:180)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)
Consolidated Balance Sheets. The facility has a 364-day term which was renewed and amended in October 2012
to run until October 2013. At December 31, 2012 and 2011, the receivables included in (cid:179)(cid:36)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:86)(cid:3)(cid:85)(cid:72)(cid:70)(cid:72)(cid:76)(cid:89)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:177)
(cid:81)(cid:72)(cid:87)(cid:180)(cid:3)(cid:86)(cid:72)(cid:85)(cid:89)(cid:76)(cid:81)(cid:74)(cid:3)(cid:68)(cid:86)(cid:3)(cid:70)(cid:82)(cid:79)(cid:79)(cid:68)(cid:87)(cid:72)(cid:85)(cid:68)(cid:79)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:86)(cid:72)(cid:3)(cid:69)(cid:82)(cid:85)(cid:85)(cid:82)(cid:90)(cid:76)(cid:81)(cid:74)(cid:86)(cid:3)totaled $751 million and $745 million, respectively.
Some equipment and lease obligations are secured by liens on the underlying equipment. Certain lease
obligations which expired during the first quarter of 2012 required the maintenance of yen-denominated deposits,
which were pledged to the lessor to satisfy yen-denominated lease payments. These deposits were included in
(cid:179)(cid:50)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:68)(cid:86)(cid:86)(cid:72)(cid:87)(cid:86)(cid:180)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)2011 Consolidated Balance Sheet and totaled $14 million at December 31, 2011.
Issuance of Debt or Equity Securities
We have authority from our Board of Directors to issue an additional $600 million of debt or equity securities
through public or private sale.
Credit Agreement, Debt Covenants, and Commercial Paper
We have in place and available a $750 million, five-year credit agreement expiring in 2016, which provides for
borrowings at prevailing rates and includes covenants. We had no amounts outstanding under this facility at
December 31, 2012 and 2011, and we are in compliance with all of its covenants.
K58
We have the ability to issue commercial paper supported by the $750 million credit agreement. At December 31,
2012 and 2011, we had no outstanding commercial paper.
9. Lease Commitments
We are committed under long-term lease agreements, which expire on various dates through 2067, for equipment,
lines of road and other property. The following amounts do not include payments to CRC under the Shared
Assets Areas agreements (Note 5). Future minimum lease payments and operating lease expense are as follows:
Future Minimum Lease Payments
Operating
Leases
Capital
Leases
($ in millions)
2013
2014
2015
2016
2017
2018 and subsequent years
Total
$
91 $
78
63
51
44
422
$
749
Less imputed interest on capital leases at an average rate of 5.30%
Present value of minimum lease payments included in debt
$
3
2
1
-
-
2
8
(1)
7
Operating Lease Expense
Minimum rents
Contingent rents
Total
2012
2011
($ in millions)
2010
$
$
129 $
73
202 $
150 $
77
227 $
159
79
238
Contingent rents are primarily comprised of usage-based rent paid to other railroads for joint facility operations.
10. Other Liabilities
December 31,
2012
2011
($ in millions)
$
$
1,049
482
258
133
315
964
346
275
133
332
$
2,237 $
2,050
Net postretirement benefit obligations (Note 11)
Net pension benefit obligations (Note 11)
Casualty and other claims (Note 16)
Long-term advances from Conrail (Note 5)
Other
Total
K59
11. Pensions and Other Postretirement Benefits
We have both funded and unfunded defined benefit pension plans covering principally salaried employees. We
also provide specified health care and death benefits to eligible retired employees and their dependents; these
plans can be amended or terminated at our option. Under our health care plans, a defined percentage of health
care expenses is covered, reduced by any deductibles, co-payments, Medicare payments and, in some cases,
coverage provided under other group insurance policies.
Pension and Other Postretirement Benefit Obligations and Plan Assets
Change in benefit obligations:
Benefit obligation at beginning of year
Service cost
Interest cost
Actuarial losses
Benefits paid
Benefit obligation at end of year
Change in plan assets:
Fair value of plan assets at beginning of year
Actual return on plan assets
Employer contribution
Benefits paid
Fair value of plan assets at end of year
Pension Benefits
2012
2011
Other Postretirement
Benefits
2012
2011
($ in millions)
$
2,027 $
34
89
253
(118)
2,285
1,813 $
28
92
209
(115)
2,027
1,206 $
15
54
82
(46)
1,311
1,082
14
58
101
(49)
1,206
1,670
227
12
(118)
1,791
1,756
18
11
(115)
1,670
186
19
46
(46)
205
178
8
49
(49)
186
Funded status at end of year
$
(494) $
(357) $
(1,106) $
(1,020)
Amounts recognized in the Consolidated
Balance Sheets:
Noncurrent assets
Current liabilities
Noncurrent liabilities
$
1 $
1 $
- $
(13)
(482)
(12)
(346)
(57)
(1,049)
-
(56)
(964)
Net amount recognized
$
(494) $
(357) $
(1,106) $
(1,020)
Amounts recognized in accumulated other
comprehensive loss (pretax):
Net loss
Prior service cost
$
1,160 $
4
1,071 $
4
459 $
-
434
-
Our accumulated benefit obligation for our defined benefit pension plans is $2.1 billion and $1.9 billion at
December 31, 2012 and 2011, respectively. Our unfunded pension plans, included above, which in all cases have
no assets and therefore have an accumulated benefit obligation in excess of plan assets, had projected benefit
obligations of $239 million at December 31, 2012, and $219 million at December 31, 2011, and had accumulated
benefit obligations of $215 million at December 31, 2012, and $195 million at December 31, 2011.
K60
Pension and Other Postretirement Benefit Cost Components
Pension benefits:
Service cost
Interest cost
Expected return on plan assets
Amortization of net losses
Amortization of prior service cost
Net cost
Other postretirement benefits:
Service cost
Interest cost
Expected return on plan assets
Amortization of net losses
Net cost
2012
2011
($ in millions)
2010
$
$
$
34 $
89
(138)
75
-
28 $
92
(140)
67
3
60 $
50 $
15 $
54
(15)
53
14 $
58
(15)
44
$
107 $
101 $
26
96
(142)
48
3
31
16
61
(15)
52
114
Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Loss
Net loss arising during the year
Amortization of net losses
Total recognized in other comprehensive loss
Total recognized in net periodic cost
and other comprehensive loss
2012
Other
Pension
Benefits
Postretirement
Benefits
($ in millions)
$
$
$
$
164
(75)
89
$
78
(53)
25
149
$
132
The estimated net losses and prior service cost for the pension benefit plans that will be amortized from
accumulated other comprehensive loss into net periodic cost over the next year are $88 million and $1 million,
respectively. The estimated net losses for the other postretirement benefit plans that will be amortized from
accumulated other comprehensive loss into net periodic cost over the next year are $57 million.
K61
Pension and Other Postretirement Benefits Assumptions
Costs for pension and other postretirement benefits are determined based on actuarial valuations that reflect
appropriate assumptions as of the measurement date, ordinarily the beginning of each year. The funded status of
the plans is determined using appropriate assumptions as of each year end. A summary of the major assumptions
follows:
Pension funded status:
Discount rate
Future salary increases
Other postretirement benefits funded status:
Discount rate
Pension cost:
Discount rate
Return on assets in plans
Future salary increases
Other postretirement benefits cost:
Discount rate
Return on assets in plans
Health care trend rate
2012
2011
2010
3.65%
4.50%
3.80%
4.50%
8.25%
4.50%
4.55%
8.00%
7.70%
4.50%
4.50%
4.55%
5.25%
8.75%
4.50%
5.40%
8.50%
8.10%
5.25%
4.50%
5.40%
5.85%
8.75%
4.50%
5.85%
8.50%
8.50%
To determine the discount rates, we utilize analyses in which the projected annual cash flows from the pension
and other postretirement benefit plans were matched with yield curves based on an appropriate universe of high-
quality corporate bonds. We use the results of the yield curve analyses to select the discount rates that match the
payment streams of the benefits in these plans.
Health Care Cost Trend Assumptions
For measurement purposes at December 31, 2012, increases in the per capita cost of covered health care benefits
were assumed to be 7.3% for 2013. It is assumed the rate will decrease gradually to an ultimate rate of 5.0% for
2019 and remain at that level thereafter.
Assumed health care cost trend rates have a significant effect on the amounts reported in the consolidated
financial statements. To illustrate, a one-percentage point change in the assumed health care cost trend would
have the following effects:
One-percentage point
Increase Decrease
($ in millions)
Increase (decrease) in:
Total service and interest cost components
Postretirement benefit obligation
$
11 $
190
(9)
(156)
K62
Asset Management
Nine investment firms manage our defined benefit pension plans(cid:182) assets under investment guidelines approved by
our Benefits Investment Committee that is comprised of members of our management. Investments are restricted
to domestic and international equity securities, domestic and international fixed income securities, and
unleveraged exchange-traded options and financial futures. Limitations restrict investment concentration and use
of certain derivative investments. The target asset allocation for equity is 75% of the pension plan(cid:86)(cid:182) assets. The
fixed income portfolio is invested in the Barclays Government/Credit Bond Index Fund, except that the Canadian
earmarked portion of the portfolio is maintained in U.S. Treasury Bonds. Equity investments must be in liquid
securities listed on national exchanges. No investment is permitted in our securities (except through commingled
pension trust funds). (cid:44)(cid:81)(cid:89)(cid:72)(cid:86)(cid:87)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:80)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:85)(cid:86)(cid:182)(cid:3)(cid:85)(cid:72)(cid:87)(cid:88)(cid:85)(cid:81)(cid:86)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:72)(cid:91)(cid:83)(cid:72)(cid:70)(cid:87)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:80)(cid:72)(cid:72)(cid:87)(cid:3)(cid:82)(cid:85)(cid:3)(cid:72)(cid:91)(cid:70)(cid:72)(cid:72)(cid:71)(cid:3)(cid:86)(cid:72)(cid:79)(cid:72)(cid:70)(cid:87)(cid:72)(cid:71)(cid:3)(cid:80)(cid:68)(cid:85)(cid:78)(cid:72)(cid:87)(cid:3)(cid:76)(cid:81)(cid:71)(cid:76)(cid:70)(cid:72)(cid:86)(cid:3)(cid:69)(cid:92)(cid:3)
prescribed margins.
Our pension plan(cid:86)(cid:182) weighted-average asset allocations, by asset category, were as follows:
Domestic equity securities
International equity securities
Debt securities
Cash and cash equivalents
Total
Percentage of plan
assets at December 31,
2012
2011
52%
22%
24%
2%
56%
17%
25%
2%
100%
100%
The other postretirement benefit plan assets consist primarily of trust-owned variable life insurance policies with
an asset allocation at December 31, 2012, of 58% in equity securities and 42% in debt securities compared with
56% in equity securities and 44% in debt securities at December 31, 2011. The target asset allocation for equity
is between 50% and 75% of the (cid:83)(cid:79)(cid:68)(cid:81)(cid:182)(cid:86)(cid:3)(cid:68)(cid:86)(cid:86)(cid:72)(cid:87)(cid:86)(cid:17)
(cid:55)(cid:75)(cid:72)(cid:3)(cid:83)(cid:79)(cid:68)(cid:81)(cid:86)(cid:182)(cid:3)(cid:68)(cid:86)(cid:86)(cid:88)(cid:80)(cid:72)(cid:71)(cid:3)(cid:73)(cid:88)(cid:87)(cid:88)(cid:85)(cid:72)(cid:3)(cid:85)(cid:72)(cid:87)(cid:88)(cid:85)(cid:81)(cid:86)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:69)(cid:68)(cid:86)(cid:72)(cid:71)(cid:3)(cid:83)(cid:85)(cid:76)(cid:81)(cid:70)(cid:76)(cid:83)(cid:68)(cid:79)(cid:79)(cid:92)(cid:3)(cid:82)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:68)(cid:86)(cid:86)(cid:72)(cid:87)(cid:3)(cid:68)(cid:79)(cid:79)(cid:82)(cid:70)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:75)(cid:76)(cid:86)(cid:87)(cid:82)(cid:85)(cid:76)(cid:70)(cid:3)(cid:85)(cid:72)(cid:87)(cid:88)(cid:85)(cid:81)(cid:86)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:83)(cid:79)(cid:68)(cid:81)(cid:86)(cid:182)(cid:3)
asset classes determined from both actual plan returns and, over longer time periods, market returns for those
asset classes. The expected long-term rate of return on plan assets is applied to a calculated value of plan assets
that recognizes changes in fair value over a three-year period. We assumed a rate of return on pension plan assets
of 8.25% for 2012 and 8.75% for both 2011 and 2010. A one-percentage point change to the rate of return
assumption would result in a $17 million change to the net pension cost and, as a result, an equal change in
(cid:179)(cid:38)(cid:82)(cid:80)(cid:83)(cid:72)(cid:81)(cid:86)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:69)(cid:72)(cid:81)(cid:72)(cid:73)(cid:76)(cid:87)(cid:86)(cid:180)(cid:3)(cid:72)(cid:91)(cid:83)(cid:72)(cid:81)(cid:86)(cid:72)(cid:17) For 2013, we assume an 8.25% return on pension plan assets.
K63
Fair Value of Plan Assets
Following is a description of the valuation methodologies used for pension plan assets measured at fair value.
Common stock: Shares held by the plan at year end are valued at the official closing price as defined by
the exchange or at the most recent trade price of a security at the close of the active market.
Common collective trusts: Valued at the net asset value (NAV) of shares held by the plan at year end,
based on the quoted market prices of the underlying assets of the trusts. The investments are valued using
NAV as a practical expedient for fair value. The common collective trusts hold equity securities, fixed
income securities and cash and cash equivalents.
Corporate bonds and other fixed income instruments: When available, valued at an estimated price at
which a dealer would pay for a similar security at year end using observable market inputs. Otherwise,
valued at an estimated price at which a dealer would pay for a similar security at year end using
unobservable market inputs.
Municipal bonds: Valued at an estimated price at which a dealer would pay for a security at year end
using observable market based inputs.
Commingled funds: Valued at the NAV of shares held by the plan at year end, based on the quoted
market prices of the underlying assets of the funds. The investments are valued using NAV as a practical
expedient for fair value. The commingled funds hold equity securities.
Interest bearing cash: Short-term bills or notes are valued at an estimated price at which a dealer would
pay for the security at year end using observable market based inputs; money market funds are valued at
the closing price reported on the active market on which the funds are traded.
United States Government and agencies securities: Valued at an estimated price at which a dealer would
pay for a security at year end using observable as well as unobservable market based inputs. Inflation
adjusted instruments utilize the appropriate index factor.
Preferred stock: Shares held by the plan at year end are valued at the most recent trade price of a security
at the close of the active market or at an estimated price at which a dealer would pay for a similar security
at year end using primarily observable as well as unobservable market-based inputs.
K64
The following table sets forth the pension plan(cid:86)(cid:182) assets by valuation technique level, within the fair value
hierarchy (there were no level 3 valued assets).
Common stock
Common collective trusts:
Debt securities
International equity securities
Commingled funds
Interest bearing cash
U.S. government and agencies securities
Preferred stock
Level 1
December 31, 2012
Level 2
($ in millions)
Total
$
1,028 $
- $
1,028
-
-
-
31
-
-
433
211
84
-
3
1
433
211
84
31
3
1
Total investments
$
1,059 $
732 $
1,791
Common stock
Common collective trusts:
Debt securities
International equity securities
Commingled funds
Interest bearing cash
U.S. government and agencies securities
Preferred stock
Level 1
December 31, 2011
Level 2
($ in millions)
Total
$
1,017 $
- $
1,017
-
-
-
37
-
-
416
154
42
-
3
1
416
154
42
37
3
1
Total investments
$
1,054 $
616 $
1,670
Following is a description of the valuation methodologies used for other postretirement benefit plan assets
measured at fair value.
Trust-owned life insurance: Valued at our share of the net assets of trust-owned life insurance issued by a
major insurance company. The underlying investments of that trust consist of a U.S. stock account and a
U.S. bond account, valued based upon the aggregate market values of the underlying investments. The
loan asset account is valued at cash surrender value at the time of the loan, plus accrued interest.
The other postretirement benefit plan assets consisted of trust-owned life insurance with fair values of
$205 million and $186 million at December 31, 2012 and 2011, respectively, and are valued under level 2 of the
fair value hierarchy. There were no level 1 or level 3 related assets.
The methods used to value pension and other postretirement benefit plan assets may produce a fair value
calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore,
while we believe our valuation methods are appropriate and consistent with other market participants, the use of
different methodologies or assumptions to determine the fair value of certain financial instruments could result in
a different fair value measurement at the reporting date.
K65
Contributions and Estimated Future Benefit Payments
In 2013, we expect to contribute approximately $13 million to our unfunded pension plans for payments to
pensioners and approximately $57 million to our other postretirement benefit plans for retiree health and death
benefits. We do not expect to contribute to our funded pension plan in 2013.
Benefit payments, which reflect expected future service, as appropriate, are expected to be paid as follows:
2013
2014
2015
2016
2017
Years 2018 (cid:177) 2022
Other
Pension
Benefits
Postretirement
Benefits
($ in millions)
$
$
123
126
128
131
132
674
57
59
61
63
65
348
The other postretirement benefits payments include an estimated average annual reduction due to the Medicare
Part D subsidy of approximately $6 million.
Other Postretirement Coverage
Under collective bargaining agreements, Norfolk Southern and certain subsidiaries participate in a multi-employer
benefit plan, which provides certain postretirement health care and life insurance benefits to eligible union
employees. Premiums under this plan are expensed as incurred and totaled $47 million in 2012, $48 million in
2011, and $43 million in 2010.
