www.norfolksouthern.com
2020
ANNUAL
REPORT
N
O
R
F
O
L
K
S
O
U
T
H
E
R
N
C
O
R
P
O
R
A
T
I
O
N
2
0
2
0
A
N
N
U
A
L
R
E
P
O
R
T
© 2021 Norfolk Southern Corporation
All Rights Reserved
10.032021.133802.22K
FINANCIAL HIGHLIGHTS
NORFOLK SOUTHERN CORPORATION & SUBSIDIARIES
DESCRIPTION
OF BUSINESS
Norfolk Southern
Corporation (NYSE: NSC)
is one of the nation’s
premier transportation
companies. Its Norfolk
Southern Railway
Company subsidiary
operates approximately
19,300 route miles
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. Norfolk
Southern is a major
transporter of industrial
products, including
agriculture, forest and
consumer products,
chemicals, and metals
and construction
materials. In addition,
the railroad operates
the most extensive
intermodal network
in the East and is a
principal carrier of coal,
automobiles, and
automotive parts.
FOR THE YEAR
(numbers in millions, except per-share amounts)
Railway operating revenues
Income from railway operations1
Net income1
Per share – diluted1
Dividends per share
Dividend payout ratio1
Net cash provided by operating activities
Property additions
Free cash flow2
AT YEAR-END
Total assets3
Total debt
Stockholders’ equity
Shares outstanding
FINANCIAL RATIOS
Operating ratio1
Debt-to-total capitalization ratio
TOTAL STOCKHOLDER RETURNS4
(in dollars)
$
$
$
$
$
$
$
$
2020
9,789
3,486
2,375
9.25
3.76
2019
2018
$ 11,296
3,989
$
2,722
$
10.25
$
3.60
$
$ 11,458
3,959
$
2,666
$
9.51
$
3.04
$
40%
35%
32%
3,637
1,494
2,143
$ 37,962
$ 12,681
$ 14,791
252.1
$
$
$
$
$
$
3,892
2,019
1,873
37,923
12,196
15,184
257.9
$
$
$
3,726
1,951
1,775
$ 36,239
11,145
$
$ 15,362
268.1
64.4%
46.2%
64.7%
44.5%
65.4%
42.0%
RAILWAY
OPERATING
REVENUES
(in millions)
INCOME FROM
RAILWAY
OPERATIONS
(in millions)
FREE CASH
FLOW 2
(in millions)
$11,458
$11,296
$9,789
$3,989
$3,959
$3,486
$2,143
$1,873
$1,775
$ 350
$ 300
$ 250
$ 200
$ 150
$ 100
$ 50
$
0
12/2015
12/2016
12/2017
12/2018
12/2019
12/2020
2020 2019 2018
20201 2019 2018
2020 2019 2018
n Norfolk Southern Corp. Common Stock
S&P Railroad Stock Price Index
n S&P Composite – 500 Stock Price Index
1 Our 2020 financial results included a loss on asset disposal of $385M related to locomotives sold and a $99M impairment charge related to an equity method investment. For purposes of period-
over-period comparability, 2020 results for income from railway operations, net income, net income per share – diluted, dividend payout ratio, and operating ratio have been adjusted to exclude
these charges, and are considered non-GAAP financial measures. The 2020 dividend payout ratio is dividends paid ($960M) as a percentage of adjusted net income ($2,375M), as compared to a 48%
dividend payout ratio using net income under GAAP ($2,013M). For more information, see the “Non-GAAP Reconciliation for 2020” on page K20 of our Annual Report on Form 10-K.
2 Free cash flow is considered a non-GAAP financial measure and is a measure of cash available for other investing and financing activities, including payment of dividends, repurchases of common
stock, and repayments of debt. Management believes that this non-GAAP financial measure provides useful supplemental information to investors regarding our ability to generate cash flows after
taking into consideration cash necessary to cover operations and maintain and grow our capital base. Net cash provided by operating activities is a GAAP measure. Free cash flow ($2,143M) is net
cash provided by operating activities ($3,637M) reduced by payments for property additions ($1,494M).
3 On Jan. 1, 2019, we adopted Financial Accounting Standards Board Accounting Standards Update 2016-02, “Leases (Topic 842),” which requires lessees to recognize right-of-use (ROU) assets
and lease liabilities on the balance sheet for leases greater than twelve months. The Consolidated Balance Sheets include ROU assets of $433M and $539M at Dec. 31, 2020 and 2019, respectively,
and lease liabilites of $433M and $538M, respectively.
4 This graph compares the cumulative stockholder return on Norfolk Southern Corporation common stock with the other identified indices. It assumes an investment of $100 in NSC common stock
and each index on Dec. 31, 2015, and that all dividends were reinvested over the five-year period, ending Dec. 31, 2020. Data furnished by Bloomberg Financial Markets.
DEAR FELLOW SHAREHOLDERS:
In 2020, the Norfolk
Southern team stepped
up in remarkable fashion
to weather a global pandemic that
triggered one of the most severe economic
disruptions in modern times. Our agile
response to the year’s unpredictable
events is testament to our unwavering
commitment to our customers, our
shareholders, and the communities
that rely on our service. As we quickly
adapted, we stayed focused on our
transformational goals to build a faster,
more efficient, and technologically
innovative railroad.
ADAPTING TO CHANGE,
CONTROLLING COSTS,
AND FORGING AHEAD
Driven by our resiliency, financial
discipline, and successful
execution of precision scheduled
railroading, we achieved our fifth
consecutive year of improvement in
our operating ratio.1 In every quarter
but the second, which was marked by
the most sudden and severe impacts
of the pandemic, we made consistent
progress towards our goal of reaching
a 60% operating ratio. In the fourth
quarter of 2020, we attained a record
low 61.8% operating ratio.
COVID-19-related supply-chain impacts
and downward trends in global energy
markets created significant headwinds.
Revenues in 2020 declined 13% on a
12% reduction in volume. Merchandise
revenue fell 11%, with almost all markets
experiencing pandemic-related losses.
While intermodal traffic recovered
significantly in the year’s second half with a
surge in e-commerce and consumer-driven
demand, intermodal revenue declined 6%
for the year. Faced with COVID impacts and
adverse market conditions, coal revenue
dropped 37%. In total, energy market
headwinds accounted for 70% of our 2020
revenue decline.
NORFOLK SOUTHERN (1)
DRIVING PRODUCTIVITY TO
REDUCE RESOURCE NEEDS,
INCREASE NETWORK SPEED
AND CAPACITY
Despite these challenges, our commitment
to increase efficiencies generated a 14%
reduction in adjusted operating expenses,1
exceeding the percentage decline in
revenue. Efficiencies gained through our
implementation of PSR drove fourth-
quarter company records for train weight,
length, and fuel efficiency as volumes
continued a recovery from pandemic-
induced lows. By handling increased
volumes with reduced resources, we
increased our productivity throughout the
year with a smaller workforce and a record
low number of locomotives, disposing of
more than 700 during 2020.
ACCELERATING OUR TRANSFORMATION
WITH TECHNOLOGY
Our agility and efficiency were amplified by the transformative
power of technology. We made significant progress in 2020 toward
our goal of deploying advanced technologies to enhance safety,
increase productivity, and better serve our customers. Our data
scientists, developers, and IT professionals are pioneers in the rail
industry’s use of artificial intelligence, mobile applications, and
mathematical modeling. Their work is helping to transform how
we do everything from train reporting and inspecting rail cars to
deciding when we replace rail and how we maintain locomotives
for optimum performance – and the list continues to grow.
As we managed
significant volume
fluctuations
through the year,
we continued to
consolidate and
streamline yard
operations, as well
as restructure
our operations
teams to create
a flatter, more
responsive, and
more collaborative
organization.
(2) NORFOLK SOUTHERN
GROWING OUR BUSINESS THROUGH COLLABORATION
AND IMPROVED CUSTOMER EXPERIENCE
Expanding our topline through smart, profitable growth is core to our
business strategy. In 2020, we assisted 86 businesses across 18 states in
opening new or expanded rail-served facilities on our network, generating an
estimated 54,300 carloads of new traffic volume annually. Expected to create
over 2,900 customer jobs, these development initiatives help communities
thrive as they expand economic opportunity.
Our commitment to improving the
customer experience is key to our
growth strategy. To advance this goal, we
continued refining and developing our
use of customer-facing technologies that
are user-friendly. We initiated the industry
partnership, Rail Pulse, to enable real-time
onboard location, condition, and health
information of rail cars across 99% of
the North American rail geography. We
expanded our use of mobile applications
to increase efficiencies for truck drivers
at our intermodal terminals. In addition,
we completed a strategic realignment
of our marketing, finance, and customer
operations and service teams to break
down internal silos and foster collaboration
across departments. With a shared
goal of improvement through increased
productivity, we’re making it easier for
customers to do business with us. When
they succeed, we succeed.
OUR COMMITMENT TO CORPORATE RESPONSIBILITY
As an industry leader in sustainability, we believe that being a
good steward of our resources is vital to achieving our business
goals and driving long-term value. Through our adoption of smart
operating practices and energy management technologies, we
achieved record locomotive fuel efficiency in 2020. By offering a
low-carbon transportation service, we continued to work with
customers to help them reduce supply-chain emissions and
achieve their own environmental goals.