Section 401(k) Plans
Norfolk Southern and certain subsidiaries provide Section 401(k) savings plans for employees. Under the plans,
we match a portion of employee contributions, subject to applicable limitations. Our matching contributions,
recorded as an expense, under these plans were $18 million in 2012, $17 million in 2011, and $15 million in
2010.
12. Stock-Based Compensation
Under the stockholder-approved Long-Term Incentive Plan (LTIP), the Compensation Committee (Committee),
made up of nonemployee members of the Board of Directors or the Chief Executive Officer (if delegated such
authority by the Committee), may grant stock options, stock appreciation rights (SARs), restricted stock units
(RSUs), restricted shares, performance share units (PSUs), and performance shares, up to a maximum of
96,125,000 shares of our common Stock (Common Stock). Of these shares, 5,000,000 were approved by the
Board for issuance to non-officer participants; as a broad-based issuance, stockholder approval was not required.
In May 2010, the stockholders approved an amended LTIP that eliminated the previous limit on the number of
shares of Common Stock that could be granted as RSUs, restricted shares, or PSUs and instead adopted a fungible
share reserve ratio so that, for awards granted after May 13, 2010, the number of shares remaining for issuance
under the amended LTIP will be reduced (i) by 1 for each award granted as a stock option or stock-settled SAR,
or (ii) by 1.61 for an award made in the form other than a stock option or stock-settled SAR. Under the Board-
approved Thoroughbred Stock Option Plan (TSOP), the Committee may grant stock options up to a maximum of
K66
6,000,000 shares of Common Stock; as a broad-based stock option plan, stockholder approval of TSOP was not
required. We use newly issued shares to satisfy any exercises and awards under LTIP and TSOP.
LTIP also permits the payment (cid:177) on a current or a deferred basis and in cash or in stock (cid:177) of dividend equivalents
on shares of Common Stock covered by stock options, RSUs, or PSUs in an amount commensurate with regular
quarterly dividends paid on Common Stock. With respect to stock options, if employment of the participant is
terminated for any reason, including retirement, disability, or death, we have no further obligation to make any
dividend equivalent payments. Regarding RSUs, if employment of the participant is terminated for any reason
other than retirement, disability, or death, we have no further obligation to make any dividend equivalent
payments. Should an employee terminate employment, they are not required to forfeit dividend equivalent
payments already received. Outstanding PSUs do not currently receive dividend equivalent payments.
During the first quarter of 2012, the Committee granted stock options, RSUs and PSUs pursuant to LTIP and
granted stock options pursuant to TSOP. Receipt of an award under LTIP was made contingent upon the
(cid:68)(cid:90)(cid:68)(cid:85)(cid:71)(cid:72)(cid:72)(cid:182)(cid:86)(cid:3)(cid:72)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:68)(cid:3)(cid:81)(cid:82)(cid:81)-compete agreement, and all awards under LTIP were made subject to forfeiture in
(cid:87)(cid:75)(cid:72)(cid:3)(cid:72)(cid:89)(cid:72)(cid:81)(cid:87)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:68)(cid:90)(cid:68)(cid:85)(cid:71)(cid:72)(cid:72)(cid:3)(cid:179)(cid:72)(cid:81)(cid:74)(cid:68)(cid:74)(cid:72)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:72)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:72)(cid:80)(cid:83)(cid:79)(cid:82)(cid:92)(cid:80)(cid:72)(cid:81)(cid:87)(cid:180)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:68)(cid:3)(cid:83)(cid:72)(cid:85)(cid:76)(cid:82)(cid:71)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:76)(cid:80)(cid:72)(cid:3)(cid:73)(cid:82)(cid:79)(cid:79)(cid:82)(cid:90)(cid:76)(cid:81)(cid:74)(cid:3)(cid:85)(cid:72)(cid:87)(cid:76)(cid:85)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:17)
Accounting Method
We account for our grants of stock options, RSUs, PSUs, and dividend equivalent payments in accordance with
ASC 718 (cid:179)(cid:38)(cid:82)(cid:80)(cid:83)(cid:72)(cid:81)(cid:86)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)-(cid:54)(cid:87)(cid:82)(cid:70)(cid:78)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:72)(cid:81)(cid:86)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:17)(cid:180) Accordingly, all awards result in charges to net income while
dividend equivalent payments, which are all related to equity classified awards, are charged to retained income.
Related compensation costs were $45 million in 2012, $61 million in 2011, and $67 million in 2010. The total tax
effects recognized in income in relation to stock-based compensation were benefits of $14 million in 2012, $20
million in 2011, and $21 million in 2010.
(cid:179)(cid:38)(cid:82)(cid:80)(cid:80)(cid:82)(cid:81)(cid:3)(cid:86)(cid:87)(cid:82)(cid:70)(cid:78)(cid:3)(cid:76)(cid:86)(cid:86)(cid:88)(cid:72)(cid:71)(cid:3)(cid:177) (cid:81)(cid:72)(cid:87)(cid:180)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:81)(cid:86)(cid:82)(cid:79)(cid:76)(cid:71)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:54)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:38)(cid:68)(cid:86)(cid:75)(cid:3)(cid:41)(cid:79)(cid:82)(cid:90)(cid:86)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:86)(cid:3)(cid:72)(cid:81)(cid:71)(cid:72)(cid:71)(cid:3)(cid:39)(cid:72)(cid:70)ember 31,
2012, 2011, and 2010 includes tax benefits generated from tax deductions in excess of compensation costs
recognized (excess tax benefits) for share-based awards of $42 million, $45 million, and $33 million, respectively.
Stock Options
Option exercise prices may not be less than the average of the high and low prices at which Common Stock is
traded on the grant date and, effective for LTIP options granted after May 13, 2010, will be at least the higher of
(i) the average of the high and low prices at which Common Stock is traded on the grant date, or (ii) the closing
price of Common Stock on the grant date. All options are subject to a vesting period of at least one year, and the
term of the option will not exceed ten years. In the first quarter of 2012, 567,300 options were granted under
LTIP and 210,300 options were granted under TSOP. In each case, the grant price was $75.14. The options
granted under LTIP and TSOP in 2012, 2011, and 2010 may not be exercised prior to the fourth and third
anniversaries of the date of grant, respectively, or if the optionee retires or dies before that anniversary date, may
not be exercised before the later of one year after (cid:87)(cid:75)(cid:72)(cid:3)(cid:74)(cid:85)(cid:68)(cid:81)(cid:87)(cid:3)(cid:71)(cid:68)(cid:87)(cid:72)(cid:3)(cid:82)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:71)(cid:68)(cid:87)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:82)(cid:83)(cid:87)(cid:76)(cid:82)(cid:81)(cid:72)(cid:72)(cid:182)(cid:86)(cid:3)(cid:85)(cid:72)(cid:87)(cid:76)(cid:85)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:82)(cid:85)(cid:3)(cid:71)(cid:72)(cid:68)(cid:87)(cid:75)(cid:17)
In the first quarter of 2011, 627,700 options were granted under LTIP and 257,000 options were granted under
TSOP, each with a grant price of $62.75. In the first quarter of 2010, 824,900 options were granted under LTIP
and 259,800 options were granted under TSOP, each with a grant price of $47.76.
Holders of the options granted under LTIP in 2012 who remain actively employed receive cash dividend
equivalent payments for four years in an amount equal to the regular quarterly dividends paid on Common Stock.
Dividend equivalent payments are not made on TSOP options.
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The fair value of each option awarded in 2012, 2011, and 2010 was measured on the date of grant using a lattice-
based option valuation model. Expected volatilities are based on implied volatilities from traded options on and
historical volatility of Common Stock. Historical data is used to estimate option exercises and employee
terminations within the valuation model. The average expected option life is derived from the output of the
valuation model and represents the period of time that options granted are expected to be outstanding. The
average risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. For options
granted that include dividend equivalent payments, a dividend yield of zero was used. For 2012, 2011, and 2010,
a dividend yield of 2.30%, 2.55%, and 2.89%, respectively, was used for LTIP options for periods where no
dividend equivalent payments are made, as well as for TSOP options, which do not receive dividend
equivalents. The assumptions for the LTIP and TSOP grants for the last three years are shown in the following
table:
Expected volatility range
Average expected volatility
Average risk-free interest rate
Average expected option term LTIP
Per-share grant-date fair value LTIP
Average expected option term TSOP
Per-share grant-date fair value TSOP
Options granted (LTIP and TSOP)
2012
2011
2010
27% (cid:177) 29% 28% (cid:177) 32% 29% (cid:177) 32%
32%
28%
3.63%
3.42%
8.3 years
8.5 years
$18.54
$22.26
8.3 years
8.5 years
$18.10
$14.91
884,700 1,084,700
27%
1.96%
8.9 years
$23.84
8.8 years
$19.55
777,600
A summary of the status of changes in stock options is presented below:
Outstanding at December 31, 2011
Granted
Exercised
Forfeited
Outstanding at December 31, 2012
Stock
Options
Weighted Avg.
Exercise Price
$
9,759,436
777,600
(1,809,770)
(8,700)
8,718,566
41.60
75.14
26.95
57.28
47.61
The aggregate intrinsic value of options outstanding at December 31, 2012, was $135 million with a weighted
average remaining contractual term of 5.1 years. Of these options outstanding, 5,299,966 were exercisable and
had an aggregate intrinsic value of $101 million with a weighted average exercise price of $42.88 and a weighted
average remaining contractual term of 3.6 years.
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The following table provides information related to options exercised for the last three years:
2012
2011
($ in millions)
2010
Options exercised
Total intrinsic value
Cash received upon exercise
Related excess tax benefits realized
1,809,770 2,845,677 2,533,727
91
$
55
32
127 $
75
42
80 $
47
28
At December 31, 2012, total unrecognized compensation related to options granted under LTIP and TSOP was
$10 million, and is expected to be recognized over a weighted-average period of approximately 2.2 years.
Restricted Stock Units
RSU grants and grant-date fair values were 140,000 and $75.14 in 2012; 177,400 and $62.75 in 2011; and
168,250 and $47.76 in 2010. RSUs granted in 2012, 2011, and 2010 have a five-year restriction period and will
be settled through issuance of shares of Common Stock. The RSU grants include cash dividend equivalent
payments during the restriction period commensurate with regular quarterly dividends paid on Common Stock.
During 2012, 311,900 of the RSUs granted in 2007 vested, with 191,875 shares of Common Stock issued net of
withholding taxes. A summary of the status of and changes in RSUs is presented below:
Nonvested at December 31, 2011
Granted
Vested
Forfeited
Nonvested at December 31, 2012
Weighted-
Average
Grant-Date
Fair Value
48.72
75.14
49.85
54.24
51.75
$
RSUs
1,275,400
140,000
(311,900)
(1,050)
1,102,450
At December 31, 2012, total unrecognized compensation related to RSUs granted under LTIP was $7 million, and
is expected to be recognized over a weighted-average period of approximately 3.2 years. The total fair value of
the RSUs paid in cash during 2012 and 2011 was zero, and for 2010 was $14 million. The total related excess tax
amounts realized in 2012, 2011, and 2010 were benefits of $3 million, $1 million, and $2 million, respectively.
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Performance Share Units
PSUs provide for awards based on achievement of certain predetermined corporate performance goals (total
shareholder return, return on average invested capital and operating ratio) at the end of a three-year cycle. PSU
grants and grant-date fair values were 468,850 and $75.14 in 2012; 580,900 and $62.75 in 2011; and 824,900 and
$47.76 in 2010. PSUs granted in 2012, 2011, and 2010 will be paid in the form of shares of Common Stock.
During 2012, 782,889 of the PSUs granted in 2009 were earned, with 488,957 shares of Common Stock issued
net of withholding taxes. A summary of the status of and changes in PSUs is presented below:
Balance at December 31, 2011
Granted
Earned
Unearned
Forfeited
Balance at December 31, 2012
Weighted-
Average
Grant-Date
Fair Value
46.91
75.14
38.71
38.71
58.45
59.27
$
PSUs
2,609,900
468,850
(782,889)
(423,411)
(2,250)
1,870,200
At December 31, 2012, total unrecognized compensation related to PSUs granted under LTIP was $7 million, and
is expected to be recognized over a weighted-average period of approximately 1.7 years. The total fair values of
PSUs earned and paid in cash during 2011 and 2010 totaled $27 million and $20 million, respectively. The total
related excess tax amounts realized were: a benefit of $11 million in 2012, a benefit of $2 million in 2011, and a
cost of less than $1 million in 2010.
Shares Available and Issued
Shares of Common Stock available for future grants and issued in connection with all features of LTIP and TSOP
at December 31, were as follows:
Available for future grants:
LTIP
TSOP
Issued:
LTIP
TSOP
2012
2011
2010
7,638,688 8,803,298 10,551,253
1,434,356 1,640,456 1,891,556
2,337,179 3,077,739 2,901,786
57,800
153,423
193,060
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13. (cid:54)(cid:87)(cid:82)(cid:70)(cid:78)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)(cid:182)(cid:3)(cid:40)(cid:84)(cid:88)(cid:76)(cid:87)(cid:92)
Common Stock
Common Stock is reported net of shares held by our consolidated subsidiaries (Treasury Shares). Treasury Shares
at December 31, 2012 and 2011, amounted to 20,320,777, with a cost of $19 million for both 2012 and 2011.
Accumulated Other Comprehensive Loss
(cid:179)(cid:36)(cid:70)(cid:70)(cid:88)(cid:80)(cid:88)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:82)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:85)(cid:72)(cid:75)(cid:72)(cid:81)(cid:86)(cid:76)(cid:89)(cid:72)(cid:3)(cid:79)(cid:82)(cid:86)(cid:86)(cid:180)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:81)(cid:86)(cid:82)(cid:79)(cid:76)(cid:71)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:54)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:38)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)(cid:54)(cid:87)(cid:82)(cid:70)(cid:78)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)(cid:182)(cid:3)
Equity consisted of the following:
Balance
at Beginning
of Year
Net
Loss
Reclassification
Adjustments
($ in millions)
Balance
at End
of Year
Year ended December 31, 2012
Pensions and other postretirement liabilities $
Other comprehensive loss of equity investees
$
(928)
(98)
$
(149)
(12)
Accumulated other comprehensive loss
$
(1,026)
$
(161)
$
Year ended December 31, 2011
Pensions and other postretirement liabilities $
Other comprehensive loss of equity investees
$
(726)
(79)
$
(270)
(19)
Accumulated other comprehensive loss
$
(805)
$
(289)
$
78 $
-
78 $
68 $
-
68 $
(999)
(110)
(1,109)
(928)
(98)
(1,026)
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Other Comprehensive Income (Loss)
(cid:179)(cid:50)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:85)(cid:72)(cid:75)(cid:72)(cid:81)(cid:86)(cid:76)(cid:89)(cid:72)(cid:3)(cid:76)(cid:81)(cid:70)(cid:82)(cid:80)(cid:72)(cid:3)(cid:11)(cid:79)(cid:82)(cid:86)(cid:86)(cid:12)(cid:180)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:81)(cid:86)(cid:82)(cid:79)(cid:76)(cid:71)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:54)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:38)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)(cid:54)(cid:87)(cid:82)(cid:70)(cid:78)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)(cid:182)(cid:3)
Equity consisted of the following:
Other comprehensive loss
$
(127) $
44 $
Year ended December 31, 2012
Net gain (loss) arising during the year:
Pensions and other postretirement benefits
Reclassification adjustments for costs
included in net income
Subtotal
Other comprehensive loss of equity investees
Year ended December 31, 2011
Net gain (loss) arising during the year:
Pensions and other postretirement benefits
Reclassification adjustments for costs
included in net income
Subtotal
Other comprehensive loss of equity investees
Pretax
Amount
Tax
(Expense)
Benefit
($ in millions)
Net-of-Tax
Amount
$
(242) $
93 $
(149)
128
(114)
(13)
(50)
43
1
$
(439) $
169 $
(270)
114
(325)
(21)
(46)
123
2
78
(71)
(12)
(83)
68
(202)
(19)
(221)
64
38
10
48
Other comprehensive loss
$
(346) $
125 $
Year ended December 31, 2010
Net gain (loss) arising during the year:
Pensions and other postretirement benefits
Reclassification adjustments for costs
included in net income
Subtotal
Other comprehensive income of equity investees
$
(42) $
16 $
(26)
103
61
11
(39)
(23)
(1)
Other comprehensive income
$
72 $
(24) $
14. Stock Repurchase Program
We repurchased and retired 18.8 million, 30.2 million, and 14.7 million shares under our share repurchase
program in 2012, 2011, and 2010, respectively, at a cost of $1.3 billion, $2.1 billion, and $863 million. On
August 1, 2012, our Board of Directors authorized the repurchase of up to an additional 50 million shares of
Common Stock through December 31, 2017. The timing and volume of purchases is guided by our assessment of
market conditions and other pertinent factors. Any near-term share repurchases are expected to be made with
internally generated cash, cash on hand, or proceeds from borrowings. Since the beginning of 2006, we have
repurchased and retired 128.4 million shares of Common Stock at a total cost of $7.5 billion.