We partnered with communities and organizations across our
network on sustainability initiatives that generate economic,
environmental, and social benefits. In 2020, we constructed a
living shoreline at our Lamberts Point terminal in Norfolk, Virginia,
creating a green oasis for oysters and wildlife on the Elizabeth
River while protecting railroad property from erosion and sea level
rise. In another initiative, we joined Operation Clean Sweep in a
pledge to help supply-chain partners eliminate plastic pollution
from the environment. Underscoring our commitment, the Wall
Street Journal in 2020 named Norfolk Southern to its list of the
100 Most Sustainably Managed Companies in the World.
Our goal is to be an employer of choice,
enhancing diversity, equity, and inclusion at
our company. Across the country, 2020 was a
year of significant civil unrest and widespread
concern surrounding the issues of equality
and racial justice. Addressing these events
head-on, we applied a renewed energy to
ensuring that our company is a place that
values the unique experiences, perspectives,
and contributions of all people. To help drive
our progress, we established our own Inclusion
Leadership Council and created the position
of director equity and inclusion.
NORFOLK SOUTHERN (3)
PRIORITIZING THE SAFETY
OF NS EMPLOYEES, CUSTOMERS,
AND COMMUNITIES
Taking a holistic approach to employee well-
being, we’re resolved to providing a safe
working environment and operating safely
in the communities we serve. To oversee
the company’s ongoing efforts in safety
investments, culture, and performance,
our board of directors formed a dedicated
safety committee that will consult regularly
with our senior leadership team.
We completed full implementation of
positive train control on 8,000 miles
of our core mainline routes, achieving
a significant milestone. In addition to
enhancing rail safety, we plan to leverage
PTC’s communication capabilities as part
of our transformation into a next-generation
railroad. As part of a community safety
initiative, we partnered with the mobile
navigation app, Waze, to provide motorists
with warning alerts as they approach a
highway-rail grade crossing.
1 Our 2020 financial results included a loss on asset
disposal of $385M related to locomotives sold and a
$99M impairment charge related to an equity method
investment. For purposes of period-over-period
comparability discussed herein, 2020 operating ratio
and operating expenses have been adjusted to exclude
these charges and are considered non-GAAP financial
measures. For more information, see the “Non-GAAP
Reconciliation for 2020” on page K20 of our Annual
Report on Form 10-K.
(4) NORFOLK SOUTHERN
REINVESTING IN INFRASTRUCTURE, RETURNING
CASH TO SHAREHOLDERS, STRONG GOVERNANCE
While advancing new partnerships and initiatives in 2020, we made
considerable investment in our essential business assets and
operations to ensure safe and efficient operations and support
growth. We funded $1.5 billion in capital improvement projects,
including investments in track and rail infrastructure and in
modernizing our locomotive fleet. At the same time, we maintained
our strong commitment to return capital to our shareholders. In
2020, our board approved dividend distributions of $960 million,
a 1% increase over the previous year. We also repurchased more
than $1.4 billion of the company’s shares.
BUILDING ON SUCCESSES TO FORGE
THE RAILROAD OF THE FUTURE
We were pleased to welcome Christopher T. Jones and
John C. Huffard Jr. as new board members in 2020. With extensive
and diverse technology backgrounds, they are providing
invaluable guidance for Norfolk Southern as we accelerate our
transformation into a faster, more efficient, and technologically
innovative railroad.
While we faced significant challenges in 2020, the NS team never
wavered. From the front lines of operations to back offices and
makeshift home offices, employees across all departments
stepped up in truly heroic fashion to deliver for our customers and
the country. Thanks to their tireless efforts, Norfolk Southern is a
leaner, smarter, and more efficient company.
As we prepare to finalize the relocation of our corporate
headquarters to the technology hub and talent-rich city of Atlanta,
we look forward to making our company even stronger. The
Thoroughbred Team is well-positioned to continue growing our
business and delivering superior shareholder value in 2021 and in
the years ahead.
Thank you for your investment in Norfolk Southern.
BOARD OF DIRECTORS
All directors are subject to re-election each year. Information as of Feb. 1, 2021.
THOMAS D.
BELL JR.
DIRECTOR SINCE 2010
MITCHELL E.
DANIELS JR.
DIRECTOR SINCE 2016
MARCELA
E. DONADIO
DIRECTOR SINCE 2016
JOHN C.
HUFFARD JR.
DIRECTOR SINCE 2020
Bell is chairman of
Mesa Capital Partners
LLC, a real-estate
investment company.
From 2002 to 2009,
he served as chairman
and CEO of Cousins
Properties, a publicly
traded real-estate
investment trust
that invests in office
buildings throughout
the South. He is a
director of Southern
Company Gas, formerly
AGL Resources.
Previously, he was a
director of Regal
Entertainment Group Inc.
COMMITTEES:
compensation, finance
and risk management
EXPERTISE:
CEO/senior officer;
environmental and
safety; governance/
board; governmental
and stakeholder
relations; human
resources and
compensation;
marketing; strategic
planning
Daniels has been
president of Purdue
University since 2013.
He served as governor
of Indiana from 2005
to 2013. From 1990 to
2000, he worked for
Eli Lilly and Company,
holding the executive
positions of president
of North American
pharmaceutical
operations and senior
vice president of
corporate strategy and
policy. He is a director
of Cerner Corp.
COMMITTEES:
compensation,
executive, governance
and nominating (chair)
EXPERTISE:
CEO/senior officer;
finance and accounting;
governance/board;
governmental and
stakeholder relations;
strategic planning
Donadio retired
as a partner of
Ernst & Young LLP,
a multinational
professional services
firm, in 2014. From 2007
until her retirement,
she was Americas Oil
& Gas sector leader,
with responsibility for
one of Ernst & Young’s
significant industry
groups. She helped
set firm strategy for
oil and gas industry
clients in the United
States and throughout
the Americas. She is a
director of Marathon Oil
Corp. and NOV Inc.
COMMITTEES:
audit, finance and risk
management
EXPERTISE:
CEO/senior
officer; finance
and accounting;
governance/board;
human resources
and compensation;
strategic planning
Huffard is a co-founder
of Tenable Network
Security Inc. and
Tenable Holdings Inc.,
a cybersecurity
software company.
He served as president
and chief operating
officer and as a director
of Tenable Network
Security Inc. from
2002 to 2018, where
he was responsible for
driving Tenable’s global
corporate strategy and
business operations
and was instrumental
in the venture funding
and IPO process.
From 2018 to 2019, he
focused exclusively on
business operations as
chief operating officer
of Tenable Holdings Inc.
He has been a director
of Tenable Holdings Inc.
since 2016.
COMMITTEES:
compensation, finance
and risk management
EXPERTISE: CEO/
senior officer; finance
and accounting;
governance/board;
human resources
and compensation;
information technology
NORFOLK SOUTHERN (5)
CHRISTOPHER
T. JONES
DIRECTOR SINCE 2020
THOMAS C.
KELLEHER
DIRECTOR SINCE 2019
STEVEN F. LEER
LEAD DIRECTOR
DIRECTOR SINCE 1999
MICHAEL D.
LOCKHART
DIRECTOR SINCE 2008
Jones served as
corporate vice
president and president
of the technology
services sector of
Northrop Grumman
Corporation, a global
aerospace and defense
technology company,
from January 2013
through December
2019. Previously, he
served as vice president
and general manager of
Northrop Grumman’s
integrated logistics and
modernization division
from 2010 through
2012. Jones was a
maintenance officer
in the Connecticut Air
National Guard from
1997 to 2011.
COMMITTEES:
audit, governance
and nominating
EXPERTISE:
CEO/senior
officer; finance
and accounting;
governmental
and stakeholder
relations; information
technology, strategic
planning
Kelleher served as
president of Morgan
Stanley, a leading global
financial services
firm, from 2016 until
his retirement in June
2019. He also served
as chairman and chief
executive officer of
Morgan Stanley Bank
N.A. until June 2019.
He was president
of Morgan Stanley
Institutional Securities
from 2010 to 2016, CEO
of Morgan Stanley
International from 2011
to 2016, chief financial
officer and cohead of
corporate strategy
from 2007 to early 2010,
and head of Morgan
Stanley’s global capital
markets from 2006
to 2007.
COMMITTEES:
audit, executive,
finance and risk
management (chair)
EXPERTISE:
CEO/senior officer;
finance/accounting;
governance/board;
governmental and
stakeholder relations;
human resources
and compensation;
strategic planning
Lockhart served
as chairman of the
board, president
and chief executive
officer of Armstrong
World Industries Inc.
and its predecessor,
Armstrong Holdings
Inc., a leading global
producer of flooring
products and ceiling
systems, from 2000
until his retirement
in February 2010.
Previously, he served
as chairman and
CEO of General
Signal Corporation,
a diversified
manufacturer, from
September 1995 until it
was acquired in 1998.