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15. Earnings Per Share
The following table sets forth the calculation of basic and diluted earnings per share:
2010
2012
($ in millions except per share amounts, shares in millions)
2010
2012
Diluted
2011
Basic
2011
Net income
Dividend equivalent payments
$ 1,749 $ 1,916 $ 1,496
(8)
(9)
(9)
$ 1,749 $ 1,916 $ 1,496
(8)
(2)
(4)
Income available to common stockholders
1,740 1,907 1,488
1,745 1,914 1,488
Weighted-average shares outstanding
Dilutive effect of outstanding options
and share-settled awards
Adjusted weighted-average shares outstanding
320.9 345.5 366.5
320.9 345.5 366.5
4.3
5.3
325.2 351.3 371.8
5.8
Earnings per share
$ 5.42 $ 5.52 $ 4.06
$ 5.37 $ 5.45 $ 4.00
In each year, dividend equivalent payments were made to holders of stock options and RSUs. For purposes of
computing basic earnings per share, dividend equivalent payments made to holders of stock options and RSUs
were deducted from net income to determine income available to common stockholders. For purposes of
computing diluted earnings per share, we evaluate on a grant-by-grant basis those stock options and RSUs
receiving dividend equivalent payments under the two-class and treasury stock methods to determine which
method is the more dilutive for each grant. For those grants for which the two-class method was more dilutive,
net income was reduced by dividend equivalent payments to determine income available to common
stockholders. The diluted calculations exclude options having exercise prices exceeding the average market price
of Common Stock as follows: 2 million in 2012, and none in both 2011 and 2010.
16. Commitments and Contingencies
Lawsuits
We and/or certain subsidiaries are defendants in numerous lawsuits and other claims relating principally to
railroad operations. When we conclude that it is probable that a liability has been incurred and the amount of the
liability can be reasonably estimated, it is accrued through a charge to earnings. While the ultimate amount of
liability incurred in any of these lawsuits and claims is dependent on future developments, in our opinion, the
recorded liability is adequate to cover the future payment of such liability and claims. However, the final
outcome of any of these lawsuits and claims cannot be predicted with certainty, and unfavorable or unexpected
outcomes could result in additional accruals that could be significant to results of operations in a particular year or
quarter. Any adjustments to the recorded liability will be reflected in earnings in the periods in which such
adjustments are known.
One of our customers, DuPont, has a rate reasonableness complaint pending before the STB alleging that our
tariff rates for transportation of regulated movements are unreasonable. We dispute this allegation. Since June 1,
2009, we have been billing and collecting from DuPont amounts based on the challenged tariff rates. We
presently expect resolution of the DuPont case to occur in 2014 and believe the estimate of reasonably possible
loss will not have a material effect on our financial position, results of operations, or liquidity. With regard to rate
cases, we record adjustments to revenues in the periods, if and when, such adjustments are probable and
estimable.
On November 6, 2007, various antitrust class actions filed against us and other Class I railroads in various Federal
district courts regarding fuel surcharges were consolidated in the District of Columbia by the Judicial Panel on
K73
Multidistrict Litigation. We believe the allegations in the complaints are without merit and intend to vigorously
defend the cases. We do not believe that the outcome of these proceedings will have a material effect on our
financial position, results of operations, or liquidity. A lawsuit filed on March 25, 2008, in the U.S. District Court
for the District of Minnesota containing similar allegations against us and four other major railroads was
voluntarily dismissed by the plaintiff subject to a tolling agreement entered into in August 2008.
Casualty Claims
Casualty claims include employee personal injury and occupational claims as well as third-party claims, all
exclusive of legal costs. To aid in valuing our personal injury liability and determining the amount to accrue with
respect to such claims during the year, we utilize studies prepared by an independent consulting actuarial
firm. Job-related acciden(cid:87)(cid:68)(cid:79)(cid:3)(cid:76)(cid:81)(cid:77)(cid:88)(cid:85)(cid:92)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:82)(cid:70)(cid:70)(cid:88)(cid:83)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3)(cid:70)(cid:79)(cid:68)(cid:76)(cid:80)(cid:86)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:86)(cid:88)(cid:69)(cid:77)(cid:72)(cid:70)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:41)(cid:72)(cid:71)(cid:72)(cid:85)(cid:68)(cid:79)(cid:3)(cid:40)(cid:80)(cid:83)(cid:79)(cid:82)(cid:92)(cid:72)(cid:85)(cid:86)(cid:182)(cid:3)(cid:47)(cid:76)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:3)(cid:36)(cid:70)(cid:87)(cid:3)
(FELA), which is applicable only to railroads. (cid:41)(cid:40)(cid:47)(cid:36)(cid:182)(cid:86)(cid:3)(cid:73)(cid:68)(cid:88)(cid:79)(cid:87)-based system produces results that are unpredictable
and inconsistent as compared with a no-(cid:73)(cid:68)(cid:88)(cid:79)(cid:87)(cid:3)(cid:90)(cid:82)(cid:85)(cid:78)(cid:72)(cid:85)(cid:86)(cid:182)(cid:3)(cid:70)ompensation system. The variability inherent in this
system could result in actual costs being different from the liability recorded. While the ultimate amount of
claims incurred is dependent on future developments, in our opinion, the recorded liability is adequate to cover
the future 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 estimable.
The Consolidated Balance Sheets reflect long-term receivables for estimated recoveries from our insurance
carriers for claims associated with the January 6, 2005, derailment in Graniteville, S.C. In the first quarter of
2011, we received an unfavorable ruling for an arbitration claim with an insurance carrier, and were denied
recovery of the contested portion of the claim. As a result, we recorded a $43 million charge for the receivables
associated with the contested portion of the claim and a $15 million charge for other receivables affected by the
ruling for which recovery is no longer probable.
Employee personal injury claims (cid:177) The largest component of casualties and other claims expense is employee
personal injury costs. The independent actuarial firm engaged by us provides quarterly studies to aid in valuing
our employee personal injury liability and estimating personal injury expense. The actuarial firm studies our
historical patterns of reserving for claims and subsequent settlements, taking into account relevant outside
influences. The actuarial firm uses the results of these analyses to estimate the ultimate amount of liability, which
includes amounts for incurred but unasserted claims. We adjust the liability quarterly based upon our assessment
and the results of the study. Our estimate of loss liabilities is subject to inherent limitation given the difficulty of
predicting future events such as jury decisions, court interpretations, or legislative changes and as such the actual
loss may vary from the estimated liability recorded.
Occupational claims (cid:177) Occupational claims (including asbestosis and other respiratory diseases, as well as
conditions allegedly related to repetitive motion) are often not caused by a specific accident or event but rather
allegedly result from a claimed exposure over time. Many such claims are being asserted by former or retired
employees, some of whom have not been employed in the rail industry for decades. The independent actuarial
firm provides an estimate of the occupational claims liability based upon our history of claim filings, severity,
payments, and other pertinent facts. The liability is dependent upon judgments we make as to the specific case
reserves as well as judgments of the actuarial firm in the quarterly studies. (cid:55)(cid:75)(cid:72)(cid:3)(cid:68)(cid:70)(cid:87)(cid:88)(cid:68)(cid:85)(cid:76)(cid:68)(cid:79)(cid:3)(cid:73)(cid:76)(cid:85)(cid:80)(cid:182)(cid:86)(cid:3)(cid:72)(cid:86)timate of
ultimate loss includes a provision for those claims that have been incurred but not reported. This provision is
derived by analyzing industry data and projecting our experience into the future as far as can be reasonably
determined. We adjust the liability quarterly based upon our assessment and the results of the study. However, it
is possible that the recorded liability may not be adequate to cover the future payment of claims. Adjustments to
the recorded liability are reflected in operating expenses in the periods in which such adjustments become known.
Third-party claims (cid:177) We record a liability for third-party claims including those for highway crossing accidents,
trespasser and other injuries, automobile liability, property damage, and lading damage. The actuarial firm assists
us with the calculation of potential liability for third-party claims, except lading damage, based upon our
experience including the number and timing of incidents, amount of payments, settlement rates, number of open
claims, and legal defenses. The actuarial estimate includes a provision for claims that have been incurred but not
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reported. We adjust the liability quarterly based upon our assessment and the results of the study. Given the
inherent uncertainty in regard to the ultimate outcome of third-party claims, it is possible that the actual loss may
differ from the estimated liability recorded.
Environmental Matters
We are (cid:86)(cid:88)(cid:69)(cid:77)(cid:72)(cid:70)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:89)(cid:68)(cid:85)(cid:76)(cid:82)(cid:88)(cid:86)(cid:3)(cid:77)(cid:88)(cid:85)(cid:76)(cid:86)(cid:71)(cid:76)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:182)(cid:3)(cid:72)(cid:81)(cid:89)(cid:76)(cid:85)(cid:82)(cid:81)(cid:80)(cid:72)(cid:81)(cid:87)(cid:68)(cid:79)(cid:3)(cid:79)(cid:68)(cid:90)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:85)(cid:72)(cid:74)(cid:88)(cid:79)ations. We record a liability where such
liability or loss is probable and its amount can be estimated reasonably. Claims, if any, against third parties, for
recovery of cleanup costs we have incurred are reflected as receivables (when collection is probable) in the
Consolidated Balance Sheets and are not netted against the associated liability. Environmental engineers
regularly participate in ongoing evaluations of all known sites and in determining any necessary adjustments to
liability estimates. We have an Environmental Policy Council, composed of senior managers, to oversee and
interpret our environmental policy.
Our Consolidated Balance Sheets include liabilities for environmental exposures of $42 million at December 31,
2012, and $35 million at December 31, 2011 (of which $12 million is classified as a current liability at both
December 31, 2012 and 2011). At December 31, 2012, the liability represents our estimate of the probable
cleanup and remediation costs based on available information at 146 known locations and projects compared with
149 locations and projects at December 31, 2011. At December 31, 2012, nine sites accounted for $23 million of
the liability, and no individual site was considered to be material. We anticipate that much of this liability will be
paid out over five years; however, some costs will be paid out over a longer period.
At 22 locations, one or more of our subsidiaries in conjunction with a number of other parties have been identified
as potentially responsible parties under the Comprehensive Environmental Response, Compensation and Liability
Act of 1980 or comparable state statutes that impose joint and several liability for cleanup costs. We calculate our
estimated liability for these sites based on facts and legal defenses applicable to each site and not solely on the
basis of the potential for joint liability.
With respect to known environmental sites (whether identified by us or by the EPA or comparable state
authorities), estimates of our ultimate potential financial exposure for a given site or in the aggregate for all such
sites are necessarily imprecise because of the widely varying costs of currently available cleanup techniques,
unpredictable contaminant recovery and reduction rates associated with available cleanup technologies, the likely
development of new cleanup technologies, the difficulty of determining in advance the nature and full extent of
(cid:70)(cid:82)(cid:81)(cid:87)(cid:68)(cid:80)(cid:76)(cid:81)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:72)(cid:68)(cid:70)(cid:75)(cid:3)(cid:83)(cid:82)(cid:87)(cid:72)(cid:81)(cid:87)(cid:76)(cid:68)(cid:79)(cid:3)(cid:83)(cid:68)(cid:85)(cid:87)(cid:76)(cid:70)(cid:76)(cid:83)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:86)(cid:75)(cid:68)(cid:85)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:68)(cid:81)(cid:92)(cid:3)(cid:72)(cid:86)(cid:87)(cid:76)(cid:80)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:79)(cid:82)(cid:86)(cid:86)(cid:3)(cid:11)(cid:68)(cid:81)(cid:71)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:83)(cid:68)(cid:85)(cid:87)(cid:76)(cid:70)(cid:76)(cid:83)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:3)(cid:87)(cid:82)(cid:3)(cid:69)(cid:72)ar it),
and evolving statutory and regulatory standards governing liability.
The risk of incurring environmental liability (cid:177) for acts and omissions, past, present, and future (cid:177) is inherent in the
railroad business. Some of the commodities in our traffic mix, particularly those classified as hazardous
materials, pose special risks that we work diligently to minimize. In addition, several of our subsidiaries own, or
have owned, land used as operating property, or which is leased and operated by others, or held for sale. Because
environmental problems that are latent or undisclosed may exist on these properties, there can be no assurance
that we will not incur environmental liabilities or costs with respect to one or more of them, the amount and
materiality of which cannot be estimated reliably at this time. Moreover, lawsuits and claims involving these and
potentially other unidentified environmental sites and matters are likely to arise from time to time. The resulting
liabilities could have a significant effect on financial position, results of operations, or liquidity in a particular
year or quarter.
Based on our assessment of the facts and circumstances now known, we believe we have recorded the probable
and reasonably estimable costs for dealing with those environmental matters of which we are aware. Further, we
believe that it is unlikely that any known matters, either individually or in the aggregate, will have a material
adverse effect on our financial position, results of operations, or liquidity.
K75
Insurance
We obtain on behalf of ourself and our subsidiaries insurance for potential losses for third-party liability and first-
party property damages. We are currently self-insured up to $50 million and above $1 billion per occurrence for
bodily injury and property damage to third parties and up to $25 million and above $175 million per occurrence
for property owned by us or in our care, custody, or control.
Purchase Commitments
At December 31, 2012, we had outstanding purchase commitments totaling approximately $560 million for long-
term service contracts through 2019 as well as locomotives, track material, and freight cars, in connection with
our capital programs through 2016.
Change-In-Control Arrangements
We have compensation agreements with certain officers and key employees that become operative only upon a
change in control of Norfolk Southern, as defined in those agreements. The agreements provide generally for
(cid:83)(cid:68)(cid:92)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:69)(cid:68)(cid:86)(cid:72)(cid:71)(cid:3)(cid:82)(cid:81)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:72)(cid:81)(cid:86)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:68)(cid:87)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:87)(cid:76)(cid:80)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:68)(cid:3)(cid:70)(cid:82)(cid:89)(cid:72)(cid:85)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:71)(cid:76)(cid:89)(cid:76)(cid:71)(cid:88)(cid:68)(cid:79)(cid:182)(cid:86)(cid:3)(cid:76)(cid:81)(cid:89)(cid:82)(cid:79)(cid:88)(cid:81)(cid:87)(cid:68)(cid:85)(cid:92)(cid:3)(cid:82)(cid:85)(cid:3)(cid:82)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:86)(cid:83)(cid:72)(cid:70)(cid:76)(cid:73)(cid:76)(cid:72)(cid:71)(cid:3)(cid:87)(cid:72)(cid:85)(cid:80)(cid:76)nation
and for certain other benefits.
Guarantees
In a number of instances, we have agreed to indemnify lenders for additional costs they may bear as a result of
certain changes in laws or regulations applicable to their loans. Such changes may include impositions or
modifications with respect to taxes, duties, reserves, liquidity, capital adequacy, special deposits, and similar
requirements relating to extensions of credit by, deposits with, or the assets or liabilities of such lenders. The
nature and timing of changes in laws or regulations applicable to our financings are inherently unpredictable, and
therefore our exposure in connection with the foregoing indemnifications cannot be quantified. No liability has
been recorded related to these indemnifications.
We have agreed to indemnify parties in a number of transactions for U.S. income tax withholding imposed as a
result of changes in U.S. tax law. In all cases, we have the right to unwind the related transaction if the
withholding cannot be avoided in the future. Because these indemnities would be triggered and are dependent
upon a change in the tax law, the maximum exposure is not quantifiable. We do not believe it is likely that we
will be required to make any payments under these indemnities.
At December 31, 2012, certain Norfolk Southern subsidiaries are contingently liable as guarantors with respect to
$7 million of indebtedness, due in 2019, of an entity in which they have an ownership interest, the Terminal
Railroad Association of St. Louis. Four other railroads are also jointly and severally liable as guarantors for this
indebtedness. No liability has been recorded related to this guaranty.
K76
NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES
QUARTERLY FINANCIAL DATA
(Unaudited)
2012
Railway operating revenues
Income from railway operations
Net income
Earnings per share:
Basic
Diluted
2011
Railway operating revenues
Income from railway operations
Net income
Earnings per share:
Basic
Diluted
Three Months ended
March 31
June 30
September 30 December 31
($ in millions, except per share amounts)
$
$
2,789 $
745
410
2,874 $
934
524
2,693 $
731
402
1.24
1.23
1.62
1.60
1.26
1.24
2,620 $
600
325
2,866 $
875
557
2,889 $
938
554
0.91
0.90
1.58
1.56
1.61
1.59
2,684
714
413
1.31
1.30
2,797
800
480
1.44
1.42
K77
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our Chief Executive Officer and Chief Financial Officer, with the assistance of management, evaluated the
effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934, as amended (Exchange Act)) at December 31, 2012. Based on such
evaluation, our officers have concluded that, at December 31, 2012, our disclosure controls and procedures were
effective to ensure that information required to be disclosed in our reports under the Exchange Act is recorded,
(cid:83)(cid:85)(cid:82)(cid:70)(cid:72)(cid:86)(cid:86)(cid:72)(cid:71)(cid:15)(cid:3)(cid:86)(cid:88)(cid:80)(cid:80)(cid:68)(cid:85)(cid:76)(cid:93)(cid:72)(cid:71)(cid:15)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:72)(cid:71)(cid:15)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:87)(cid:76)(cid:80)(cid:72)(cid:3)(cid:83)(cid:72)(cid:85)(cid:76)(cid:82)(cid:71)(cid:3)(cid:86)(cid:83)(cid:72)(cid:70)(cid:76)(cid:73)(cid:76)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:54)(cid:40)(cid:38)(cid:182)(cid:86)(cid:3)(cid:85)(cid:88)(cid:79)(cid:72)(cid:86)(cid:3)(cid:68)nd forms, and that such
information is accumulated and communicated to management, including the Chief Executive Officer and the
Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Internal Control Over Financial Reporting
We are responsible for establishing and maintaining adequate internal control over financial reporting. Our
internal control over financial reporting includes those policies and procedures that pertain to our ability to record,
process, summarize, and report reliable financial data. We recognize that there are inherent limitations in the
effectiveness of any internal control over financial reporting, including the possibility of human error and the
circumvention or overriding of internal control. Accordingly, even effective internal control over financial
reporting can provide only reasonable assurance with respect to financial statement preparation. Further, because
of changes in conditions, the effectiveness of internal control over financial reporting may vary over time.
In order to ensure that our internal control over financial reporting is effective, we regularly assess such controls
and did so most recently for our financial reporting at December 31, 2012. This assessment was based on criteria
for effective internal control over financial reporting set forth by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on our assessment, we
have concluded that we maintained effective internal control over financial reporting at December 31, 2012.
Our Board of Directors, acting through its Audit Committee, is responsible for the oversight of our accounting
policies, financial reporting, and internal control. The Audit Committee of our Board of Directors is comprised
entirely of outside directors who are independent of management. The independent registered public accounting
firm and our internal auditors have full and unlimited access to the Audit Committee, with or without
management, to discuss the adequacy of internal control over financial reporting, and any other matters which
they believe should be brought to the attention of the Audit Committee.
We have issued a report of our assessment of internal control over financial reporting, and our independent
registered public accounting firm has issued an attestation report on our internal control over financial reporting at
December 31, 2012. These reports appear in Part II, Item 8 of this report on Form 10-K.
During the fourth quarter of 2012, we have not identified any changes in internal control over financial reporting
that have materially affected, or are reasonably likely to materially effect, our internal control over financial
reporting.
Item 9B. Other Information
None.
K78
PART III
NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES
Item 10. Directors, Executive Officers, and Corporate Governance
In accordance with General Instruction G(3), information called for by Part III, Item 10, is incorporated herein by
reference from the information ap(cid:83)(cid:72)(cid:68)(cid:85)(cid:76)(cid:81)(cid:74)(cid:3)(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:70)(cid:68)(cid:83)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:179)(cid:40)(cid:79)(cid:72)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:39)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:86)(cid:15)(cid:180)(cid:3)(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:70)(cid:68)(cid:83)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:179)(cid:54)(cid:72)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)
(cid:20)(cid:25)(cid:11)(cid:68)(cid:12)(cid:3)(cid:37)(cid:72)(cid:81)(cid:72)(cid:73)(cid:76)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:50)(cid:90)(cid:81)(cid:72)(cid:85)(cid:86)(cid:75)(cid:76)(cid:83)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:79)(cid:76)(cid:68)(cid:81)(cid:70)(cid:72)(cid:15)(cid:180)(cid:3)(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:70)(cid:68)(cid:83)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:179)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:72)(cid:3)(cid:42)(cid:82)(cid:89)(cid:72)(cid:85)(cid:81)(cid:68)(cid:81)(cid:70)(cid:72)(cid:15)(cid:180)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)
(cid:70)(cid:68)(cid:83)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:179)(cid:38)(cid:82)(cid:80)(cid:80)(cid:76)(cid:87)(cid:87)(cid:72)(cid:72)(cid:86)(cid:180)(cid:3)(cid:76)(cid:81)(cid:3)our definitive Proxy Statement for the Annual Meeting of Stockholders to be held on
May 9, 2013, which definitive Proxy Statement will be filed electronically with the SEC pursuant to Regulation
14A. The information regarding executive officers called for by Item 401 of Regulation S-K is included in Part I
(cid:75)(cid:72)(cid:85)(cid:72)(cid:82)(cid:73)(cid:3)(cid:69)(cid:72)(cid:74)(cid:76)(cid:81)(cid:81)(cid:76)(cid:81)(cid:74)(cid:3)(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:3)(cid:179)(cid:40)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:50)(cid:73)(cid:73)(cid:76)(cid:70)(cid:72)(cid:85)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:53)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:17)(cid:180)
Item 11. Executive Compensation
In accordance with General Instruction G(3), information called for by Part III, Item 11, is incorporated herein by
reference from the information:
(cid:120)
(cid:120)
(cid:120)
(cid:68)(cid:83)(cid:83)(cid:72)(cid:68)(cid:85)(cid:76)(cid:81)(cid:74)(cid:3)(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:86)(cid:88)(cid:69)(cid:70)(cid:68)(cid:83)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:179)(cid:38)(cid:82)(cid:80)(cid:83)(cid:72)(cid:81)(cid:86)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:180)(cid:3)(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:70)(cid:68)(cid:83)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:179)(cid:37)(cid:82)(cid:68)(cid:85)(cid:71)(cid:3)(cid:82)(cid:73)(cid:3)(cid:39)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:86)(cid:180)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:71)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:86)(cid:15)(cid:3)
(cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:179)2012 Non-Employee Director Compensa(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:55)(cid:68)(cid:69)(cid:79)(cid:72)(cid:180)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:179)(cid:49)(cid:68)(cid:85)(cid:85)(cid:68)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:49)(cid:82)(cid:81)-Employee
(cid:39)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:72)(cid:81)(cid:86)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:55)(cid:68)(cid:69)(cid:79)(cid:72)(cid:30)(cid:180)
(cid:68)(cid:83)(cid:83)(cid:72)(cid:68)(cid:85)(cid:76)(cid:81)(cid:74)(cid:3)(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:70)(cid:68)(cid:83)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:179)(cid:40)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:72)(cid:81)(cid:86)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:180)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:72)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:86)(cid:15)(cid:3)(cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:179)(cid:38)(cid:82)(cid:80)(cid:83)(cid:72)(cid:81)(cid:86)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)
(cid:39)(cid:76)(cid:86)(cid:70)(cid:88)(cid:86)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:36)(cid:81)(cid:68)(cid:79)(cid:92)(cid:86)(cid:76)(cid:86)(cid:15)(cid:180)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:76)(cid:81)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:68)(cid:83)(cid:83)(cid:72)(cid:68)(cid:85)(cid:76)(cid:81)(cid:74)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:179)(cid:54)(cid:88)(cid:80)(cid:80)(cid:68)(cid:85)(cid:92)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:72)(cid:81)(cid:86)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:55)(cid:68)(cid:69)(cid:79)(cid:72)(cid:180)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)
(cid:179)2012 Grants of Plan-(cid:37)(cid:68)(cid:86)(cid:72)(cid:71)(cid:3)(cid:36)(cid:90)(cid:68)(cid:85)(cid:71)(cid:86)(cid:180)(cid:3)(cid:87)(cid:68)(cid:69)(cid:79)(cid:72)(cid:15)(cid:3)(cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:81)(cid:68)(cid:85)(cid:85)(cid:68)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:86)(cid:88)(cid:70)(cid:75)(cid:3)(cid:87)(cid:68)(cid:69)(cid:79)(cid:72)(cid:86)(cid:15)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:179)(cid:50)(cid:88)(cid:87)(cid:86)(cid:87)(cid:68)(cid:81)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3)
Equity Awards at Fiscal Year-End 2012(cid:180)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:179)(cid:50)(cid:83)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:40)(cid:91)(cid:72)(cid:85)(cid:70)(cid:76)(cid:86)(cid:72)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:54)(cid:87)(cid:82)(cid:70)(cid:78)(cid:3)(cid:57)(cid:72)(cid:86)(cid:87)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)2012(cid:180)(cid:3)(cid:87)(cid:68)(cid:69)(cid:79)(cid:72)(cid:86)(cid:15)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)
(cid:87)(cid:75)(cid:72)(cid:3)(cid:87)(cid:68)(cid:69)(cid:88)(cid:79)(cid:68)(cid:85)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:81)(cid:68)(cid:85)(cid:85)(cid:68)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:76)(cid:81)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:68)(cid:83)(cid:83)(cid:72)(cid:68)(cid:85)(cid:76)(cid:81)(cid:74)(cid:3)(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:86)(cid:88)(cid:69)(cid:70)(cid:68)(cid:83)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:179)(cid:53)(cid:72)(cid:87)(cid:76)(cid:85)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:37)(cid:72)(cid:81)(cid:72)(cid:73)(cid:76)(cid:87)(cid:86)(cid:15)(cid:180)(cid:3)(cid:179)(cid:39)(cid:72)(cid:73)(cid:72)(cid:85)(cid:85)(cid:72)(cid:71)(cid:3)
(cid:38)(cid:82)(cid:80)(cid:83)(cid:72)(cid:81)(cid:86)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:15)(cid:180)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:179)(cid:51)(cid:82)(cid:87)(cid:72)(cid:81)(cid:87)(cid:76)(cid:68)(cid:79)(cid:3)(cid:51)(cid:68)(cid:92)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:56)(cid:83)(cid:82)(cid:81)(cid:3)(cid:68)(cid:3)(cid:38)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)(cid:3)(cid:76)(cid:81)(cid:3)(cid:38)(cid:82)(cid:81)(cid:87)(cid:85)(cid:82)(cid:79)(cid:3)(cid:82)(cid:85)(cid:3)(cid:50)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:55)(cid:72)(cid:85)(cid:80)(cid:76)(cid:81)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)
(cid:40)(cid:80)(cid:83)(cid:79)(cid:82)(cid:92)(cid:80)(cid:72)(cid:81)(cid:87)(cid:30)(cid:180)(cid:3)(cid:68)(cid:81)(cid:71)
appearing under the cap(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:179)(cid:38)(cid:82)(cid:80)(cid:83)(cid:72)(cid:81)(cid:86)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:38)(cid:82)(cid:80)(cid:80)(cid:76)(cid:87)(cid:87)(cid:72)(cid:72)(cid:3)(cid:44)(cid:81)(cid:87)(cid:72)(cid:85)(cid:79)(cid:82)(cid:70)(cid:78)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:44)(cid:81)(cid:86)(cid:76)(cid:71)(cid:72)(cid:85)(cid:3)(cid:51)(cid:68)(cid:85)(cid:87)(cid:76)(cid:70)(cid:76)(cid:83)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81),(cid:180)
(cid:179)(cid:38)(cid:82)(cid:80)(cid:83)(cid:72)(cid:81)(cid:86)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:51)(cid:82)(cid:79)(cid:76)(cid:70)(cid:92)(cid:3)(cid:53)(cid:76)(cid:86)(cid:78)(cid:3)(cid:36)(cid:86)(cid:86)(cid:72)(cid:86)(cid:86)(cid:80)(cid:72)(cid:81)(cid:87)(cid:15)(cid:180) (cid:68)(cid:81)(cid:71)(cid:3)(cid:179)(cid:38)(cid:82)(cid:80)(cid:83)(cid:72)(cid:81)(cid:86)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:38)(cid:82)(cid:80)(cid:80)(cid:76)(cid:87)(cid:87)(cid:72)(cid:72)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:15)(cid:180)(cid:3)
in each case included in our definitive Proxy Statement for the Annual Meeting of Stockholders to be held on
May 9, 2013, which definitive Proxy Statement will be filed electronically with the SEC pursuant to Regulation
14A.
K79
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
In accordance with General Instruction G(3), information on security ownership of certain beneficial owners and
management called for by Item 403 of Regulation S-K, Part III, Item 12, is incorporated herein by reference from
(cid:87)(cid:75)(cid:72)(cid:3)(cid:76)(cid:81)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:68)(cid:83)(cid:83)(cid:72)(cid:68)(cid:85)(cid:76)(cid:81)(cid:74)(cid:3)(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:70)(cid:68)(cid:83)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:179)(cid:37)(cid:72)(cid:81)(cid:72)(cid:73)(cid:76)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:50)(cid:90)(cid:81)(cid:72)(cid:85)(cid:86)(cid:75)(cid:76)(cid:83)(cid:3)(cid:82)(cid:73)(cid:3)(cid:54)(cid:87)(cid:82)(cid:70)(cid:78)(cid:180)(cid:3)(cid:76)(cid:81)(cid:3)our definitive Proxy Statement
for the Annual Meeting of Stockholders to be held on May 9, 2013, which definitive Proxy Statement will be filed
electronically with the SEC pursuant to Regulation 14A.
Equity Compensation Plan Information (at December 31, 2012)
Number of
securities
to be issued upon
exercise of
outstanding options,
warrants and rights
(a)
Weighted-
average
exercise price
of outstanding
options, warrants
and rights
(b)
Number of securities
remaining available
for future issuance
under equity
compensation plans
(excluding
securities reflected
in column (a))
(c)
Plan
Category
Equity compensation plans
approved by securities holders (1)
10,860,827 (3)
$
46.40 (4)
7,638,688
Equity compensation plans
not approved by securities holders (2)
Total
1,232,768
12,093,595
55.01
1,452,356 (5)
9,091,044
(1) LTIP, excluding five million shares for broad-based issuance to non-officers.
(2) (cid:47)(cid:55)(cid:44)(cid:51)(cid:182)(cid:86) five million shares for broad-based issuance to non-officers, TSOP (cid:68)(cid:81)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:39)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:182)(cid:86)(cid:3)(cid:53)(cid:72)(cid:86)(cid:87)(cid:85)(cid:76)(cid:70)(cid:87)(cid:72)(cid:71)(cid:3)(cid:54)(cid:87)(cid:82)(cid:70)(cid:78)(cid:3)
Plan.
(3) Includes options, RSUs and PSUs granted under LTIP that may be settled in shares of stock.
(4) Calculated without regard to 3,375,529, outstanding RSUs and PSUs at December 31, 2012.
(5) Of the shares remaining available for grant under plans not approved by stockholders, 18,000 are available for
(cid:74)(cid:85)(cid:68)(cid:81)(cid:87)(cid:3)(cid:68)(cid:86)(cid:3)(cid:85)(cid:72)(cid:86)(cid:87)(cid:85)(cid:76)(cid:70)(cid:87)(cid:72)(cid:71)(cid:3)(cid:86)(cid:87)(cid:82)(cid:70)(cid:78)(cid:3)(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:39)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:86)(cid:182)(cid:3)(cid:53)(cid:72)(cid:86)(cid:87)(cid:85)(cid:76)(cid:70)(cid:87)(cid:72)(cid:71)(cid:3)(cid:54)(cid:87)(cid:82)(cid:70)(cid:78)(cid:3)(cid:51)(cid:79)(cid:68)(cid:81)(cid:17)
K80
Norfolk Southern Corporation Long-Term Incentive Plan (LTIP)
Established on June 28, 1983, and approved by our stockholders at their Annual Meeting held on May 10, 1984,
LTIP was adopted to promote the success of our company by providing an opportunity for non-employee
Directors, officers, and other key employees to acquire a proprietary interest in the Corporation. On January 23,
2001, our Board of Directors further amended LTIP and approved the issuance of an additional 5,000,000 shares
of authorized but unissued Common Stock to participants who are not officers of our company. The issuance of
these shares was broadly-based, and stockholder approval of these shares was not required. Accordingly, this
portion of LTIP is included in the number of securities available for future issuance for plans not approved by
stockholders. Also on January 23, 2001, our Board of Directors amended LTIP, which amendment was approved
by shareholders on May 10, 2001, that included the reservation for issuance of an additional 30,000,000 shares of
authorized but unissued Common Stock.
In May 2010, our shareholders approved an amended LTIP that adopted a fungible share reserve ratio so that, for
awards granted after May 13, 2010, the number of shares remaining for issuance under the amended LTIP will be
reduced (i) by 1 for each award granted as an option or stock-settled stock appreciation right, or (ii) by 1.61 for an
award made in the form other than an option or stock-settled stock appreciation right. Cash payments of restricted
units, stock appreciation rights, and PSUs will not be applied against the maximum number of shares issuable
under LTIP. Any shares of Common Stock subject to options, PSUs, restricted shares, or RSUs which are not
issued as Common Stock will again be available for award under LTIP after the expiration or forfeiture of an
award.
Non-employee Directors, officers, and other key employees residing in the United States or Canada are eligible
for selection to receive LTIP awards. Under LTIP, the Compensation Committee (Committee) may grant
incentive stock options, nonqualified stock options, stock appreciation rights, RSUs, restricted shares, PSUs, and
performance shares. In addition, dividend equivalent payments may be awarded for options, RSUs, and
PSUs. The Committee may make awards under LTIP subject to forfeiture under certain circumstances and may
establish such other terms and conditions for the awards as provided in LTIP.
For options granted after May 13, 2010, the option price will be at least the higher of (i) the average of the high
and low prices at which Common Stock is traded on the date of grant, or (ii) the closing price of Common Stock
on the date of the grant. All options are subject to a vesting period of at least one year, and the term of the option
will not exceed ten years. LTIP specifically prohibits option repricing without stockholder approval, except for
capital adjustments.
PSUs entitle a recipient to receive performance-based compensation at the end of a three-year cycle based on our
performance during that period. For the 2013 PSU awards, corporate performance will be measured using three
equally weighted standards established by the Committee: (1) three-year average return on average capital
invested, (2) three-year average operating ratio, and (3) total return to stockholders measured at the end of the
three-year period. PSUs may be payable in either shares of Common Stock or cash.
RSUs are payable in cash or in shares of Common Stock at the end of a restriction period of not less than 36
months and not more than 60 months. During the restriction period, the holder of the RSUs has no beneficial
ownership interest in the Common Stock represented by the RSUs and has no right to vote the shares represented
by the units or to receive dividends (except for dividend equivalent payment rights that may be awarded with
respect to the RSUs). The Committee at its discretion may waive the restriction period, but settlement of any
RSUs will occur on the same settlement date as would have applied absent a waiver of restrictions, if no
performance goals were imposed.
K81
Norfolk Southern Corporation Thoroughbred Stock Option Plan (TSOP)
Our Board of Directors adopted TSOP on January 26, 1999, to promote the success of our company by providing
an opportunity for nonagreement employees to acquire a proprietary interest in our company and thereby to
provide an additional incentive to nonagreement employees to devote their maximum efforts and skills to the
advancement, betterment, and prosperity of our company and our stockholders. Under TSOP there were
6,000,000 shares of authorized but unissued Common Stock reserved for issuance. TSOP has not been and is not
required to have been approved by our stockholders.