COMMITTEES:
audit, executive,
finance and risk
management,
safety (chair)
EXPERTISE:
CEO/senior officer;
environmental and
safety; finance
and accounting;
governance/
board; marketing;
strategic planning;
transportation
Leer served as the
chief executive officer
of Arch Coal Inc.,
a company engaged
in coal mining and
related businesses,
from 1992 through
2012. He was chairman
of its board from 2006
through 2012 and its
executive chairman
from 2012 through
2014. He served as
senior advisor to the
president and CEO
of Arch Coal from
2014 through May
2015. He is a director
of Cenovus Energy
Inc. and Parsons
Corporation. He
previously served
as the nonexecutive
chairman of USG
Corporation.
COMMITTEES:
compensation,
executive, governance
and nominating
EXPERTISE:
CEO/senior officer;
environmental and
safety; governance/
board; governmental
and stakeholder
relations; human
resources and
compensation;
marketing;
strategic planning;
transportation
AMY E. MILES
DIRECTOR SINCE 2014
Miles served as chief
executive officer of
Regal Entertainment
Group Inc., a leading
motion picture
exhibitor, from 2009
until its acquisition in
March 2018. During
that time, she served
as a director of Regal
and was named chair
of its board in March
2015. Previously,
she served as Regal
Entertainment’s
executive vice
president, chief
financial officer and
treasurer from March
2002 through June
2009. She has been a
director of The Gap
Inc. since April 2020
and Amgen Inc. since
July 2020.
COMMITTEES:
audit (chair), executive,
governance and
nominating
EXPERTISE:
CEO/senior
officer; finance
and accounting;
governance/
board; information
technology; marketing;
strategic planning
(6) NORFOLK SOUTHERN
CLAUDE
MONGEAU
DIRECTOR SINCE 2019
JENNIFER F.
SCANLON
DIRECTOR SINCE 2018
Mongeau served as
president and chief
executive officer of
Canadian National
Railway Company (CN),
a North American
railroad and transportation
company, from January
2010 to June 2016 and
as a director of CN from
October 2009 to June
2016. During his 22-year
career at CN, he also
served as executive
vice president and chief
financial officer, vice
president strategic and
financial planning, and
assistant vice president
corporate development.
He also is a director
of Cenovus Energy
and Toronto-Dominion
Bank and was formerly
a director of Telus,
a telecommunications
company, from 2017
to 2019.
COMMITTEES:
compensation,
finance and risk
management, safety
EXPERTISE:
CEO/senior officer;
environmental and
safety; finance
and accounting;
governance/board;
governmental and
stakeholder relations;
human resources
and compensation;
marketing;
strategic planning;
transportation
Scanlon has been
president, chief
executive officer, and
board member of UL,
a global science safety
organization, since
September 2019. She
is the first woman to
lead the organization.
She previously served
as president and CEO
of USG Corporation,
from 2016 until its
acquisition in April
2019. During that
time, she served as
a board member of
USG. Scanlon also
previously served as
president of USG’s
international business,
president of its L&W
Supply Corporation,
and chief information
officer and chairman
of the board for
USG Boral Building
Products.
COMMITTEES:
compensation,
governance and
nominating, safety
EXPERTISE:
CEO/senior officer;
environmental and
safety; governance/
board; information
technology; marketing;
strategic planning;
transportation
JAMES A.
SQUIRES
CHAIRMAN,
PRESIDENT AND CEO
DIRECTOR SINCE 2014
Squires has been
president of Norfolk
Southern since 2013
and chief executive
officer since June
2015. He was named
chairman of the
board of Norfolk
Southern in October
2015. Previously, he
served as Norfolk
Southern’s executive
vice president
administration,
executive vice
president finance and
chief financial officer,
senior vice president
finance, senior vice
president law, and vice
president law.
COMMITTEES:
executive (chair)
EXPERTISE:
CEO/senior
officer; finance
and accounting;
governance/board;
governmental and
stakeholder relations;
human resources
and compensation;
marketing;
strategic planning;
transportation
JOHN R.
THOMPSON
DIRECTOR SINCE 2013
Thompson served
as a government
relations consultant
for Best Buy Co.
Inc., a multinational
consumer electronics
corporation, from
October 2012 to April
2016. He served as
senior vice president
and general manager
of BestBuy.com LLC,
a subsidiary of Best
Buy Co. Inc., from
2002 through 2012.
Previously, he was
a director of Belk
Inc. and Wendy’s
International Inc.
COMMITTEES:
compensation (chair),
executive, governance
and nominating
EXPERTISE:
CEO/senior
officer; finance
and accounting;
governance/board;
governmental and
stakeholder relations;
human resources
and compensation;
information technology;
marketing; strategic
planning
NORFOLK SOUTHERN (7)
OFFICERS
As of Feb. 1, 2021
James A. Squires
Chairman, President
and Chief Executive Officer
Ann A. Adams
Executive Vice President
and Chief Transformation Officer
Vanessa Allen Sutherland
Executive Vice President
and Chief Legal Officer
Mark R. George
Executive Vice President Finance
and Chief Financial Officer
Cynthia M. Sanborn
Executive Vice President
and Chief Operating Officer
Alan H. Shaw
Executive Vice President
and Chief Marketing Officer
Clyde H. Allison Jr.
Vice President and Controller
Edward F. Boyle Jr.
Vice President Engineering
John S. Hatfield
Vice President Corporate Communications
Jeffrey S. Heller
Vice President Intermodal and Automotive
Lorri J. Kleine
Vice President Law
Karol R. Lawrence
Vice President Customer Operations
and Service
David T. Lawson
Vice President Coal
Marque I. Ledoux
Vice President Government Relations
Michael R. McClellan
Vice President Strategic Planning
Gregory R. Comstock
Vice President Network Operations
Christopher R. Neikirk
Vice President and Treasurer
Michael F. Cox
Vice President Taxation
Barbara N. Paul
Vice President Human Resources
Fredric M. Ehlers
Vice President Information Technology
and Chief Information Officer
Claude E. Elkins
Vice President Industrial Products
John H. Friedmann
Vice President Network Planning
and Optimization
Thomas W. Schnautz
Vice President Advanced Train Control
Kathleen C. Smith
Vice President Business Development
and Real Estate
Susan S. Stuart
Vice President Audit and Compliance
Scott R. Weaver
Vice President Labor Relations
Jason A. Zampi
Vice President Financial Planning
and Analysis
Denise W. Hutson
Corporate Secretary
EQUAL
EMPLOYMENT
OPPORTUNITY
POLICY
Norfolk Southern
Corporation’s policy is
to comply with all
applicable laws,
regulations, and
executive orders
concerning equal
opportunity and
nondiscrimination.
The company’s policy
is to offer employment,
training, remuneration,
advancement, and all
other privileges of
employment on the
basis of qualification
and performance
regardless of race,
religion, color, national
origin, gender, age,
status as a covered
veteran, sexual orientation,
gender identity, the
presence of a disability,
genetic information,
or any other legally
protected status.
(8) NORFOLK SOUTHERN
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
for the fiscal year ended DECEMBER 31, 2020
☐ 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)
(State or other jurisdiction of incorporation or organization)
Virginia
52-1188014
(I.R.S Employer Identification No.)
Three Commercial Place
Norfolk, Virginia
(Address of principal executive offices)
23510-2191
(Zip Code)
(757) 629-2680
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Norfolk Southern Corporation Common Stock (Par Value $1.00)
NSC
New York Stock Exchange
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
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 ☒ 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 ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an
emerging growth company. See the definitions of "large accelerated filer", "accelerated filer", "smaller reporting company", and "emerging growth company"
in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or
revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control
over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its
audit report. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of the voting common equity held by non-affiliates at June 30, 2020 was $44,745,974,634 (based on the closing price as quoted on
the New York Stock Exchange on June 30, 2020).
The number of shares outstanding of each of the registrant’s classes of common stock, at January 31, 2021: 251,911,634 (excluding 20,320,777 shares held by
the registrant’s consolidated subsidiaries).
DOCUMENTS INCORPORATED BY REFERENCE: Portions of the Registrant’s definitive proxy statement to be filed electronically pursuant to
Regulation 14A not later than 120 days after 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
Information About Our Executive Officers
Part II.
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Item 15.
Item 16.
Part III.
Part IV.
Issuer Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and
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
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 Accounting Fees and Services
Exhibits and Financial Statement Schedule
Form 10-K Summary
Power of Attorney
Signatures
Page
K3
K11
K14
K15
K15
K16
K17
K18
K19
K32
K33
K77
K77
K77
K78
K78
K79
K81
K81
K82
K92
K93
K93
K2
PART I
NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES
Item 1. Business and Item 2. Properties
GENERAL – Norfolk Southern Corporation (Norfolk Southern) is a Norfolk, Virginia-based company that owns a
major freight railroad, Norfolk Southern Railway Company (NSR). We were 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) under the symbol “NSC.”
Unless indicated otherwise, Norfolk Southern Corporation and its subsidiaries, including NSR, 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 (U.S.). We also transport overseas freight through several Atlantic and Gulf Coast ports. We offer
the most extensive intermodal network in the eastern half of the U.S.