Active full-time nonagreement employees residing in the United States or Canada are eligible for selection to
receive TSOP awards. Under TSOP, the Committee may grant nonqualified stock options subject to such terms
and conditions as provided in TSOP.
The option price may not be less than the average of the high and low prices at which Common Stock is traded on
the date of the grant. All options are subject to a vesting period of at least one year, and the term of the option
will not exceed ten years. TSOP specifically prohibits repricing without stockholder approval, except for capital
adjustments.
Norfolk Southern Corporation D(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:86)(cid:182)(cid:3)(cid:53)(cid:72)(cid:86)(cid:87)(cid:85)(cid:76)(cid:70)(cid:87)(cid:72)(cid:71)(cid:3)(cid:54)(cid:87)(cid:82)(cid:70)(cid:78)(cid:3)(cid:51)(cid:79)(cid:68)(cid:81)(cid:3)(cid:11)(cid:51)(cid:79)(cid:68)(cid:81)(cid:12)
The Plan was adopted on January 1, 1994, and is designed to increase ownership of Common Stock by our non-
employee Directors so as to further align their ownership interest in our company with that of our stockholders.
The Plan has not been and is not required to have been approved by our stockholders. Currently, a maximum of
66,000 shares of Common Stock may be granted under the Plan. To make grants eligible to Directors, we
purchase, through one or more subsidiary companies, the number of shares required in open-market transactions
at prevailing market prices, or make such grants from Common Stock already owned by one or more of our
subsidiary companies.
Only non-employee Directors who are not and never have been employees of our company are eligible to
participate in the Plan. Upon becoming a Director, each eligible Director receives a one-time grant of 3,000
restricted shares of Common Stock. No individual member of the Board exercises discretion concerning the
eligibility of any Director or the number of shares granted.
The restriction period applicable to restricted shares granted under the Plan begins on the date of the grant and
(cid:72)(cid:81)(cid:71)(cid:86)(cid:3)(cid:82)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:72)(cid:68)(cid:85)(cid:79)(cid:76)(cid:72)(cid:85)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:70)(cid:76)(cid:83)(cid:76)(cid:72)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:71)(cid:72)(cid:68)(cid:87)(cid:75)(cid:3)(cid:82)(cid:85)(cid:3)(cid:86)(cid:76)(cid:91)(cid:3)(cid:80)(cid:82)(cid:81)(cid:87)(cid:75)(cid:86)(cid:3)(cid:68)(cid:73)(cid:87)(cid:72)r the recipient ceases to be a Director by reason of
disability or retirement. During the restriction period, shares may not be sold, pledged, or otherwise
encumbered. Directors will forfeit the restricted shares if they cease to serve as a Director of our company for
reasons other than their disability, retirement, or death.
K82
Item 13. Certain Relationships and Related Transactions, and Director Independence
In accordance with General Instruction G(3), information called for by Part III, Item 13, is incorporated herein by
(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3)(cid:73)(cid:85)(cid:82)(cid:80)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:76)(cid:81)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:68)(cid:83)(cid:83)(cid:72)(cid:68)(cid:85)(cid:76)(cid:81)(cid:74)(cid:3)(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:70)(cid:68)(cid:83)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:179)(cid:55)(cid:85)(cid:68)(cid:81)(cid:86)(cid:68)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:53)(cid:72)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:51)(cid:72)(cid:85)(cid:86)(cid:82)(cid:81)(cid:86)(cid:180)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)
(cid:70)(cid:68)(cid:83)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:179)(cid:39)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:3)(cid:44)(cid:81)(cid:71)(cid:72)(cid:83)(cid:72)(cid:81)(cid:71)(cid:72)(cid:81)(cid:70)(cid:72)(cid:180) in our definitive Proxy Statement for the Annual Meeting of Stockholders to be
held on May 9, 2013, which definitive Proxy Statement will be filed electronically with the SEC pursuant to
Regulation 14A.
Item 14. Principal Accountant Fees and Services
In accordance with General Instruction G(3), information called for by Part III, Item 14, is incorporated herein by
reference from the information appearing under the ca(cid:83)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:179)(cid:53)(cid:68)(cid:87)(cid:76)(cid:73)(cid:76)(cid:70)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:36)(cid:83)(cid:83)(cid:82)(cid:76)(cid:81)(cid:87)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:44)(cid:81)(cid:71)(cid:72)(cid:83)(cid:72)(cid:81)(cid:71)(cid:72)(cid:81)(cid:87)(cid:3)
(cid:53)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:72)(cid:85)(cid:72)(cid:71)(cid:3)(cid:51)(cid:88)(cid:69)(cid:79)(cid:76)(cid:70)(cid:3)(cid:36)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:41)(cid:76)(cid:85)(cid:80)(cid:180)(cid:3)(cid:76)(cid:81)(cid:3)our definitive Proxy Statement for the Annual Meeting of Stockholders to
be held on May 9, 2013, which definitive Proxy Statement will be filed electronically with the SEC pursuant to
Regulation 14A.
K83
PART IV
NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES
Item 15. Exhibits and Financial Statement Schedules
(A)
The following documents are filed as part of this report:
1. Index to Consolidated Financial Statements
Page
Report of Management
Reports of Independent Registered Public Accounting Firm
Consolidated Statements of Income, Years ended December 31, 2012, 2011, and 2010
Consolidated Statements of Comprehensive Income, Years ended December 31, 2012,
2011, and 2010
K39
K40
K42
K43
K44
Consolidated Balance Sheets at December 31, 2012 and 2011
Consolidated Statements of Cash Flows, Years ended December 31, 2012, 2011, and 2010 K45
K46
(cid:38)(cid:82)(cid:81)(cid:86)(cid:82)(cid:79)(cid:76)(cid:71)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:54)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:38)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)(cid:54)(cid:87)(cid:82)(cid:70)(cid:78)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)(cid:182)(cid:3)(cid:40)(cid:84)(cid:88)(cid:76)(cid:87)(cid:92)(cid:15)(cid:3)(cid:60)(cid:72)(cid:68)(cid:85)(cid:86)(cid:3)(cid:72)(cid:81)(cid:71)(cid:72)(cid:71)
December 31, 2012, 2011, and 2010
Notes to Consolidated Financial Statements
K47
2. Financial Statement Schedule:
The following consolidated financial statement schedule should be read in connection with
the consolidated financial statements:
Index to Consolidated Financial Statement Schedule
Schedule II (cid:177) Valuation and Qualifying Accounts
K101
Schedules other than the one listed above are omitted either because they are not required
or are inapplicable, or because the information is included in the consolidated financial
statements or related notes.
Exhibit
Number
3
3(i)
3. Exhibits
Description
Articles of Incorporation and Bylaws (cid:177)
The Restated Articles of Incorporation of Norfolk Southern Corporation are incorporated
(cid:69)(cid:92)(cid:3)(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:40)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87)(cid:3)(cid:22)(cid:11)(cid:76)(cid:12)(cid:3)(cid:87)(cid:82)(cid:3)(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:20)(cid:19)-K filed on March 5,
2001.
K84
3(ii)
3(iii)
An amendment to the Articles of Incorporation of Norfolk Southern Corporation is
(cid:76)(cid:81)(cid:70)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:69)(cid:92)(cid:3)(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:40)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87)(cid:3)(cid:22)(cid:11)(cid:76)(cid:12)(cid:3)(cid:87)(cid:82)(cid:3)(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:27)-K filed
on May 18, 2010.
The Bylaws of Norfolk Southern Corporation, as amended January 22, 2013, is
(cid:76)(cid:81)(cid:70)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:69)(cid:92)(cid:3)(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:40)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87)(cid:3)(cid:22)(cid:11)(cid:76)(cid:76)(cid:12)(cid:3)(cid:87)(cid:82)(cid:3)(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:27)-K
filed on December 21, 2012.
4
Instruments Defining the Rights of Security Holders, Including Indentures:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
Indenture, dated as of January 15, 1991, from Norfolk Southern Corporation to First Trust of New
York, National Association, as Trustee, is incorporated by reference to Exhibit 4.1 to Norfolk
So(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:53)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:54)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:82)(cid:81)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:54)-3 (No. 33-38595).
First Supplemental Indenture, dated May 19, 1997, between Norfolk Southern Corporation and
First Trust of New York, National Association, as Trustee, related to the issuance of notes in the
principal amount of $4.3 billion, is incorporated herein by reference to Exhibit 1.1(d) to Norfolk
(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)Form 8-K filed on May 21, 1997.
Second Supplemental Indenture, dated April 26, 1999, between Norfolk Southern Corporation and
U.S. Bank Trust National Association, as Trustee, is incorporated herein by reference to Exhibit
(cid:20)(cid:17)(cid:20)(cid:11)(cid:70)(cid:12)(cid:3)(cid:87)(cid:82)(cid:3)(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:27)-K filed on April 30, 1999.
Fourth Supplemental Indenture, dated as of February 6, 2001, between Norfolk Southern
Corporation and U.S. Bank Trust National Association, as Trustee, related to the issuance of notes
in the principal amount of $1 billion, is incorporated herein by reference to Exhibit 4.1 to Norfolk
(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)Form 8-K filed on February 7, 2001.
Eighth Supplemental Indenture, dated as of September 17, 2004, between Norfolk Southern
Corporation and U.S. Bank Trust National Association, as Trustee, related to the issuance of
5.257% Notes due 2014 (Securities) in the aggregate principal amount of $441.5 million in
(cid:70)(cid:82)(cid:81)(cid:81)(cid:72)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:82)(cid:73)(cid:73)(cid:72)(cid:85)(cid:3)(cid:87)(cid:82)(cid:3)(cid:72)(cid:91)(cid:70)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:54)(cid:72)(cid:70)(cid:88)(cid:85)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:70)(cid:68)(cid:86)(cid:75)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:88)(cid:83)(cid:3)(cid:87)(cid:82)(cid:3)
$400 million of its outstanding 7.350% Notes due 2007, is incorporated herein by reference to
(cid:40)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87)(cid:3)(cid:23)(cid:17)(cid:20)(cid:3)(cid:87)(cid:82)(cid:3)(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:27)-K filed on September 23, 2004.
Indenture, dated August 27, 2004, among PRR Newco, Inc., as Issuer, and Norfolk Southern
Railway Company, as Guarantor, and The Bank of New York, as Trustee, is incorporated herein by
(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:40)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87)(cid:3)(cid:23)(cid:11)(cid:20)(cid:12)(cid:3)(cid:87)(cid:82)(cid:3)(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:20)(cid:19)-Q filed on October 28, 2004.
First Supplemental Indenture, dated August 27, 2004, among PRR Newco, Inc., as Issuer, and
Norfolk Southern Railway Company, as Guarantor, and The Bank of New York, as Trustee, related
to the issuance of notes in the principal amount of approximately $451.8 million, is incorporated
her(cid:72)(cid:76)(cid:81)(cid:3)(cid:69)(cid:92)(cid:3)(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:40)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87)(cid:3)(cid:23)(cid:11)(cid:80)(cid:12)(cid:3)(cid:87)(cid:82)(cid:3)(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:20)(cid:19)-Q filed on October
28, 2004.
Ninth Supplemental Indenture, dated as of March 11, 2005, between Norfolk Southern Corporation
and U.S. Bank Trust National Association, as Trustee, related to the issuance of notes in the
principal amount of $300 million, is incorporated herein by reference to Exhibit 4.1 to Norfolk
(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:27)-K filed on March 15, 2005.
K85
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Tenth Supplemental Indenture, dated as of May 17, 2005, between Norfolk Southern Corporation
and U.S. Bank Trust National Association, as Trustee, related to the issuance of notes in the
principal amount of $366.6 million, is incorporated herein by reference to Exhibit 99.1 to Norfolk
Southern Cor(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:27)-K filed on May 18, 2005.
Eleventh Supplemental Indenture, dated as of May 17, 2005, between Norfolk Southern
Corporation and U.S. Bank Trust National Association, as Trustee, related to the issuance of notes
in the principal amount of $350 million, is incorporated herein by reference to Exhibit 99.2 to
(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:27)-K filed on May 18, 2005.
Twelfth Supplemental Indenture, dated as of August 26, 2010, between Norfolk Southern
Corporation and U.S. Bank Trust National Association, as Trustee, related to the issuance of notes
in the principal amount of $250 million, is incorporated herein by reference to Exhibit 4.2 to
(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)m 8-K filed on August 26, 2010.
Indenture, dated as of April 4, 2008, between Norfolk Southern Corporation and U.S. Bank Trust
National Association, as Trustee, related to the issuance of notes in the principal amount of $600
(cid:80)(cid:76)(cid:79)(cid:79)(cid:76)(cid:82)(cid:81)(cid:15)(cid:3)(cid:76)(cid:86)(cid:3)(cid:76)(cid:81)(cid:70)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:75)(cid:72)(cid:85)(cid:72)(cid:76)(cid:81)(cid:3)(cid:69)(cid:92)(cid:3)(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:40)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87)(cid:3)(cid:23)(cid:17)(cid:20)(cid:3)(cid:87)(cid:82)(cid:3)(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)
Form 8-K filed on April 9, 2008.
Indenture, dated as of January 15, 2009, between Norfolk Southern Corporation and U.S. Bank
Trust National Association, as Trustee, related to the issuance of notes in the principal amount of
(cid:7)(cid:24)(cid:19)(cid:19)(cid:3)(cid:80)(cid:76)(cid:79)(cid:79)(cid:76)(cid:82)(cid:81)(cid:15)(cid:3)(cid:76)(cid:86)(cid:3)(cid:76)(cid:81)(cid:70)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:75)(cid:72)(cid:85)(cid:72)(cid:76)(cid:81)(cid:3)(cid:69)(cid:92)(cid:3)(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:40)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87)(cid:3)(cid:23)(cid:17)(cid:20)(cid:3)(cid:87)(cid:82)(cid:3)(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)
Form 8-K filed on January 20, 2009.
Indenture, dated as of June 1, 2009, between Norfolk Southern Corporation and U.S. Bank Trust
National Association, as Trustee, is incorporated herein by reference to Exhibit 4.1 to Norfolk
(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86) Form 8-K filed on June 1, 2009.
First Supplemental Indenture, dated as of June 1, 2009, between Norfolk Southern Corporation and
U.S. Bank Trust National Association, as Trustee, related to the issuance of notes in the principal
amount of $500 million, is incorporated herein by reference to Exhibit 4.2 to Norfolk Southern
(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)Form 8-K filed on June 1, 2009.
Second Supplemental Indenture, dated as of May 23, 2011, between the Registrant and U.S. Bank
Trust National Association, as Trustee, related to the issuance of notes in the principal amount of
$400 million, (cid:76)(cid:86)(cid:3)(cid:76)(cid:81)(cid:70)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:69)(cid:92)(cid:3)(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:40)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87)(cid:3)(cid:23)(cid:17)(cid:20)(cid:3)(cid:87)(cid:82)(cid:3)(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)
8-K filed on May 23, 2011.
Indenture, dated as of September 14, 2011, between the Registrant and U.S. Bank Trust National
Association, as Trustee, related to the issuance of notes in the principal amount of $595,504,000, is
incorporated by reference to Exhibit 4.1 to Norfolk Southern Corpora(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:27)-K filed on
September 15, 2011.
Third Supplemental Indenture, dated as of September 14, 2011, between the Registrant and U.S.
Bank Trust National Association, as Trustee, related to the issuance of notes in the principal
amount of $4,492,000, is incorporated by reference to Exhibit 4.2 to Norfolk Southern
(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:27)-K filed on September 15, 2011.
K86
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Fourth Supplemental Indenture, dated as of November 17, 2011, between the Registrant and U.S.
Bank Trust National Association, as Trustee, related to the issuance of two series of notes, one in
the principal amount of $500 million and one in the principal amount of $100 million, is
incorporated herein by reference to Exhibit 4.1 to Norfolk Southern Corporatio(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:27)-K filed
on November 17, 2011.
Indenture, dated as of March 15, 2012, between the Registrant and U.S. Bank Trust National
Association, as Trustee, is incorporated herein by reference to Exhibit 4.1 to Norfolk Southern
(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:27)-K filed on March 15, 2012.
First Supplemental Indenture, dated as of March 15, 2012, between the Registrant and U.S. Bank
Trust National Association, as Trustee, is incorporated herein by reference to Exhibit 4.2 to Norfolk
(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:27)-K filed on March 15, 2012.
Indenture, dated as of August 20, 2012, between the Registrant and U.S. Bank Trust National
Association, as Trustee, is incorporated herein by reference to Exhibit 4.1 to the (cid:53)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)
8-K filed on August 21, 2012.
Registration Rights Agreement, dated as of August 20, 2012, among the Registrant, Merrill Lynch,
Pierce, Fenner & Smith Incorporated and Citigroup Global Markets Inc. is incorporated herein by
(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:40)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87)(cid:3)(cid:23)(cid:17)(cid:21)(cid:3)(cid:87)(cid:82)(cid:3)(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:27)-K filed on August 21, 2012.
Second Supplemental Indenture, dated as of September 7, 2012, between the Registrant and U.S.
Bank Trust National Association, as Trustee, is incorporated herein by reference to Exhibit 4.1 to
(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:27)-K filed on September 7, 2012.
In accordance with Item 601(b)(4)(iii) of Regulation S-K, copies of other instruments of Norfolk
Southern Corporation and its subsidiaries with respect to the rights of holders of long-term debt are
not filed herewith, or incorporated by reference, but will be furnished to the Commission upon
request.