We make available free of charge through our website, www.norfolksouthern.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:
The Thoroughbred Code of Ethics
• Corporate Governance Guidelines
• Charters of the Committees of the Board of Directors
•
• Code of Ethical Conduct for Senior Financial Officers
• Categorical Independence Standards for Directors
• Norfolk Southern Corporation Bylaws
K3
RAILROAD OPERATIONS – At December 31, 2020, we operated approximately 19,300 route miles in 22 states
and the District of Columbia.
Our system reaches many manufacturing plants, electric generating facilities, mines, distribution centers, transload
facilities, and other businesses located in our service area.
Corridors with heaviest freight volume:
• New York City area to Chicago (via Allentown and Pittsburgh)
• Chicago to Macon (via Cincinnati, Chattanooga, and Atlanta)
• Central Ohio to Norfolk (via Columbus and Roanoke)
• Birmingham to Meridian
• Cleveland to Kansas City
• Memphis to Chattanooga
K4
The miles operated, which include major leased lines between Cincinnati and Chattanooga, and an exclusive
operating agreement for trackage rights over property owned by North Carolina Railroad Company, were as
follows:
Mileage Operated at December 31, 2020
Passing
Track,
Crossovers
and
Turnouts
Second
and
Other
Main
Track
Way and
Yard
Switching
Route
Miles
Total
Owned
Operated under lease, contract or trackage
rights
Total
14,540
2,678
2,004
8,310
27,532
4,795
1,889
406
840
7,930
19,335
4,567
2,410
9,150
35,462
We operate freight service over lines with significant ongoing Amtrak and commuter passenger operations and
conduct freight operations over trackage owned or leased by Amtrak, New Jersey Transit, Southeastern
Pennsylvania Transportation Authority, Metro-North Commuter Railroad Company, Maryland Department of
Transportation, and Michigan Department of Transportation.
The following table sets forth certain statistics relating to our operations for the past five years:
2020
Years ended December 31,
2017
2018
2019
2016
Revenue ton miles (billions)
Revenue per thousand revenue ton miles
Revenue ton miles (thousands) per railroad employee
Ratio of railway operating expenses to railway
operating revenues (railway operating ratio)
164
$ 59.67
8,191
194
$ 58.21
7,939
207
$ 55.25
7,822
201
$ 52.38
7,474
191
$ 51.91
6,838
69.3%
64.7%
65.4%
66.6%
69.6%
RAILWAY OPERATING REVENUES – Total railway operating revenues were $9.8 billion in 2020. Following
is an overview of our three commodity groups. See the discussion of merchandise revenues by major commodity
group, intermodal revenues, and coal revenues and tonnage in Item 7 “Management’s Discussion and Analysis of
Financial Condition and Results of Operations.”
MERCHANDISE – Our merchandise commodity group is composed of four groupings:
• Agriculture, forest and consumer products includes soybeans, wheat, corn, fertilizer, livestock and poultry
feed, food products, food oils, flour, sweeteners, ethanol, lumber and wood products, pulp board and paper
products, wood fibers, wood pulp, scrap paper, beverages, canned goods, and consumer products.
• Chemicals includes sulfur and related chemicals, petroleum products (including crude oil), chlorine and
bleaching compounds, plastics, rubber, industrial chemicals, chemical wastes and sand.
• Metals and construction includes steel, aluminum products, machinery, scrap metals, cement, aggregates,
minerals, clay, transportation equipment, and items for the U.S. military.
• Automotive includes finished motor vehicles and automotive parts.
In 2020, we handled 2.1 million merchandise carloads, which accounted for 62% of our total railway operating
revenues.
K5
INTERMODAL – Our intermodal commodity group consists of shipments moving in domestic and international
containers and trailers. These shipments are handled on behalf of intermodal marketing companies, international
steamship lines, premium customers and asset owning companies. In 2020, we handled 4.0 million intermodal
units, which accounted for 27% of our total railway operating revenues.
COAL – Coal revenues accounted for 11% of our total railway operating revenues in 2020. We handled 64 million
tons, or 0.6 million carloads, most of which originated on our lines from major eastern coal basins, with the balance
from major western coal basins received via the Memphis and Chicago gateways. Our coal franchise supports the
electric generation market, serving approximately 50 coal-fired power plants, as well as the export, domestic
metallurgical and industrial markets, primarily through direct rail and river, lake, and coastal facilities, including
various terminals on the Ohio River, Lamberts Point in Norfolk, Virginia, the Port of Baltimore, and Lake Erie.
FREIGHT RATES – Our predominant pricing mechanisms, private contracts and exempt price quotes, are not
subject to regulation. In general, market forces are the primary determinant of rail service prices.
RAILWAY PROPERTY
Our railroad infrastructure makes us capital intensive with net properties of approximately $31 billion on a historical
cost basis.
Property Additions – Property additions for the past five years were as follows:
2020
2019
2018
($ in millions)
2017
2016
Road and other property
Equipment
$ 1,046 $ 1,371 $ 1,276 $ 1,210 $ 1,292
595
675
448
648
513
Total
$ 1,494 $ 2,019 $ 1,951 $ 1,723 $ 1,887
Our capital spending and replacement programs are and have been designed to assure the ability to provide safe,
efficient, and reliable rail transportation services.
K6
Equipment – At December 31, 2020, we owned or leased the following units of equipment:
Locomotives:
Multiple purpose
Auxiliary units
Switching
Total locomotives
Freight cars:
Gondola
Hopper
Covered hopper
Box
Flat
Other
Total freight cars
Other:
Chassis
Containers
Work equipment
Vehicles
Miscellaneous
Total other
Capacity of
Equipment
(Horsepower)
11,901,400
—
4,400
11,905,800
(Tons)
2,460,176
992,956
661,573
312,994
133,586
70,045
4,631,330
Owned
Leased
Total
3,060
138
4
3,202
18,958
8,723
5,951
2,851
1,494
1,559
39,536
33,865
18,350
5,546
2,928
2,306
62,995
—
—
—
—
3,203
—
—
617
85
4
3,909
—
—
183
32
—
215
3,060
138
4
3,202
22,161
8,723
5,951
3,468
1,579
1,563
43,445
33,865
18,350
5,729
2,960
2,306
63,210
The following table indicates the number and year built for locomotives and freight cars owned at December 31,
2020:
Locomotives:
No. of units
% of fleet
Freight cars:
No. of units
% of fleet
2020
2019
2018
2017
2016
2011-
2015
2006-
2010
2005 &
Before
Total
—
—
—
—
35
1%
200
1%
15
1%
—
—
55
2%
470
1%
65
2%
291
9%
260
8%
2,481
77%
3,202
100%
775
2%
8,782
22%
4,840
12%
24,469
62%
39,536
100%
K7
The following table shows the average age of our owned locomotive and freight car fleets at December 31, 2020
and information regarding 2020 retirements:
Average age – in service
Retirements
Average age – retired
Locomotives
25.7 years
704 units
31.3 years
Freight Cars
25.6 years
6,338 units
42.7 years
Track Maintenance – Of the 35,500 total miles of track on which we operate, we are responsible for maintaining
28,800 miles, with the remainder being operated under trackage rights from other parties responsible for
maintenance.
Over 84% 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 39% of our lines, excluding rail operated pursuant to trackage
rights, carried 20 million or more gross tons per track mile during 2020.
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
Crossties installed (millions)
2020
2019
2018
2017
2016
418
4,785
1.8
449
5,012
2.4
416
4,594
2.2
466
5,368
2.5
518
4,984
2.3
Traffic Control – Of the 16,400 route miles we dispatch, 11,300 miles are signalized, including 8,500 miles of
centralized traffic control (CTC) and 2,800 miles of automatic block signals. Of the 8,500 miles of CTC, 7,600
miles are controlled by data radio originating at 355 base station radio sites.
ENVIRONMENTAL MATTERS – Compliance with federal, state, and local laws and regulations relating to the
protection of the environment is one of our principal goals. To date, such compliance has not had a material effect
on our financial position, results of operations, liquidity, or competitive position. See Note 17 to the Consolidated
Financial Statements.
HUMAN CAPITAL MANAGEMENT
Workforce – We employed an average of 20,200 employees during 2020, and 19,100 employees at the end of
2020. Approximately 80% of our railroad employees – referred to as “craft” employees – are covered by collective
bargaining agreements with various labor unions. See the discussion of “Labor Agreements” in Item 7
“Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The remainder of our
workforce is composed of management employees.
Craft Workforce Levels and Productivity – Maintaining appropriate headcount levels for our craft-employee
workforce is critical to our on-time and consistent delivery of customers’ goods and operational efficiency goals.
We manage this human capital metric through forecasting tools designed to ensure the optimal level of staffing to
meet business demands while controlling costs. We measure and monitor employee productivity based on gross ton
miles per train and engine employee.
Safety – We are dedicated to providing employees with a safe workplace and the knowledge and tools they need to
work safely and return home safely every day. Our commitment to an injury-free workplace is illustrated by our “I
am Coming Home” safety message, which is featured prominently in our yards, shops, and facilities and further
reinforces the importance of working safely. We measure employee safety performance through internal metrics
K8
such as lost-time injuries and serious injuries per 200,000 employee-hours and metrics established by the Federal
Railroad Administration (FRA), such as FRA reportable injuries per 200,000 employee-hours. Given the
importance of safety among our workforce and business, in 2020, our Board of Directors established a standing
Safety Committee that, among other duties, reviews, monitors, and evaluates our compliance with our safety
programs and practices.
Attracting and Retaining Management Employees – Our talent strategy for management employees is essential
to attracting strong candidates in a competitive talent environment. We evaluate the effectiveness of that strategy by
studying market trends, benchmarking the attractiveness of our employee value proposition, and analyzing retention
data.
We also focus on driving employee engagement, which is key to increasing employee productivity, retention, and
safety. We take a data-centric approach, including the use of quarterly surveys among management employees, to
identify new initiatives that will help boost engagement and drive business results.
Employee Development and Training – We provide a range of developmental programs, opportunities, skills, and
resources for our employees to work safely and be successful in their careers. We provide hands-on training and
simulation training designed to improve training effectiveness and safety outcomes.
We also use modern learning and performance technologies to offer robust professional growth opportunities.
Through on-demand digital course offerings, custom-built learning paths, and performance-management tools, our
platforms deliver a contemporary, convenient, and inclusive approach to professional development.
Diversity, Equity and Inclusion – As a leading transportation service company, we understand that competing in
the global marketplace requires recruiting the most qualified, talented, and diverse people. We strive to create a
diverse, equitable, and inclusive workplace where a wide range of perspectives and experiences are represented,
valued, and empowered to thrive.
While our current workforce reflects a broad range of backgrounds and experiences, we continue to focus on
building an even more diverse workforce, using technology-driven outreach and multiple recruiting relationships to
maintain a robust pipeline of diverse talent.
To underscore our commitment to cultivating a workplace experience where the unique experiences, perspectives,
and contributions of all our people are valued, our senior management team recently signed a pledge reaffirming our
commitment to diversity, equity, and inclusion. To advance that commitment, senior leaders from across the
company serve on an Inclusion Leadership Council, which is accountable for setting our enterprise inclusion
strategy and articulating measurable goals and actions needed to achieve them.
GOVERNMENT REGULATION – In addition to environmental, safety, securities, and other regulations
generally applicable to all business, our railroads are subject to regulation by the U.S. Surface Transportation Board
(STB). The STB has jurisdiction to varying extents over rates, routes, customer access provisions, fuel surcharges,
conditions of service, and the extension or abandonment of rail lines. The STB has jurisdiction to determine
whether we are “revenue adequate” on an annual basis based on the results of the prior year. A railroad is “revenue
adequate” on an annual basis under the applicable law when its return on net investment exceeds the rail industry’s
composite cost of capital. This determination is made pursuant to a statutory requirement. The STB also has
jurisdiction over the consolidation, merger, or acquisition of control of and by rail common carriers.
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 commercial regulation for the duration of the contract. Approximately 90%
of our revenues comes from either exempt shipments or shipments moving under transportation contracts; the
remainder comes from shipments moving under public tariff rates.
K9
Efforts have been made over the past several years to increase federal economic regulation of the rail industry, and
such efforts are expected to continue in 2021. The Staggers Rail Act of 1980 substantially balanced the interests of
shippers and rail carriers, and 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.
Government regulations are further discussed within Item 1A “Risk Factors” and the safety and security of our
railroads are discussed within the “Security of Operations” section contained herein.
COMPETITION – 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.
Our primary rail competitor is CSX Corporation (CSX); both we and CSX 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 to expand reach and shipping options among railroads and between railroads and motor
carriers enable railroads to compete more effectively in specific markets.
SECURITY OF OPERATIONS – We continue to enhance the security of our rail system. Our comprehensive
security plan 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 to mitigate the risk of terrorist,
violent extremist or seriously disruptive cyber-attack 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. 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 security plan also 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 is integrated into hazardous material training programs. Additionally, location-specific security plans are in
place for rail corridors in certain metropolitan areas referred to as High Threat Urban Areas (HTUA). Particular
attention is aimed at reducing risk in a 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) reducing the number of unattended loaded tank cars carrying TIH materials; and (4) cooperation with
federal, state, local, and tribal governments to identify those locations where security risks are the highest.
We also operate six facilities that are under U.S. Coast Guard (USCG) Maritime Security Regulations. With respect
to these facilities, each facility’s security plan has been approved by the applicable Captain of the Port and remains
subject to inspection by the USCG.
Additionally, we continue to engage in close and regular coordination with numerous federal and state agencies,
including the U.S. Department of Homeland Security (DHS), the Transportation Security Administration, the
Federal Bureau of Investigation, the FRA, the USCG, U.S. Customs and Border Protection, the Department of
Defense, and various state Homeland Security offices.
In 2020, the COVID-19 pandemic led to cancellation of all face-to-face training, including the Safety Train Tour as
part of our Operation Awareness and Response Program, as well as participation in the Transportation Community
K10
Awareness and Emergency Response Program. The need to provide training to first responders did not go away.
Our Hazmat Group adapted and created online training courses as well as conducted training webinars for first
responders. Even with the adverse conditions of 2020, we provided rail accident response training to approximately
1,000 emergency responders, such as local police and fire personnel.
We also continually evaluate ourselves for appropriate business continuity and disaster recovery planning, with test
scenarios that include cybersecurity attacks. Our risk-based information security program helps ensure our defenses
and resources are aligned to address the most likely and most damaging potential attacks, to provide support for our
organizational mission and operational objectives, and to keep us in the best position to detect, mitigate, and recover
from a wide variety of potential attacks in a timely fashion.
Item 1A. Risk Factors
The risks set forth in the following risk factors could have a materially adverse effect on our financial position,
results of operations, or liquidity in a particular year or quarter, and could cause those results to differ materially
from those expressed or implied in our forward-looking statements. The information set forth in this Item 1A “Risk
Factors” should be read in conjunction with the rest of the information included in this annual report, including
Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Item 8
“Financial Statements and Supplementary Data.”
REGULATORY RISKS
Significant governmental legislation and regulation over commercial, tax, operating and environmental
matters could affect us, our customers, and the markets we serve. Congress can enact laws that could increase
economic regulation of the industry. Railroads presently are subject to commercial regulation by the STB, which
has jurisdiction to varying extents over rates, routes, customer access provisions, 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 negotiate prices for rail services, on railway operating revenues, and on the efficiency of our
operations. Such additional industry regulation, as well as enactment of any new tax laws, could also negatively
impact cash flows from operating activities and, therefore, could result in reduced capital spending on our rail
network or abandonment of lines.
Railroads are also subject to the enactment of laws by Congress and regulation by the DOT and the DHS, which
regulate most aspects of our operations related to safety and security. The Rail Safety Improvement Act of 2008, the
Surface Transportation Extension Act of 2015, and the implementing regulations promulgated by the FRA
(collectively “the PTC laws and regulations”) required us (and each other Class I railroad) to implement an
interoperable positive train control system (PTC) on main lines over which five million or more gross tons of annual
traffic and certain hazardous materials are transported, and on any main lines over which intercity or commuter rail
passenger transportation is regularly provided. We completed our PTC implementation prior to the December 31,
2020 deadline. PTC is installed on 8,000 of our 19,300 routes miles. PTC is designed to prevent train-to-train
collisions, speed-related derailments, and certain other accidents caused by human error, but it will not prevent all
types of train accidents or incidents. The PTC system will continue to result in additional operating costs and capital
expenditures, and may result in 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, for acts and omissions, past, present, and future, 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.
K11
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, 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.
OPERATIONAL RISKS
The COVID-19 pandemic could further impact us, our customers, our supply chain and our operations. The
pandemic has negatively impacted the economy and continues to generate significant economic uncertainty. The
magnitude and duration of the pandemic, and its impact on our customers and general economic conditions will
influence the demand for our services and affect our revenues. In addition, COVID-19 could affect our operations
and business continuity if a significant number of our essential employees, overall or in a key location, are
quarantined from contraction of or exposure to the disease or if governmental orders prevent our operating
employees or critical suppliers from working. To the extent COVID-19 adversely affects our business and financial
results, it may also have the effect of heightening many of the other risks described in the risk factors included
herein.
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 (including environmental) damage and compromise critical parts of our rail network. The costs of a
catastrophic rail accident involving hazardous materials could exceed our insurance coverage. We have obtained
insurance for potential losses for third-party liability and first-party property damages (see Note 17 to the
Consolidated Financial Statements); however, 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.
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, expenditures, legislation, or regulation materially increasing the quality or reducing the cost of
alternative modes of transportation in the regions in which we operate (such as granting materially greater latitude
for motor carriers with respect to size or weight limitations or adoption of autonomous commercial vehicles) could
have a material adverse effect on our ability to compete with other modes of transportation.
Capacity constraints could negatively impact our service and operating efficiency. We could experience
capacity constraints on our rail network related to increased demand for rail services, locomotive or employee
shortages, severe weather, congestion on other railroads, including passenger activities, or impacts from changes to
our network structure or composition. Such constraints could result in operational inefficiencies or adversely affect
our operations.