10
Material Contracts -
(a)
(b)
The Transaction Agreement, dated as of June 10, 1997, by and among CSX and CSX
Transportation, Inc., Registrant, Norfolk Southern Railway Company, Conrail Inc., Consolidated
Rail Corporation, and CRR Holdings LLC, with certain schedules thereto, previously filed, is
incor(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:75)(cid:72)(cid:85)(cid:72)(cid:76)(cid:81)(cid:3)(cid:69)(cid:92)(cid:3)(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:40)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87)(cid:3)(cid:20)(cid:19)(cid:11)(cid:68)(cid:12)(cid:3)(cid:87)(cid:82)(cid:3)(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:20)(cid:19)-K
filed on February 24, 2003.
Amendment No. 1 dated as of August 22, 1998, to the Transaction Agreement, dated as of June 10,
1997, by and among CSX Corporation, CSX Transportation, Inc., Norfolk Southern Corporation,
Norfolk Southern Railway Company, Conrail, Inc., Consolidated Rail Corporation, and CRR
Holdings LLC, is incorporated herein by reference from Exhibit 10.1 to Norfolk Southern
Corpora(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)Form 10-Q filed on August 11, 1999.
K87
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
(k)
Amendment No. 2 dated as of June 1, 1999, to the Transaction Agreement, dated June10, 1997, by
and among CSX Corporation, CSX Transportation, Inc., Norfolk Southern Corporation, Norfolk
Southern Railway Company, Conrail, Inc., Consolidated Rail Corporation, and CRR Holdings LLC,
(cid:76)(cid:86)(cid:3)(cid:76)(cid:81)(cid:70)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:75)(cid:72)(cid:85)(cid:72)(cid:76)(cid:81)(cid:3)(cid:69)(cid:92)(cid:3)(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3)(cid:73)(cid:85)(cid:82)(cid:80)(cid:3)(cid:40)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87)(cid:3)(cid:20)(cid:19)(cid:17)(cid:21)(cid:3)(cid:87)(cid:82)(cid:3)(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:20)(cid:19)-Q
filed on August 11, 1999.
Amendment No. 3 dated as of June 1, 1999, and executed in April 2004, to the Transaction
Agreement, dated June 10, 1997, by and among CSX Corporation, CSX Transportation, Inc.,
Norfolk Southern Corporation, Norfolk Southern Railway Company, Conrail, Inc., Consolidated
Rail Corporation, and CRR Holdings LLC, is incorporated herein by reference from Exhibit 10(dd)
(cid:87)(cid:82)(cid:3)(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:20)(cid:19)-Q filed on July 30, 2004.
Amendment No. 5 to the Transaction Agreement, dated as of August 27, 2004, by and among CSX
Corporation, CSX Transportation, Inc., Norfolk Southern Corporation, Norfolk Southern Railway
Company, Conrail, Inc., Consolidated Rail Corporation, and CRR Holdings LLC, is incorporated
herein by reference to Exhibit 10.1 to Norfolk Southern Corpor(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:27)-K filed on September
2, 2004.
Amendment No. 6 dated as of April 1, 2007, to the Transaction Agreement, dated June 10, 1997, by
and among CSX Corporation, CSX Transportation, Inc., Norfolk Southern Railway Company,
Conrail, Inc., Consolidated Rail Corporation, and CRR Holdings LLC, is incorporated herein by
reference to (cid:40)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87)(cid:3)(cid:20)(cid:19)(cid:17)(cid:24)(cid:3)(cid:87)(cid:82)(cid:3)(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:20)(cid:19)-Q filed on July 27, 2007.
Shared Assets Area Operating Agreement for North Jersey, dated as of June 1, 1999, by and among
Consolidated Rail Corporation, CSX Transportation, Inc., and Norfolk Southern Railway Company,
with exhibit thereto, is incorporated herein by reference from Exhibit 10.4 to Norfolk Southern
(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80) 10-Q filed on August 11, 1999.
Shared Assets Area Operating Agreement for Detroit, dated as of June 1, 1999, by and among
Consolidated Rail Corporation, CSX Transportation, Inc., and Norfolk Southern Railway Company,
with exhibit thereto, is incorporated herein by reference from Exhibit 10.6 to Norfolk Southern
(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:20)(cid:19)-Q filed on August 11, 1999.
Shared Assets Area Operating Agreement for South Jersey/Philadelphia, dated as of June 1, 1999,
by and among Consolidated Rail Corporation, CSX Transportation, Inc., and Norfolk Southern
Railway Company, with exhibit thereto, is incorporated herein by reference from Exhibit 10.5 to
(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:20)(cid:19)-Q filed on August 11, 1999.
Amendment No. 1, dated as of June 1, 2000, to the Shared Assets Area Operating Agreements for
North Jersey, South Jersey/Philadelphia, and Detroit, dated as of June 1, 1999, by and among
Consolidated Rail Corporation, CSX Transportation, Inc., and Norfolk Southern Railway Company,
with exhibits thereto, is incorporated herein by reference to Exhibit 10(h) to Norfolk Southern
(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:20)(cid:19)-K filed on March 5, 2001.
Amendment No. 2, dated as of January 1, 2001, to the Shared Assets Area Operating Agreements
for North Jersey, South Jersey/Philadelphia, and Detroit, dated as of June 1, 1999, by and among
Consolidated Rail Corporation, CSX Transportation, Inc., and Norfolk Southern Railway Company,
with exhibits thereto, is incorporated herein by reference to Exhibit 10(j) to Norfolk Southern
(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:20)(cid:19)-K filed on February 21, 2002.
K88
(l)
(m)
(n)
(o)
(p)
(q)
(r)
(s)*
(t)*
Amendment No. 3, dated as of June 1, 2001, and executed in May of 2002, to the Shared Assets
Area Operating Agreements for North Jersey, South Jersey/Philadelphia, and Detroit, dated as of
June 1, 1999, by and among Consolidated Rail Corporation, CSX Transportation, Inc., and Norfolk
Southern Railway Company, with exhibits thereto, is incorporated herein by reference to Exhibit
10(k) to Nor(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:20)(cid:19)-K filed on February 24, 2003.
Amendment No. 4, dated as of June 1, 2005, and executed in late June 2005, to the Shared Assets
Area Operating Agreements for North Jersey, South Jersey/Philadelphia, and Detroit, dated as of
June 1, 1999, by and among Consolidated Rail Corporation, CSX Transportation, Inc., and Norfolk
Southern Railway Company, with exhibits thereto, is incorporated herein by reference to Exhibit 99
(cid:87)(cid:82)(cid:3)(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:27)-K filed on July 1, 2005.
Monongahela Usage Agreement, dated as of June 1, 1999, by and among CSX Transportation, Inc.,
Norfolk Southern Railway Company, Pennsylvania Lines LLC, and New York Central Lines LLC,
with exhibit thereto, is incorporated herein by reference from -Exhibit 10.7 to Norfolk Southern
(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:20)(cid:19)-Q filed on August 11, 1999.
The Agreement, entered into as of July 27, 1999, between North Carolina Railroad Company and
Norfolk Southern Railway Company, is incorporated herein by reference from Exhibit 10(i) to
(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:20)(cid:19)-K filed on March 6, 2000.
First Amendment, dated March 19, 2007, to the Master Agreement dated July 27, 1999, by and
between North Carolina Railroad Company and Norfolk Southern Railway Company, is
(cid:76)(cid:81)(cid:70)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:75)(cid:72)(cid:85)(cid:72)(cid:76)(cid:81)(cid:3)(cid:69)(cid:92)(cid:3)(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:40)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87)(cid:3)(cid:20)(cid:19)(cid:17)(cid:22)(cid:3)(cid:87)(cid:82)(cid:3)(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:20)(cid:19)-Q filed
on July 27, 2007.
Second Amendment, dated December 28, 2009, to the Master Agreement dated July 27, 1999, by
and between North Carolina Railroad Company and Norfolk Southern Railway Company, is
(cid:76)(cid:81)(cid:70)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:75)(cid:72)(cid:85)(cid:72)(cid:76)(cid:81)(cid:3)(cid:69)(cid:92)(cid:3)(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:40)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87)(cid:3)(cid:20)(cid:19)(cid:11)(cid:84)(cid:12)(cid:3)(cid:87)(cid:82)(cid:3)(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:20)(cid:19)-K
filed on February 17, 2010 (Exhibits, annexes and schedules omitted. The Registrant will furnish
supplementary copies of such materials to the SEC upon request).
The Supplementary Agreement, entered into as of January 1, 1987, between the Trustees of the
Cincinnati Southern Railway and The Cincinnati, New Orleans and Texas Pacific Railway
Company (the latter a wholly owned subsidiary of Norfolk Southern Railway Company) (cid:177)
extending and amending a Lease, dated as of October 11, 1881 (cid:177) is incorporated by reference to
Exhibit 10(cid:11)(cid:78)(cid:12)(cid:3)(cid:87)(cid:82)(cid:3)(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:20)(cid:19)-K filed on March 5, 2001.
Norfolk Southern Corporation Executive Management Incentive Plan, as approved by shareholders
May 13, 2010 and as amended September 27, 2011 and April 26, 2012, is incorporated herein by
reference to (cid:40)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87)(cid:3)(cid:20)(cid:19)(cid:17)(cid:21)(cid:3)(cid:87)(cid:82)(cid:3)(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:20)(cid:19)-Q filed on April 27, 2012.
(cid:55)(cid:75)(cid:72)(cid:3)(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:50)(cid:73)(cid:73)(cid:76)(cid:70)(cid:72)(cid:85)(cid:86)(cid:182)(cid:3)(cid:39)(cid:72)(cid:73)(cid:72)(cid:85)(cid:85)(cid:72)(cid:71)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:72)(cid:81)(cid:86)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:51)(cid:79)(cid:68)(cid:81)(cid:15)(cid:3)(cid:68)(cid:86)(cid:3)(cid:68)(cid:80)(cid:72)(cid:81)(cid:71)(cid:72)(cid:71)(cid:3)(cid:72)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)
September 26, 2000, is incorporated herein by reference to Exhibit 10(n) to Norfolk Southern
(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:20)(cid:19)-K filed on March 5, 2001.
K89
(u)*
(v)*
(w)*
(x)*
(y)
(z)*
(aa)
(bb)
(cc)
(dd)*
(ee)*
(cid:55)(cid:75)(cid:72)(cid:3)(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:39)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:86)(cid:182)(cid:3)(cid:53)(cid:72)(cid:86)(cid:87)(cid:85)(cid:76)(cid:70)(cid:87)(cid:72)(cid:71)(cid:3)(cid:54)(cid:87)(cid:82)(cid:70)(cid:78)(cid:3)(cid:51)(cid:79)(cid:68)(cid:81)(cid:15)(cid:3)(cid:68)(cid:71)(cid:82)(cid:83)(cid:87)(cid:72)(cid:71)(cid:3)(cid:45)(cid:68)(cid:81)(cid:88)(cid:68)(cid:85)(cid:92)(cid:3)(cid:20)(cid:15)(cid:3)(cid:20)(cid:28)(cid:28)(cid:23)(cid:15)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)
amended and restated effective as of August 1, 2012, is incorporated herein by reference to Exhibit
(cid:20)(cid:19)(cid:17)(cid:20)(cid:3)(cid:87)(cid:82)(cid:3)(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:20)(cid:19)-Q filed on October 25, 2012.
Supplemental Benefit Plan of Norfolk Southern Corporation and Participating Subsidiary
Companies, as amended effective January 1, 2009, is incorporated herein by reference to Exhibit
(cid:20)(cid:19)(cid:17)(cid:19)(cid:25)(cid:3)(cid:87)(cid:82)(cid:3)(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:27)-K filed on July 24, 2008.
Amendment to the Supplemental Benefit Plan of Norfolk Southern Corporation and Participating
Subsidiary Companies, effective as of January 1, 2009, is incorporated herein by reference to
(cid:40)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87)(cid:3)(cid:20)(cid:19)(cid:11)(cid:91)(cid:12)(cid:3)(cid:87)(cid:82)(cid:3)(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:20)(cid:19)-K filed on February 18, 2009.
(cid:55)(cid:75)(cid:72)(cid:3)(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:39)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:86)(cid:182)(cid:3)(cid:38)(cid:75)(cid:68)ritable Award Program, as amended effective July
(cid:21)(cid:19)(cid:19)(cid:26)(cid:15)(cid:3)(cid:76)(cid:86)(cid:3)(cid:76)(cid:81)(cid:70)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:75)(cid:72)(cid:85)(cid:72)(cid:76)(cid:81)(cid:3)(cid:69)(cid:92)(cid:3)(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:40)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87)(cid:3)(cid:20)(cid:19)(cid:17)(cid:25)(cid:3)(cid:87)(cid:82)(cid:3)(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)
10-Q filed on July 27, 2007.
The Norfolk Southern Corporation Thoroughbred Stock Option Plan, as amended effective
January 28, 2003, is incorporated herein by reference to Exhibit 10(z) to Norfolk Southern
(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:20)(cid:19)-K filed on February 24, 2003.
The Norfolk Southern Corporation Executive Life Insurance Plan, as amended and restated
effective November 1, 2009, is incorporated herein by reference to Exhibit 10(cc) to Norfolk
(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:20)(cid:19)-K filed on February 17, 2010.
Distribution Agreement, dated as of July 26, 2004, by and among CSX Corporation, CSX
Transportation, Inc., CSX Rail Holding Corporation, CSX Northeast Holdings Corporation, Norfolk
Southern Corporation, Norfolk Southern Railway Company, CRR Holdings LLC, Green
Acquisition Corp., Conrail Inc., Consolidated Rail Corporation, New York Central Lines LLC,
Pennsylvania Lines LLC, NYC Newco, Inc., and PRR Newco, Inc., is incorporated herein by
(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:40)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87)(cid:3)(cid:21)(cid:17)(cid:20)(cid:3)(cid:87)(cid:82)(cid:3)(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:27)-K filed on September 2, 2004.
Tax Agreement, dated as of August 27, 2004, by and among Green Acquisition Corp., Conrail Inc.,
Consolidated Rail Corporation, New York Central Lines LLC, and Pennsylvania Lines LLC, is
(cid:76)(cid:81)(cid:70)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:75)(cid:72)(cid:85)(cid:72)(cid:76)(cid:81)(cid:3)(cid:69)(cid:92)(cid:3)(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:40)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87)(cid:3)(cid:20)(cid:19)(cid:17)(cid:21)(cid:3)(cid:87)(cid:82)(cid:3)(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:27)-K filed
on September 2, 2004.
(cid:36)(cid:80)(cid:72)(cid:81)(cid:71)(cid:72)(cid:71)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:53)(cid:72)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:38)(cid:85)(cid:72)(cid:71)(cid:76)(cid:87)(cid:3)(cid:36)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:71)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:68)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:45)(cid:88)(cid:81)(cid:72)(cid:3)(cid:21)(cid:25)(cid:15)(cid:3)(cid:21)(cid:19)(cid:19)(cid:26)(cid:15)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:85)(cid:72)(cid:86)(cid:83)(cid:72)(cid:70)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:53)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)
$1 billion unsecured revolving credit facility, is incorporated herein by reference to Exhibit 99 to
(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)8-K filed on June 27, 2007. This agreement was terminated
(cid:68)(cid:86)(cid:3)(cid:81)(cid:82)(cid:87)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:27)-K filed on December 15, 2011.
(cid:55)(cid:75)(cid:72)(cid:3)(cid:71)(cid:72)(cid:86)(cid:70)(cid:85)(cid:76)(cid:83)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:72)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:83)(cid:75)(cid:92)(cid:86)(cid:76)(cid:70)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:76)(cid:80)(cid:69)(cid:88)(cid:85)(cid:86)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:81)(cid:82)(cid:81)-
employee directors and certain executives is incorporated herein by reference to Norfolk Southern
(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:27)-K filed on July 28, 2005.
Form of 2005 Incentive Stock Option and Non-Qualified Stock Option Agreement under the
Norfolk Southern Long-Term Incentive Plan, is incorporated herein by reference to Exhibit 99 to
(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:27)-K filed on January 7, 2005.
K90
(ff)*
(gg)
(hh)
(ii)
(jj)
(kk)*
(ll)
Form of 2006 Incentive Stock Option and Non-Qualified Stock Option Agreement under the
Norfolk Southern Long-Term Incentive Plan, is incorporated herein by reference to Exhibit 99 to
(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:27)-K/A filed on December 7, 2005.
The Norfolk Southern Corporation Long-Term Incentive Plan, as amended effective May 13, 2010,
(cid:76)(cid:86)(cid:3)(cid:76)(cid:81)(cid:70)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:75)(cid:72)(cid:85)(cid:72)(cid:76)(cid:81)(cid:3)(cid:69)(cid:92)(cid:3)(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:40)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87)(cid:3)(cid:20)(cid:19)(cid:17)(cid:20)(cid:3)(cid:87)(cid:82)(cid:3)(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:27)-K
filed on May 18, 2010.
The Transaction Agreement, dated as of December 1, 2005, by and among Norfolk Southern
Corporation, The Alabama Great Southern Railroad Company, Kansas City Southern, and The
Kansas City Southern Railway Company, is incorporated herein by reference to Exhibit 10(II) to
(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:20)(cid:19)-K filed on February 23, 2006 (Exhibits, annexes, and
schedules omitted. The Registrant will furnish supplementary copies of such materials to the SEC
upon request).