Significant increases in demand for rail services could result in the unavailability of qualified personnel and
resources like locomotives. Changes in workforce demographics, training requirements, and availability of
qualified personnel, particularly for engineers and conductors, could have a negative impact on our ability to meet
short-term demand for rail service. Unpredicted increases in demand for rail services may exacerbate such risks and
could negatively impact our operational efficiency.
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
collaborative relationships with connecting carriers (including shortlines and regional railroads) 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 customers’ demands or require us to use alternate train routes, which could result in significant
additional costs and network inefficiencies. Additionally, any significant consolidations, mergers or operational
changes among other railroads may significantly redefine our market access and reach.
K12
The vast majority of our employees belong to labor unions, and labor agreements, strikes, or work stoppages
could adversely affect our operations. Approximately 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 health care, wages, and other benefits.
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. Because we play a critical role in the
nation’s transportation system, we could become the target of such an attack or have a significant role in the
government’s preemptive approach or response to an attack or war.
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 supply constraints resulting from disruptions in the fuel markets or the nature of
some of our supplier markets. We consumed approximately 368 million gallons of diesel fuel in 2020. 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 refinery or pipeline infrastructure, political unrest, war or other factors could impact us as well as our customers
and other transportation companies.
Due to the capital intensive nature, as well as the 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
locomotives and certain track and rolling stock materials. Changes in the competitive landscapes of these limited
supplier markets could result in increased prices or significant shortages of materials.
LITIGATION RISKS
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 personal injury
and occupational claims are subject to the Federal Employer’s Liability Act (FELA), which is applicable only to
railroads. FELA’s fault-based tort system produces results that are unpredictable and inconsistent as compared with
a no-fault worker’s compensation system. The variability inherent in this system could result in actual costs being
different from the liability recorded.
A catastrophic rail accident, whether on our lines or another carrier’s, involving any or all of release of hazardous
materials, freight loss, property damage, personal injury, and environmental liability could compromise critical parts
of our rail network. Losses associated with such an accident involving us could exceed our insurance coverage,
resulting in a material adverse effect on our liquidity. Any material changes to current litigation trends could also
have a material adverse effect on our liquidity to the extent not covered by insurance.
We have obtained insurance for potential losses for third-party liability and first-party property damages (see Note
17 to the Consolidated Financial Statements); however, 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.
K13
CLIMATE CHANGE RISKS
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.
Concern over climate change has led to significant federal, state, and international legislative and regulatory
efforts to limit greenhouse gas (GHG) emissions. Restrictions, caps, taxes, or other controls on GHG emissions,
including diesel exhaust, could significantly increase our operating costs and decrease the amount of traffic we
handle.
In addition, legislation and regulation related to GHGs could negatively affect the markets we serve and our
customers. Even without legislation or regulation, government incentives and adverse publicity relating to GHGs
could negatively affect the markets for certain of the commodities we carry and our customers that (1) use
commodities 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.
GENERAL RISKS
We may be affected by general economic conditions. Prolonged negative changes in domestic and global
economic conditions, including reduced import and export volumes, could affect the producers and consumers of
the commodities we carry. Economic conditions could also result in bankruptcies of one or more large customers.
We may be affected by energy prices. Volatility in energy prices could have a significant effect on a variety of
items including, but not limited to: the economy; demand for transportation services; business related to the energy
sector, including crude oil, natural gas, and coal; fuel prices; and, fuel surcharges.
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. We also face cybersecurity threats which may result in breaches of systems, or compromises of
sensitive data, which may also result in service interruptions, safety failures, or operational difficulties. Such a
breach, or compromise, could decrease revenues, increase operating costs, including those to protect our
infrastructure, impact our efficiency, or damage our corporate reputation. 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 alternative modes of transportation service.
The state of capital markets could adversely affect our liquidity. We rely on the capital markets to provide
some of our capital requirements, including the issuance of debt instruments and the sale of certain receivables.
Significant instability or disruptions of the capital markets, including the credit markets, or deterioration of our
financial position 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 position, alone or in combination,
could also result in a reduction of 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.
K14
Item 3. Legal Proceedings
In 2007, various antitrust class actions filed against us and other Class I railroads in various Federal district courts
regarding fuel surcharges were consolidated in the District of Columbia by the Judicial Panel on Multidistrict
Litigation. In 2012, the court certified the case as a class action. The defendant railroads appealed this certification,
and the Court of Appeals for the District of Columbia vacated the District Court’s decision and remanded the case
for further consideration. On October 10, 2017, the District Court denied class certification. The decision was
upheld by the Court of Appeals on August 16, 2019. Since that decision, various individual cases have been filed in
multiple jurisdictions and also consolidated in the District of Columbia. We believe the allegations in the
complaints are without merit and intend to vigorously defend the cases. We do not believe the outcome of these
proceedings will have a material effect on our financial position, results of operations, or liquidity.
In 2018, a lawsuit was filed against one of our subsidiaries by the minority owner in a jointly-owned terminal
railroad company in which our subsidiary has the majority ownership. The lawsuit alleged violations of various
state laws and federal antitrust laws. It is reasonably possible that we could incur a loss in the case; however, we
intend to vigorously defend the case and believe that we will prevail. The potential range of loss cannot be
estimated at this time.
Item 4. Mine Safety Disclosures
Not applicable.
K15
Information About Our Executive Officers
Our executive officers generally are elected and designated annually by the Board of Directors (Board) 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 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, 2021, relating to our officers.
Name, Age, Present Position
Business Experience During Past Five Years
James A. Squires, 59,
Chairman, President and
Chief Executive Officer
Ann A. Adams, 50,
Executive Vice President and
Chief Transformation Officer
Vanessa Allen Sutherland, 49,
Executive Vice President and
Chief Legal Officer
Mark R. George, 53,
Executive Vice President Finance and
Chief Financial Officer
Cynthia M. Sanborn, 56,
Executive Vice President and
Chief Operating Officer
Alan H. Shaw, 53,
Executive Vice President and
Chief Marketing Officer
Clyde H. Allison, Jr., 57,
Vice President and Controller
Present position since October 1, 2015.
Present position since April 1, 2019.
Served as Vice President Human Resources from April 1, 2016 to
April 1, 2019. Served as Assistant Vice President Human
Resources from July 1, 2012 to April 1, 2016.
Present position since April 1, 2020.
Served as Senior Vice President Government Relations and Chief
Legal Officer from August 16, 2019 to April 1, 2020. Served as
Senior Vice President Law and Chief Legal Officer from April 1,
2019 to August 16, 2019. Served as Vice President Law from June
25, 2018 to April 1, 2019. Prior to joining Norfolk Southern,
served as Chairman of the U.S. Chemical Safety and Hazard
Investigation Board from August 2015 to June 2018.
Present position since November 1, 2019.
Prior to joining Norfolk Southern, served as Vice President,
Finance and Chief Financial Officer at segments of United
Technologies Corporation. The positions were Vice President
Finance, Strategy, IT and Chief Financial Officer at Otis Elevator
Company from October 2015 to May 2019, and Vice President
Finance and Chief Financial Officer at Carrier Corporation from
June 2019 until joining Norfolk Southern.
Present position since September 1, 2020.
Prior to joining Norfolk Southern, served as served as Vice
President Network Planning & Operations at Union Pacific from
May 2019 to September 2020 and as Regional Vice President –
Western Region from February 2018 to May 2019. Previously
served as Executive Vice President and Chief Operating Officer at
CSX from September 2015 to November 2017.
Present position since May 16, 2015.
Present position since June 1, 2020.
Served as Vice President and Treasurer from February 1, 2017 to
June 1, 2020. Served as Vice President Internal Audit from
November 1, 2013 to February 1, 2017.
K16
PART II
NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
STOCK INFORMATION
Common Stock is owned by 21,825 stockholders of record as of December 31, 2020, and is traded on the New York
Stock Exchange under the symbol “NSC.”
ISSUER PURCHASES OF EQUITY SECURITIES
Total
Number of
Shares (or Units)
Purchased as
Part of Publicly
Announced Plans
or Programs(2)
Maximum
Number
(or Approximate
Dollar Value)
of Shares (or
Units)
that may yet be
Purchased under
the Plans or
Programs(2)
Total Number
of Shares
(or Units)
Purchased(1)
Average
Price Paid
per Share
(or Unit)
$
327,383
793,494
943,868
213.70
235.37
235.65
327,383
793,022
943,713
22,425,507
21,632,485
20,688,772
Period
October 1-31, 2020
November 1-30, 2020
December 1-31, 2020
Total
2,064,745
2,064,118
(1) Of this amount, 627 represents shares tendered by employees in connection with the exercise of stock options
under the stockholder-approved Long-Term Incentive Plan (LTIP).
(2) On September 26, 2017, our Board of Directors authorized the repurchase of up to an additional 50 million
shares of Common Stock through December 31, 2022. As of December 31, 2020, 20.7 million shares remain
authorized for repurchase.
K17
Item 6. Selected Financial Data
FIVE-YEAR FINANCIAL REVIEW
RESULTS OF OPERATIONS
Railway operating revenues
Railway operating expenses
Income from railway operations
Other income – net
Interest expense on debt
Income before income taxes
Income taxes
Net income
PER SHARE DATA
Basic earnings per share
Diluted earnings per share
Dividends
Stockholders’ equity at year-end
FINANCIAL POSITION
Total assets
Total debt
Stockholders’ equity
OTHER
Property additions
2020
2019
2018
($ in millions, except per share amounts)
2017
2016
$ 9,789 $ 11,296 $ 11,458 $ 10,551 $ 9,888
6,879
3,009
7,307
3,989
7,029
3,522
7,499
3,959
6,787
3,002
153
625
2,530
106
604
3,491
67
557
3,469
156
550
3,128
136
563
2,582
517
914
$ 2,013 $ 2,722 $ 2,666 $ 5,404 $ 1,668
(2,276)
769
803
$
7.88 $ 10.32 $
7.84
3.76
58.67
10.25
3.60
58.87
9.58 $ 18.76 $
9.51
3.04
57.30
18.61
2.44
57.57
5.66
5.62
2.36
42.73
$ 37,962 $ 37,923 $ 36,239 $ 35,711 $ 34,892
10,212
11,145
12,681
12,409
15,362
14,791
9,836
16,359
12,196
15,184
$ 1,494 $ 2,019 $ 1,951 $ 1,723 $ 1,887
Average number of shares outstanding (thousands)
Number of stockholders at year-end
Average number of employees:
255,117
21,825
263,270
23,273
277,708
24,475
287,861
25,737
293,943
27,288
Rail
Nonrail
Total
20,029
127
20,156
24,442
145
24,587
26,512
150
26,662
26,955
155
27,110
27,856
188
28,044
Note 1: In 2017, as a result of the enactment of tax reform, “Railway operating expenses” included a $151 million
benefit and “Income taxes” included a $3,331 million benefit, which added $3,482 million to “Net income” and
$12.00 to “Diluted earnings per share.”
Note 2: On January 1, 2019, we adopted Financial Accounting Standards Board (FASB) Accounting Standards
Update (ASU) 2016-02, “Leases (Topic 842),” which requires lessees to recognize right-of-use (ROU) assets and
lease liabilities on the balance sheet for leases greater than twelve months. As a result of the adoption, the
Consolidated Balance Sheets include the recognition of ROU assets of $433 million and $539 million at December
31, 2020 and 2019, respectively, and corresponding lease liabilities of $433 million and $538 million, respectively.
See accompanying consolidated financial statements and notes thereto.
K18
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Norfolk Southern Corporation and Subsidiaries
The following discussion and analysis should be read in conjunction with the Consolidated Financial Statements
and Notes.
OVERVIEW
We are one of the nation’s premier transportation companies. Our Norfolk Southern Railway Company subsidiary
operates approximately 19,300 route miles in 22 states and the District of Columbia, serves every major container
port in the eastern U.S., and provides efficient connections to other rail carriers. We are a major transporter of
industrial products, including agriculture, forest and consumer products, chemicals, and metals and construction
materials. In addition, we operate the most extensive intermodal network in the East and are a principal carrier of
coal, automobiles, and automotive parts.
In 2020, we continued the implementation of our strategic plan, including tactical changes to our operating plan, to
generate operational efficiencies, improve customer service, and deliver strong financial results. The COVID-19
pandemic caused significant economic disruption and, along with softening energy markets, reduced the demand for
our services. Nevertheless, we executed on operational initiatives to generate efficiencies and lower our cost
structure. In the face of economic headwinds that resulted in a year-over-year volume decline of 12%, we improved
productivity by driving year-over-year average headcount down by 18%, and we increased asset utilization through
rationalization of our locomotive fleet. These sustainable cost structure improvements will provide greater benefits
as the economy recovers. However, there is still substantial uncertainty as to the pace of economic recovery and the
continued effects of the pandemic on our results of operations. We continue to monitor the impact of the pandemic
on our employees’ availability and remain committed to protecting our employees and providing excellent
transportation service products for our customers.
SUMMARIZED RESULTS OF OPERATIONS
2020
2019
($ in millions, except per share amounts)
2018
2020
vs. 2019
2019
vs. 2018
(% change)
Income from railway operations
Net income
Diluted earnings per share
Railway operating ratio (percent)
$
$
$
3,002 $
2,013 $
7.84 $
69.3
3,989 $
2,722 $
10.25 $
64.7
3,959
2,666
9.51
65.4
(25%)
(26%)
(24%)
7%
1%
2%
8%
(1%)
Income from railway operations declined in 2020 compared to 2019 as railway operating revenues fell 13% which
exceeded a 7% reduction in operating expenses. Railway operating revenues declined as lower customer demand
resulted in volume reductions. Additionally, negative mix and lower fuel surcharge revenue, partially offset by
increased pricing, led to lower revenue per unit. Railway operating expenses decreased due to declines in fuel price
and consumption, reduced employment levels, lower volumes and operational efficiency improvements.
Additionally, 2020 results were adversely impacted by a loss on asset disposal of $385 million related to
locomotives sold, and by a $99 million impairment charge related to an equity method investment. For more
information on the impact of these charges, see Notes 7 and 6, respectively.
Income from railway operations rose in 2019 compared to 2018 as a 3% reduction in railway operating expenses
more than offset the impact of a 1% decline in railway operating revenues. In addition to higher income from
railway operations, net income and diluted earnings per share growth in 2019 also benefited from a lower effective
K19
tax rate. Our continuing share repurchase program contributed to diluted earnings per share growth that exceeded
that of net income.
The following tables adjust our 2020 U.S. Generally Accepted Accounting Principles (“GAAP”) financial results to
exclude the effects of the aforementioned charges. The income tax effects on the non-GAAP adjustments were
calculated based on the applicable tax rates to which the non-GAAP adjustments relate. We use these non-GAAP
financial measures internally and believe this information provides useful supplemental information to investors to
facilitate making period-to-period comparisons by excluding the 2020 charges. While we believe that these non-
GAAP financial measures are useful in evaluating our business, this information should be considered as
supplemental in nature and is not meant to be considered in isolation from, or as a substitute for, the related
financial information prepared in accordance with GAAP. In addition, these non-GAAP financial measures may
not be the same as similar measures presented by other companies.
Non-GAAP Reconciliation for 2020
Reported 2020
(GAAP)
Loss on Asset
Disposal
Investment
Impairment
Adjusted 2020
(non-GAAP)
($ in millions, except per share amounts)
Railway operating expenses
Income from railway operations
Income before income taxes
Income taxes
Net income
Diluted earnings per share
Railway operating ratio (percent)
$
$
$
$
$
$
6,787 $
3,002 $
2,530 $
517 $
2,013 $
7.84 $
69.3
(385) $
385 $
385 $
97 $
288 $
1.12 $
(3.9)
(99) $
99 $
99 $
25 $
74 $
0.29 $
(1.0)
6,303
3,486
3,014
639
2,375
9.25
64.4
In the table below, references to 2020 results and related comparisons use the adjusted, non-GAAP results from the
table above.
Adjusted
2020
(non-GAAP)
2019
($ in millions, except per share amounts)
2018
Adjusted
2020
(non-GAAP)
vs. 2019
2019
vs. 2018
(% change)
Railway operating expenses
Income from railway operations
Income before income taxes
Income taxes
Net income
Diluted earnings per share
Railway operating ratio (percent)
$
$
$
$
$
$
6,303 $
3,486 $
3,014 $
639 $
2,375 $
9.25 $
64.4
7,307 $
3,989 $
3,491 $
769 $
2,722 $
10.25 $
64.7
7,499
3,959
3,469
803
2,666
9.51
65.4
(14%)
(13%)
(14%)
(17%)
(13%)
(10%)
—%
(3%)
1%
1%
(4%)
2%
8%
(1%)
K20
DETAILED RESULTS OF OPERATIONS
Railway Operating Revenues
The following tables present a three-year comparison of revenues, volumes (units), and average revenue per unit by
major commodity group.