Amendment No. 1, dated as of January 17, 2006, by and among Norfolk Southern Corporation, The
Alabama Great Southern Railroad Company, Kansas City Southern, and The Kansas City Southern
(cid:53)(cid:68)(cid:76)(cid:79)(cid:85)(cid:82)(cid:68)(cid:71)(cid:3)(cid:15)(cid:3)(cid:76)(cid:86)(cid:3)(cid:76)(cid:81)(cid:70)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:75)(cid:72)(cid:85)(cid:72)(cid:76)(cid:81)(cid:3)(cid:69)(cid:92)(cid:3)(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:40)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87)(cid:3)(cid:20)(cid:19)(cid:11)(cid:80)(cid:80)(cid:12)(cid:3)(cid:87)(cid:82)(cid:3)(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)
Form 10-K filed on February 23, 2006.
Amendment No. 2, dated as of May 1, 2006, to the Transaction Agreement, dated as of
December 1, 2005, by and among Norfolk Southern Corporation, The Alabama Great Southern
Railroad Company, Kansas City Southern, and The Kansas City Southern Railway Company is
incorporated herein by reference to Exhibit 10.1 to (cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:27)-K filed
on May 4, 2006.
Revised fees for outside directors are incorporated herein by reference to Norfolk Southern
(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:27)-K filed on January 27, 2006. Beginning in 2012, directors who serve as
committee chairpersons receive an additional quarterly fee of $5,000 for such service, and the Lead
Director receives an additional quarterly fee of $12,500.
Limited Liability Agreement of Meridian Speedway, LLC, dated as of May 1, 2006, by and among
the Alabama Great Southern Railroad Company and Kansas City Southern, is incorporated herein
(cid:69)(cid:92)(cid:3)(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:40)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87)(cid:3)(cid:20)(cid:19)(cid:17)(cid:21)(cid:3)(cid:87)(cid:82)(cid:3)(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:27)-K filed on May 4, 2006.
(mm)*
Form of Norfolk Southern Corporation Long-Term Incentive Plan, 2007 Award Agreement is
(cid:76)(cid:81)(cid:70)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:75)(cid:72)(cid:85)(cid:72)(cid:76)(cid:81)(cid:3)(cid:69)(cid:92)(cid:3)(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:40)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87)(cid:3)(cid:20)(cid:19)(cid:17)(cid:20)(cid:3)(cid:87)(cid:82)(cid:3)(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:27)-K filed
on January 11, 2007.
(nn)*
(oo)
(pp)
Retirement Plan of Norfolk Southern Corporation and Participating Subsidiary Companies effective
June 1, 1982, amended effective January 1, 2010, is incorporated herein by reference to Exhibit
(cid:20)(cid:19)(cid:11)(cid:85)(cid:85)(cid:12)(cid:3)(cid:87)(cid:82)(cid:3)(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:20)(cid:19)-K filed on February 17, 2010.
Transfer and Administration Agreement dated as of November 8, 2007, is incorporated herein by
(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:40)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87)(cid:3)(cid:28)(cid:28)(cid:3)(cid:87)(cid:82)(cid:3)(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:27)-K filed on November 14, 2007.
Amendment No. 2, dated as of May 19, 2009, to Transfer and Administration Agreement dated as
of November 8, 2007, is incorporated herein by reference to Exhibit 10.1 to Norfolk Southern
(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:20)(cid:19)-Q filed on July 31, 2009.
K91
(qq)
(rr)
(ss)
(tt)
(uu)
(vv)
Amendment No. 3, dated as of August 21, 2009, to Transfer and Administration Agreement dated
as of November 8, 2007, is incorporated herein by reference to Exhibit 10.1 to Norfolk Southern
(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:20)(cid:19)-Q filed on October 30, 2009.
Amendment No. 4, dated as of October 22, 2009, to Transfer and Administration Agreement dated
as of November 8, 2007, is incorporated herein by reference to Exhibit 99 to Norfolk Southern
(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:27)-K filed on October 22, 2009.
Amendment No. 5, dated as of December 23, 2009, to Transfer and Administration Agreement
dated as of November 8, 2007, is incorporated herein by reference to Exhibit 10(xx) to Norfolk
(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:20)(cid:19)-K filed on February 17, 2010.
Amendment No. 6, dated as of August 30, 2010, to Transfer and Administration Agreement dated
as of November 8, 2007, is incorporated herein by reference to Exhibit 10.1 to Norfolk Southern
(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:20)(cid:19)-Q filed on October 29, 2010.
Amendment No. 7, dated as of October 21, 2010, to Transfer and Administration Agreement dated
as of November 8, 2007, is incorporated herein by reference to Exhibit 99 to Norfolk Southern
(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:27)-K filed on October 22, 2010.
Amendment No. 8, dated as of October 20, 2011, to Transfer and Administration Agreement dated
as of November 8, 2007, is incorporated herein by reference to Exhibit 99 to Norfolk Southern
(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:27)-K filed on October 20, 2011.
(ww)*
Form of Norfolk Southern Corporation Long-Term Incentive Plan, 2008 Award Agreement is
incorporated herein by refe(cid:85)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:40)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87)(cid:3)(cid:28)(cid:28)(cid:3)(cid:87)(cid:82)(cid:3)(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:27)-K filed on
November 20, 2007.
(xx)
(yy)
(zz)*
(aaa)*
(bbb)*
Dealer Agreement dated as of January 23, 2008, between the Registrant and J. P. Morgan Securities
Inc. is incorporated herein by reference to Exhibit (cid:20)(cid:19)(cid:17)(cid:20)(cid:3)(cid:87)(cid:82)(cid:3)(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)
Form 8-K filed on January 25, 2008.
Dealer Agreement dated as of January 23, 2008, between the Registrant and Goldman, Sachs & Co.
is incorporated herein by reference to Exhibit 10.2 to Norfolk Southern (cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:27)-K
filed on January 25, 2008.
2008 Award Agreement between Norfolk Southern Corporation and Gerald L. Baliles, dated
January 24, 2008, is incorporated herein by reference to Exhibit 10.2 to Norfolk Southern
Corporation(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:27)-K filed on January 25, 2008.
2008 Award Agreement between Norfolk Southern Corporation and Daniel A. Carp, dated
January 24, 2008, is incorporated herein by reference to Exhibit 10.3 to Norfolk Southern
(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:27)-K filed on January 25, 2008.
2008 Award Agreement between Norfolk Southern Corporation and Alston D. Correll, dated
January 24, 2008, is incorporated herein by reference to Exhibit 10.5 to Norfolk Southern
(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:27)-K filed on January 25, 2008.
K92
(ccc)*
(ddd)*
(eee)*
(fff)
(ggg)
(hhh)
(iii)*
2008 Award Agreement between Norfolk Southern Corporation and Burton M. Joyce, dated
January 24, 2008, is incorporated herein by reference to Exhibit 10.7 to Norfolk Southern
(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:27)-K filed on January 25, 2008.
2008 Award Agreement between Norfolk Southern Corporation and Steven F. Leer, dated
January 24, 2008, is incorporated herein by reference to Exhibit 10.8 to Norfolk Southern
(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:27)-K filed on January 25, 2008.
2008 Award Agreement between Norfolk Southern Corporation and J. Paul Reason, dated
January 24, 2008, is incorporated herein by reference to Exhibit 10.10 to Norfolk Southern
(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:27)-K filed on January 25, 2008.
Omnibus Amendment, dated as of March 18, 2008, to the Transfer and Administration Agreement
dated as of November 8, 2007, is incorporated herein by reference to Exhibit 10.1 to Norfolk
(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:20)(cid:19)-Q filed on April 23, 2008.
Transaction Agreement (Pan Am Transaction Agreement), dated May 15, 2008, by and among
Norfolk Southern Railway Company, Pan Am Railways, Inc., Boston and Maine Corporation, and
Springfield Terminal Railway Company, is incorporated herein by reference to Exhibit 10.1 to
(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:20)(cid:19)-Q filed on July 24, 2008 (Exhibits, annexes and schedules
omitted. The Registrant will furnish supplementary copies of such materials to the SEC upon
request).
Letter Agreement, dated October 21, 2008, by and among Norfolk Southern Railway Company, Pan
Am Railways, Inc., Boston and Maine Corporation, and Springfield Terminal Railway Company
amending certain terms of the Pan Am Transaction Agreement, is incorporated herein by reference
to Exhibit 10(rrr) to Norfolk Southern C(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:20)(cid:19)-K filed on February 18, 2009.
(cid:39)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:86)(cid:182)(cid:3)(cid:39)(cid:72)(cid:73)(cid:72)(cid:85)(cid:85)(cid:72)(cid:71)(cid:3)(cid:41)(cid:72)(cid:72)(cid:3)(cid:51)(cid:79)(cid:68)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:15)(cid:3)(cid:68)(cid:86)(cid:3)(cid:68)(cid:80)(cid:72)(cid:81)(cid:71)(cid:72)(cid:71)(cid:3)(cid:72)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87)(cid:76)(cid:89)(cid:72)
January 1, 2009, is incorporated herein by reference to Exhibit 10.01 to Norfolk Southern
(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:27)-K filed on July 24, 2008.
(jjj)**
(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:40)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:86)(cid:182)(cid:3)(cid:39)(cid:72)(cid:73)(cid:72)(cid:85)(cid:85)(cid:72)(cid:71)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:72)(cid:81)(cid:86)(cid:68)(cid:87)ion Plan, as amended effective
January 1, 2012.
(kkk)*
(lll)*
(cid:36)(cid:80)(cid:72)(cid:81)(cid:71)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:50)(cid:73)(cid:73)(cid:76)(cid:70)(cid:72)(cid:85)(cid:86)(cid:182)(cid:3)Deferred Compensation Plan, effective
January 1, 2008, is incorporated herein by reference to Exhibit 10.03 to Norfolk Southern
(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:27)-K filed on July 24, 2008.
Norfolk Southern Corporation Long-Term Incentive Plan, as amended effective January 1, 2009, is
(cid:76)(cid:81)(cid:70)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:75)(cid:72)(cid:85)(cid:72)(cid:76)(cid:81)(cid:3)(cid:69)(cid:92)(cid:3)(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:40)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87)(cid:3)(cid:20)(cid:19)(cid:17)(cid:19)(cid:23)(cid:3)(cid:87)(cid:82)(cid:3)(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:27)-K filed
on July 24, 2008.
(mmm)* Norfolk Southern Corporation Restricted Stock Unit Plan, as amended effective January 1, 2009, is
(cid:76)(cid:81)(cid:70)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:75)(cid:72)(cid:85)(cid:72)(cid:76)(cid:81)(cid:3)(cid:69)(cid:92)(cid:3)(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:40)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87)(cid:3)(cid:20)(cid:19)(cid:17)(cid:19)(cid:24)(cid:3)(cid:87)(cid:82)(cid:3)(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:27)-K filed
on July 24, 2008.
K93
(nnn)
(ooo)*
(ppp)*
(qqq)*
(rrr)*
(sss)*
(ttt)*
(uuu)*
(vvv)*
Amendment No. 1 to Transfer and Administration Agreement dated as of October 22, 2008, and
effective as of October 23, 2008, is incorporated herein by reference to Exhibit 99 to Norfolk
(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:27)-K filed on October 23, 2006.
Stock Unit Plan of Norfolk Southern Corporation dated as of July 24, 2001, as amended on
August 21, 2008, with an effective date of January 1, 2009, is incorporated herein by reference to
(cid:40)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87)(cid:3)(cid:20)(cid:19)(cid:17)(cid:20)(cid:3)(cid:87)(cid:82)(cid:3)(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:20)(cid:19)-Q filed on October 24, 2008.
Form of Norfolk Southern Corporation Long-Term Incentive Plan, 2009 Award Agreement is
(cid:76)(cid:81)(cid:70)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:75)(cid:72)(cid:85)(cid:72)(cid:76)(cid:81)(cid:3)(cid:69)(cid:92)(cid:3)(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:40)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87)(cid:3)(cid:28)(cid:28)(cid:3)(cid:87)(cid:82)(cid:3)(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:27)-K/A filed
on December 17, 2008.
Form of Amended and Restated Change in Control Agreement between Norfolk Southern
Corporation and certain executive off(cid:76)(cid:70)(cid:72)(cid:85)(cid:86)(cid:3)(cid:11)(cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:82)(cid:86)(cid:72)(cid:3)(cid:71)(cid:72)(cid:73)(cid:76)(cid:81)(cid:72)(cid:71)(cid:3)(cid:68)(cid:86)(cid:3)(cid:179)(cid:81)(cid:68)(cid:80)(cid:72)(cid:71)(cid:3)(cid:72)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:82)(cid:73)(cid:73)(cid:76)(cid:70)(cid:72)(cid:85)(cid:86)(cid:180)(cid:3)
(cid:68)(cid:81)(cid:71)(cid:3)(cid:76)(cid:71)(cid:72)(cid:81)(cid:87)(cid:76)(cid:73)(cid:76)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:51)(cid:85)(cid:82)(cid:91)(cid:92)(cid:3)(cid:54)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:21)(cid:19)(cid:19)(cid:27)(cid:3)(cid:68)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:48)(cid:72)(cid:72)(cid:87)(cid:76)(cid:81)(cid:74)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:54)(cid:87)(cid:82)(cid:70)(cid:78)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)(cid:12)(cid:15)(cid:3)
(cid:76)(cid:86)(cid:3)(cid:76)(cid:81)(cid:70)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:75)(cid:72)(cid:85)(cid:72)(cid:76)(cid:81)(cid:3)(cid:69)(cid:92)(cid:3)(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:40)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87)(cid:3)(cid:20)(cid:19)(cid:11)(cid:68)(cid:68)(cid:68)(cid:68)(cid:12)(cid:3)(cid:87)(cid:82)(cid:3)(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:20)0-
K filed on February 18, 2009.
2009 Award Agreement between Norfolk Southern Corporation and Gerald L. Baliles, dated
January 29, 2009, is incorporated herein by reference to Exhibit 10.1 to Norfolk Southern
(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:27)-K filed on January 30, 2009.
2009 Award Agreement between Norfolk Southern Corporation and Daniel A. Carp, dated
January 29, 2009, is incorporated herein by reference to Exhibit 10.2 to Norfolk Southern
(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:27)-K filed on January 30, 2009.
2009 Award Agreement between Norfolk Southern Corporation and Alston D. Correll, dated
January 29, 2009, is incorporated herein by reference to Exhibit 10.4 to Norfolk Southern
(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:27)-K filed on January 30, 2009.
2009 Award Agreement between Norfolk Southern Corporation and Karen N. Horn, dated
January 29, 2009, is incorporated herein by reference to Exhibit 10.6 to Norfolk Southern
(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:27)-K filed on January 30, 2009.
2009 Award Agreement between Norfolk Southern Corporation and Burton M. Joyce, dated
January 29, 2009, is incorporated herein by reference to Exhibit 10.7 to Norfolk Southern
(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:27)-K filed on January 30, 2009.
(www)*
2009 Award Agreement between Norfolk Southern Corporation and Steven F. Leer, dated
January 29, 2009, is incorporated herein by reference to Exhibit 10.8 to Norfolk Southern
(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:27)-K filed on January 30, 2009.
(xxx)*
2009 Award Agreement between Norfolk Southern Corporation and Michael D. Lockhart, dated
January 29, 2009, is incorporated herein by reference to Exhibit 10.9 to Norfolk Southern
(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:27)-K filed on January 30, 2009.
K94
(yyy)*
(zzz)
2009 Award Agreement between Norfolk Southern Corporation and J. Paul Reason, dated
January 29, 2009, is incorporated herein by reference to Exhibit 10.10 to Norfolk Southern
(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:27)-K filed on January 30, 2009.
Limited Liability Company Agreement of Pan Am Southern LLC, dated as of April 9, 2009, is
(cid:76)(cid:81)(cid:70)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:75)(cid:72)(cid:85)(cid:72)(cid:76)(cid:81)(cid:3)(cid:69)(cid:92)(cid:3)(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:40)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87)(cid:3)(cid:20)(cid:19)(cid:17)(cid:20)(cid:3)(cid:87)(cid:82)(cid:3)(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:27)-K filed
on April 9, 2009 (exhibits, annexes, and schedules omitted (cid:177) the Registrant will furnish
supplementary copies of such materials to the SEC upon request).
(aaaa)*
Form of Norfolk Southern Corporation Long-Term Incentive Plan, 2010 Award Agreement for
Outside Directors is incorporated herein by reference to Exhibit 99, Item 10.1 to Norfolk Southern
(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:27)-K/A filed on January 29, 2010.
(bbbb)*
Form of Norfolk Southern Corporation Long-Term Incentive Plan, 2010 Award Agreement is
(cid:76)(cid:81)(cid:70)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:75)(cid:72)(cid:85)(cid:72)(cid:76)(cid:81)(cid:3)(cid:69)(cid:92)(cid:3)(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:40)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87)(cid:3)(cid:28)(cid:28)(cid:15)(cid:3)(cid:44)(cid:87)(cid:72)(cid:80)(cid:3)(cid:20)(cid:19)(cid:17)(cid:21)(cid:3)(cid:87)(cid:82)(cid:3)(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)
Form 8-K/A filed on January 29, 2010.
(cccc)*
(dddd)*
(eeee)*
(ffff)*
(gggg)*
(hhhh)*
Form of Norfolk Southern Corporation Long-Term Incentive Plan, 2011 Award Agreement for
Outside Directors approved by the Compensation Committee on November 22, 2010, is
incorporated herein by reference to Exhibit 10nnnn to Norfolk (cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:20)(cid:19)-K
filed on February 16, 2011.
Form of Norfolk Southern Corporation Long-Term Incentive Plan, 2011 Award Agreement for
incentive stock options approved by the Performance-Based Compensation Committee on
January 25, 2011, is incorporated herein by reference to Exhibit 10oooo to Norfolk Southern
(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:20)(cid:19)-K filed on February 16, 2011.
Form of Norfolk Southern Corporation Long-Term Incentive Plan, 2011 Award Agreement for
performance share units approved by the Performance-Based Compensation Committee on January
(cid:21)(cid:24)(cid:15)(cid:3)(cid:21)(cid:19)(cid:20)(cid:20)(cid:15)(cid:3)(cid:76)(cid:86)(cid:3)(cid:76)(cid:81)(cid:70)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:75)(cid:72)(cid:85)(cid:72)(cid:76)(cid:81)(cid:3)(cid:69)(cid:92)(cid:3)(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:40)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87)(cid:3)(cid:20)(cid:19)(cid:83)(cid:83)(cid:83)(cid:83)(cid:3)(cid:87)(cid:82)(cid:3)(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)
Form 10-K filed on February 16, 2011.
Form of Norfolk Southern Corporation Long-Term Incentive Plan, 2011 Award Agreement for non-
qualified stock options approved by the Performance-Based Compensation Committee on January
(cid:21)(cid:24)(cid:15)(cid:3)(cid:21)(cid:19)(cid:20)(cid:20)(cid:15)(cid:3)(cid:76)(cid:86)(cid:3)(cid:76)(cid:81)(cid:70)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:75)(cid:72)(cid:85)(cid:72)(cid:76)(cid:81)(cid:3)(cid:69)(cid:92)(cid:3)(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:40)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87)(cid:3)(cid:20)(cid:19)(cid:84)(cid:84)(cid:84)(cid:84)(cid:3)(cid:87)(cid:82)(cid:3)(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)
Form 10-K filed on February 16, 2011.
Form of Norfolk Southern Corporation Long-Term Incentive Plan, 2011 Award Agreement for
restricted stock units approved by the Performance-Based Compensation Committee on
January 25, 2011, is incorporated herein by reference to Exhibit 10rrrr to Norfolk Southern
(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:20)(cid:19)-K filed on February 16, 2011.
Form of Norfolk Southern Corporation Long-Term Incentive Plan, Non-Compete Agreement
Associated with 2011 Award Agreement approved by the Performance-Based Compensation
Committee on January 25, 2011, is incorporated herein by reference to Exhibit 10ssss to Norfolk
(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:20)(cid:19)-K filed on February 16, 2011.
(iiii)
Credit Agreement dated as of December 14, 2011, is incorporated herein by reference to Exhibit 99
(cid:87)(cid:82)(cid:3)(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:27)-K filed on December 15, 2011.
K95
(jjjj)*
Form of Norfolk Southern Corporation Long-Term Incentive Plan, 2012 Award Agreement for
Outside Directors approved by the Compensation Committee on November 22, 2011, is
(cid:76)(cid:81)(cid:70)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:75)(cid:72)(cid:85)(cid:72)(cid:76)(cid:81)(cid:3)(cid:69)(cid:92)(cid:3)(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:40)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87)(cid:3)(cid:20)(cid:19)(cid:91)(cid:91)(cid:91)(cid:91)(cid:3)(cid:87)(cid:82)(cid:3)(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:20)(cid:19)-K
filed on February 15, 2012.
(kkkk)*
Form of Norfolk Southern Corporation Long-Term Incentive Plan, 2012 Award Agreement for
incentive stock options approved by the Compensation Committee on November 22, 2011, is
incorporated herein by reference to Exhibit 10yyyy (cid:87)(cid:82)(cid:3)(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:20)(cid:19)-K
filed on February 15, 2012.
(llll)*
Form of Norfolk Southern Corporation Long-Term Incentive Plan, 2012 Award Agreement for
performance share units approved by the Compensation Committee on November 22, 2011, is
incorporated herein by reference to Exhibit 10zzzz (cid:87)(cid:82)(cid:3)(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:20)(cid:19)-K
filed on February 15, 2012.
(mmmm)* Form of Norfolk Southern Corporation Long-Term Incentive Plan, 2012 Award Agreement for
non-qualified stock options approved by the Compensation Committee on November 22, 2011, is
incorporated herein by reference to Exhibit 10aaaaa (cid:87)(cid:82)(cid:3)(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:20)(cid:19)-K
filed on February 15, 2012.
(nnnn)*
(oooo)*
Form of Norfolk Southern Corporation Long-Term Incentive Plan, 2012 Award Agreement for
restricted stock units approved by the Compensation Committee on November 22, 2011, is
incorporated herein by reference to Exhibit 10bbbbb (cid:87)(cid:82)(cid:3)(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:20)(cid:19)-K
filed on February 15, 2012.
Form of Norfolk Southern Corporation Long-Term Incentive Plan, Non-Compete Agreement
Associated with 2012 Award Agreement, approved by the Compensation Committee on
November 22, 2011, is incorporated herein by reference to Exhibit 10cccc to Norfolk Southern
(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:20)(cid:19)-K filed on February 15, 2012.
(pppp)** Form of Norfolk Southern Corporation Long-Term Incentive Plan, 2013 Award Agreement for
Outside Directors approved by the Compensation Committee on November 26, 2012.
(qqqq)** Form of Norfolk Southern Corporation Long-Term Incentive Plan, 2013 Award Agreement for
incentive stock options approved by the Compensation Committee on November 26, 2012.
(rrrr)**
Form of Norfolk Southern Corporation Long-Term Incentive Plan, 2013 Award Agreement for
performance share units approved by the Compensation Committee on November 26, 2012.
(ssss)**
Form of Norfolk Southern Corporation Long-Term Incentive Plan, 2013 Award Agreement for
non-qualified stock options approved by the Compensation Committee on November 26, 2012.
(tttt)**
Form of Norfolk Southern Corporation Long-Term Incentive Plan, 2013 Award Agreement for
restricted stock units approved by the Compensation Committee on November 26, 2012.
K96
(uuuu)** Form of Norfolk Southern Corporation Long-Term Incentive Plan, Non-Compete Agreement
Associated with 2013 Award Agreement, approved by the Compensation Committee on
November 26, 2012.
(vvvv)
Performance Criteria for bonuses payable in 2014 for the 2013 incentive year. On January 21,
2013, the Compensation Committee of the Norfolk Southern Corporation Board of Directors
adopted the following performance criteria for determining bonuses payable in 2014 for the 2013
incentive year under the Norfolk Southern Corporation Executive Management Incentive
Plan: 50% based on operating income; 35% based on operating ratio; and 15% based on a
composite of three transportation service measures, consisting of adherence to operating plan,
connection performance, and train performance.
(wwww) Omnibus Amendment, dated as of January 17, 2011, to Pan Am Transaction Agreement dated as of
May 15, 2008, and Limited Liability Company Agreement of Pan Am Southern LLC dated as of
April 9, 2009, is incorporated herein by reference to Exhibit 10.1 to Norfolk Southern (cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)
Form 10-Q filed on April 27, 2012.
(xxxx)
(yyyy)*
Amendment No. 9, dated as of October 18, 2012, to Transfer and Administration Agreement dated
(cid:68)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:49)(cid:82)(cid:89)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85)(cid:3)(cid:27)(cid:15)(cid:3)(cid:21)(cid:19)(cid:19)(cid:26)(cid:15)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:85)(cid:72)(cid:86)(cid:83)(cid:72)(cid:70)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:53)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:85)(cid:72)(cid:70)(cid:72)(cid:76)(cid:89)(cid:68)(cid:69)(cid:79)(cid:72)(cid:86)(cid:3)(cid:86)(cid:72)(cid:70)(cid:88)(cid:85)(cid:76)(cid:87)(cid:76)(cid:93)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:73)(cid:68)(cid:70)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:15)(cid:3)(cid:76)(cid:86)(cid:3)
(cid:76)(cid:81)(cid:70)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:75)(cid:72)(cid:85)(cid:72)(cid:76)(cid:81)(cid:3)(cid:69)(cid:92)(cid:3)(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:40)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87)(cid:3)(cid:28)(cid:28)(cid:3)(cid:87)(cid:82)(cid:3)(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:27)-K filed on
October 22, 2012.
Form of Amendment to Amended and Restated Change in Control Agreements between Norfolk
Southern Corporation and the (cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:38)(cid:75)(cid:68)(cid:76)(cid:85)(cid:80)(cid:68)(cid:81)(cid:15)(cid:3)(cid:51)(cid:85)(cid:72)(cid:86)(cid:76)(cid:71)(cid:72)(cid:81)(cid:87)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:38)(cid:75)(cid:76)(cid:72)(cid:73)(cid:3)(cid:40)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:50)(cid:73)(cid:73)(cid:76)(cid:70)(cid:72)(cid:85)(cid:15)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)
(cid:72)(cid:68)(cid:70)(cid:75)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:40)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:57)(cid:76)(cid:70)(cid:72)(cid:3)(cid:51)(cid:85)(cid:72)(cid:86)(cid:76)(cid:71)(cid:72)(cid:81)(cid:87)(cid:86)(cid:15)(cid:3)(cid:87)(cid:82)(cid:3)(cid:72)(cid:79)(cid:76)(cid:80)(cid:76)(cid:81)(cid:68)(cid:87)(cid:72)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:72)(cid:91)(cid:70)(cid:76)(cid:86)(cid:72)(cid:3)(cid:87)(cid:68)(cid:91)(cid:3)(cid:74)(cid:85)(cid:82)(cid:86)(cid:86)-up provision
in the Agreements, is incorporated herein by reference to Exhibit 10.1 to Norfolk Southern
(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:27)-K filed on January 23, 2013.
12**
21**
23**
Statement re: Computation of Ratio of Earnings to Fixed Charges.
Subsidiaries of the Registrant.
Consent of Independent Registered Public Accounting Firm.
31-A**
Rule 13a-14(a)/15d-014(a) CEO Certifications.
31-B**
Rule 13a-14(a)/15d-014(a) CFO Certifications.
32**
99**
Section 1350 Certifications.
Annual CEO Certification pursuant to NYSE Rule 303A.12(a).
K97
101**
(cid:55)(cid:75)(cid:72)(cid:3)(cid:73)(cid:82)(cid:79)(cid:79)(cid:82)(cid:90)(cid:76)(cid:81)(cid:74)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:76)(cid:81)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:73)(cid:85)(cid:82)(cid:80)(cid:3)(cid:49)(cid:82)(cid:85)(cid:73)(cid:82)(cid:79)(cid:78)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:72)(cid:85)(cid:81)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:82)(cid:81)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)
10-K for the year ended December 31, 2012, formatted in Extensible Business Reporting Language
(XBRL) includes: (i) the Consolidated Statements of Income of each of the years ended
December 31, 2012, 2011, and 2010; (ii) the Consolidated Statements of Comprehensive Income
for each of the years ended December 31, 2012, 2011, and 2010; (iii) the Consolidated Balance
Sheets at December 31, 2012 and 2011; (iv) the Consolidated Statements of Cash Flows for the
years ended December 31, 2012, 2011, and 2010; (v) the Consolidated Statements of Changes in
(cid:54)(cid:87)(cid:82)(cid:70)(cid:78)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)(cid:182)(cid:3)(cid:40)(cid:84)(cid:88)(cid:76)(cid:87)(cid:92)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:72)(cid:68)(cid:70)(cid:75)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:87)(cid:75)(cid:85)(cid:72)(cid:72)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:86)(cid:3)(cid:72)(cid:81)(cid:71)(cid:72)(cid:71)(cid:3)(cid:39)(cid:72)(cid:70)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85)(cid:3)(cid:22)(cid:20)(cid:15)(cid:3)(cid:21)(cid:19)(cid:20)(cid:21)(cid:15)(cid:3)(cid:21)(cid:19)(cid:20)(cid:20)(cid:15)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:21)(cid:19)(cid:20)(cid:19)(cid:30)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)
(vi) the Notes to Consolidated Financial Statements.
* Management contract or compensatory arrangement.
** Filed herewith.
(B)
Exhibits.
The Exhibits required by Item 601 of Regulation S-K as listed in Item 15(A)3 are filed herewith or
incorporated herein by reference.
(C)
Financial Statement Schedules.
Financial statement schedules and separate financial statements specified by this Item are included
in Item 15(A)2 or are otherwise not required or are not applicable.
Exhibits 23, 31, 32, and 99 are included in copies assembled for public dissemination. All exhibits
are included in the 2012 Form 10-(cid:46)(cid:3)(cid:83)(cid:82)(cid:86)(cid:87)(cid:72)(cid:71)(cid:3)(cid:82)(cid:81)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:90)(cid:72)(cid:69)(cid:86)(cid:76)(cid:87)(cid:72)(cid:3)(cid:68)(cid:87)(cid:3)(cid:90)(cid:90)(cid:90)(cid:17)(cid:81)(cid:86)(cid:70)(cid:82)(cid:85)(cid:83)(cid:17)(cid:70)(cid:82)(cid:80)(cid:3)(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:3)(cid:179)(cid:44)(cid:81)(cid:89)(cid:72)(cid:86)(cid:87)(cid:82)(cid:85)(cid:86)(cid:180)(cid:3)
(cid:68)(cid:81)(cid:71)(cid:3)(cid:179)(cid:54)(cid:40)(cid:38)(cid:3)(cid:41)(cid:76)(cid:79)(cid:76)(cid:81)(cid:74)(cid:86)(cid:180)(cid:3)(cid:82)(cid:85)(cid:3)(cid:92)(cid:82)(cid:88)(cid:3)(cid:80)(cid:68)(cid:92)(cid:3)(cid:85)(cid:72)(cid:84)(cid:88)(cid:72)(cid:86)(cid:87)(cid:3)(cid:70)(cid:82)pies by writing to:
Office of Corporate Secretary
Norfolk Southern Corporation
Three Commercial Place
Norfolk, Virginia 23510-9219
K98
POWER OF ATTORNEY
Each person whose signature appears on the next page under SIGNATURES hereby authorizes James A. Hixon
and John P. Rathbone or one of them, to execute in the name of each such person, and to file, any amendments to
this report and hereby appoints James A. Hixon and John P. Rathbone or any one of them, as attorneys-in-fact to
sign on his or her behalf, individually and in each capacity stated below, and to file, any and all amendments to
this report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Norfolk Southern
Corporation has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized,
on this 15th day of February, 2013.
/s/Charles W. Moorman
By: Charles W. Moorman
(Chairman, President and Chief Executive Officer)
K99
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on this
15th day of February, 2013, by the following persons on behalf of Norfolk Southern Corporation and in the
capacities indicated.
Signature
Title
/s/Charles W. Moorman
(Charles W. Moorman)
/s/John P. Rathbone
(John P. Rathbone)
/s/Clyde H. Allison, Jr.
(Clyde H. Allison, Jr.)
/s/Gerald L. Baliles
(Gerald L. Baliles)
/s/Thomas D. Bell, Jr.
(Thomas D. Bell, Jr.)
/s/Erskine B. Bowles
(Erskine B. Bowles)
/s/Robert A. Bradway
(Robert A. Bradway)
/s/Wesley G. Bush
(Wesley G. Bush)
/s/Daniel A. Carp
(Daniel A. Carp)
/s/Alston D. Correll
(Alston D. Correll)
/s/Karen N. Horn
(Karen N. Horn)
/s/Burton M. Joyce
(Burton M. Joyce)
/s/Steven F. Leer
(Steven F. Leer)
/s/Michael D. Lockhart
(Michael D. Lockhart)
/s/J. Paul Reason
(J. Paul Reason)
Chairman, President and Chief Executive Officer and Director
(Principal Executive Officer)
Executive Vice President Finance and Chief Financial Officer
(Principal Financial Officer)
Vice President and Controller
(Principal Accounting Officer)
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
K100
Norfolk Southern Corporation and Subsidiaries
Valuation and Qualifying Accounts
Years ended December 31, 2010, 2011, and 2012
($ in millions)
Schedule II
Additions charged to:
Beginning
Balance Expenses Accounts Deduction
Other
Ending
Balance
Year ended December 31, 2010
Valuation allowance (included net in
deferred tax liability) for deferred
tax assets
Casualty and other claims
included in other liabilities
Current portion of casualty and
other claims included in
accounts payable
Year ended December 31, 2011
Valuation allowance (included net in
deferred tax liability) for deferred
tax assets
Casualty and other claims
included in other liabilities
Current portion of casualty and
other claims included in
accounts payable
Year ended December 31, 2012
Valuation allowance (included net in
deferred tax liability) for deferred
tax assets
Casualty and other claims
included in other liabilities
Current portion of casualty and
other claims included in
accounts payable
$
14 $
7 $
- $
- $
87 (1)
-
91 (3)
13
150 (2)
142 (4)
254
$
21 $
- $
- $
2 $
102 (1)
1
89 (3)
16
133 (2)
202 (4)
201
$
19 $
- $
- $
- $
76 (1)
-
93 (3)
21
261
19
275
19
258
265
233
261
254
275
201
18
157 (2)
193 (4)
183
(1)(cid:44)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:86)(cid:3)(cid:68)(cid:71)(cid:77)(cid:88)(cid:86)(cid:87)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:70)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)(cid:72)(cid:86)(cid:87)(cid:76)(cid:80)(cid:68)(cid:87)(cid:72)(cid:86)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:83)(cid:85)(cid:76)(cid:82)(cid:85)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:86)(cid:182)(cid:3)(cid:70)(cid:79)(cid:68)(cid:76)(cid:80)(cid:86)(cid:17)
(2)Includes revenue refunds and overcharges provided through deductions from operating revenues and transfers
from other accounts.
(3)Payments and reclassifications to/from accounts payable.
(4)Payments and reclassifications to/from other liabilities.
K101
Intentionally Left Blank
K102
Intentionally Left Blank
K103
Intentionally Left Blank
K104