Merchandise:
Agriculture, forest and consumer
products
Chemicals
Metals and construction
Automotive
Merchandise
Intermodal
Coal
Total
Merchandise:
Agriculture, forest and consumer
products
Chemicals
Metals and construction
Automotive
Merchandise
Intermodal
Coal
Total
Merchandise:
Agriculture, forest and consumer
products
Chemicals
Metals and construction
Automotive
Merchandise
Intermodal
Coal
Total
2020
Revenues
2019
($ in millions)
2018
2020
vs. 2019
2019
vs. 2018
(% change)
$
$
2,116 $
1,809
1,333
830
6,088
2,654
1,047
9,789 $
2,256 $
2,092
1,461
994
6,803
2,824
1,669
11,296 $
2,188
2,083
1,482
991
6,744
2,893
1,821
11,458
(6%)
(14%)
(9%)
(16%)
(11%)
(6%)
(37%)
(13%)
3%
—%
(1%)
—%
1%
(2%)
(8%)
(1%)
2020
Units
2019
(in thousands)
2018
2020
vs. 2019
2019
vs. 2018
(% change)
704.4
482.0
601.2
329.7
2,117.3
3,992.1
574.1
6,683.5
763.7
588.9
685.1
394.7
2,432.4
4,207.2
914.0
7,553.6
790.7
604.7
719.8
403.9
2,519.1
4,375.7
1,033.5
7,928.3
(8%)
(18%)
(12%)
(16%)
(13%)
(5%)
(37%)
(12%)
(3%)
(3%)
(5%)
(2%)
(3%)
(4%)
(12%)
(5%)
2020
Revenue per Unit
2019
($ per unit)
2018
2020
vs. 2019
2019
vs. 2018
(% change)
$
3,004 $
3,753
2,216
2,518
2,875
665
1,824
1,465
2,953 $
3,553
2,133
2,517
2,797
671
1,826
1,495
2,767
3,444
2,059
2,453
2,677
661
1,762
1,445
2%
6%
4%
—%
3%
(1%)
—%
(2%)
7%
3%
4%
3%
4%
2%
4%
3%
K21
At the beginning of 2020, we combined the agriculture products and forest and consumer commodity groups. In
addition, we also made changes in the categorization of certain other commodity groups within Merchandise. Prior
period railway operating revenues, units, and revenue per unit have been reclassified to conform to the current
presentation (see Note 2).
Revenues decreased $1.5 billion in 2020 and $162 million in 2019 compared to the prior years. As reflected in the
table below, lower revenues for both years were the result of decreased volumes and lower fuel surcharge revenue,
partially offset by pricing gains.
The table below reflects the components of the revenue change by major commodity group.
2020 vs. 2019
Increase (Decrease)
2019 vs. 2018
Increase (Decrease)
($ in millions)
Merchandise
Intermodal
Coal
Merchandise
Intermodal
Coal
$
(881) $
(144) $
(621) $
(232) $
(111) $
(210)
(92)
(124)
(13)
(14)
(30)
(35)
258
98
12
305
72
93
$
(715) $
(170) $
(622) $
59 $
(69) $
(152)
Volume
Fuel surcharge
revenue
Rate, mix and
other
Total
Approximately 90% of our revenue base is covered by contracts that include negotiated fuel surcharges. These
revenues totaled $349 million, $578 million, and $657 million in 2020, 2019, and 2018, respectively.
MERCHANDISE revenues decreased in 2020 but increased in 2019 compared with the prior years. In 2020,
revenues decreased due to volume declines in all commodity groups which were partially offset by higher average
revenue per unit, driven by pricing gains. In 2019, revenues grew due to higher average revenue per unit, driven by
pricing gains, which were partially offset by volume declines in all commodity groups.
For 2021, merchandise revenues are expected to increase, the result of higher volume as the market continues to
recover from the impact of the COVID-19 pandemic and increased revenue per unit driven by pricing gains.
Agriculture, forest and consumer products revenues decreased in 2020 but increased in 2019 compared with the
prior years. In 2020, the decline was the result of reduced volume partially offset by higher average revenue per
unit, driven by pricing gains partially offset by lower fuel surcharge revenue. Volume declined due to the impact of
COVID-19 on the demand for ethanol, corn, food service products, and building, industrial and commercial
products. Revenue growth in 2019 was due to higher average revenue per unit, a result of pricing gains, which
more than offset volume declines. Volume was down due to decreased shipments of ethanol, pulpboard, lumber,
soybeans, pulp, woodchips, canned goods, and fertilizer, partially offset by increased corn shipments.
In 2021, agriculture, forest and consumer products revenues are expected to rise, a result of increased volume as the
economic recovery continues, and revenue per unit increases resulting from pricing gains. We expect volumes to
increase in most markets led by ethanol, corn, pulpboard, and food services.
Chemicals revenues fell in 2020 but rose slightly in 2019 compared with the prior years. In 2020, the decrease was
the result of volume declines partially offset by higher average revenue per unit, due to pricing gains. Volume
declined due to the impact from COVID-19 and ongoing disruptions in the energy market. The pandemic created
an overabundance of products in the market as companies reduced stockpiles before requiring more products. Oil
and petroleum shipments were negatively impacted due to reductions in gasoline/jet fuel demand and travel. In
K22
2019, the rise was the result of higher average revenue per unit, due to pricing gains, which were partially offset by
volume declines. Volume declines in natural gas, sand, petroleum products, organic and inorganic chemicals, and
plastics were partially offset by gains in crude oil and municipal waste.
For 2021, chemicals revenues are anticipated to increase, as a result of increased volume and revenue per unit
driven by pricing gains. We expect carloads to increase due to growth in plastics, organic chemicals, petroleum
products, and solid waste which is projected to be partially offset by reduced volumes of sand, crude oil and natural
gas liquids.
Metals and construction revenues declined in both periods. In 2020, volume declines were partially offset by
higher average revenue per unit, the result of pricing gains. Volume declines were largely the result of weakened
demand due to reductions in metal and domestic vehicle production. The pandemic caused industries to suspend
production which heavily impacted customers’ needs for materials and shipping of finished and semi-finished
goods. These declines were partially offset by increased demand for cement. In 2019, volume declines were
largely offset by higher average revenue per unit, the result of pricing gains. Volume declines in iron and steel, coil,
scrap metal, and kaolin were partially offset by increases in aggregates shipments due to improved service and
market strength.
For 2021, metals and construction revenues are expected to rise, a result of increased volume and revenue per unit
driven by pricing gains. As the economic recovery continues, volume growth is expected in almost all markets led
by scrap metal, coil, iron and steel, and construction.
Automotive revenues declined in 2020 but were flat in 2019 compared with the prior years. In 2020, revenue
declines were driven by lower volume and fuel surcharge revenue, partially offset by pricing gains. The volume
decline was mostly the result of unplanned automotive plant shutdowns in the first half of the year, primarily due to
the COVID-19 pandemic, which was partially offset by increased demand in the second half of the year. In 2019,
higher average revenue per unit, driven by price increases, offset volume declines that were primarily the result of
decreases in U.S. light vehicle production and the United Automobile Workers strike in the fourth quarter.
In 2021, automotive revenues are expected to increase as a result of higher volume as inventories continue to
rebuild.
INTERMODAL revenues decreased in both periods. The decline in 2020 was driven by lower volume and fuel
surcharge revenue, which were partially offset by pricing gains and favorable mix. The decline in 2019 was driven
by lower volume, which was partially offset by higher average revenue per unit, a result of pricing gains.
For 2021, we expect intermodal revenues to rise, the result of increased demand, expected highway conversions,
and higher fuel surcharge revenue.
Intermodal units by market were as follows:
Domestic
International
Total
2020
2019
(units in thousands)
2018
2020
vs. 2019
2019
vs. 2018
(% change)
2,568.7
1,423.4
2,593.5
1,613.7
2,801.1
1,574.6
(1%)
(12%)
(7%)
2%
3,992.1
4,207.2
4,375.7
(5%)
(4%)
Domestic volume fell in both periods. While volume rebounded in the second half of 2020 due to inventory
replenishment and a strong peak season, volume for the year was challenged by supply chain disruptions related to
K23
COVID-19 and strong over-the-road competition in the first half of the year. Volume was challenged in 2019 by
stronger over-the-road competition.
For 2021, we expect higher domestic volume driven by growth from new and existing customers and continued
highway conversions.
International volume fell in 2020, but rose in 2019. The decline in 2020 resulted from supply chain disruptions
due to COVID-19. The rise in 2019 was due to increased demand from new and existing customers partially offset
by lower shipments due to tariff concerns.
For 2021, we expect international volume growth as demand and trade continue to recover.
COAL revenues decreased in both periods. The decrease in 2020 was a result of significant volume declines. The
decrease in 2019 was a result of lower volume, which was partially offset by higher average revenue per unit, driven
by pricing gains.
For 2021, we expect coal revenues to decline. We anticipate overall coal volume to be down as continued declines
in utility are projected to more than offset domestic metallurgical and export gains.
As shown in the following table, total tonnage decreased in both periods.
2020
2019
(tons in thousands)
2018
2020
vs. 2019
2019
vs. 2018
(% change)
Utility
Export
Domestic metallurgical
Industrial
32,479
18,900
9,441
3,566
60,278
23,324
13,562
4,655
65,688
28,046
15,500
5,410
(46%)
(19%)
(30%)
(23%)
(8%)
(17%)
(13%)
(14%)
Total
64,386
101,819
114,644
(37%)
(11%)
Utility coal tonnage decreased in both periods. The decline in 2020 was due to low natural gas prices, diminished
industrial and commercial electricity demand, and high stockpiles. The decline in 2019 was due to continued
headwinds from low natural gas prices and additional natural gas and renewable energy generating capacity, which
were slightly offset by customer inventory rebuilding.
For 2021, utility coal tonnage is expected to decrease as a result of high stockpiles and continued pressure from
natural gas and renewable energy.
Export coal tonnage decreased in both periods. The decline in 2020 was a result of weak seaborne pricing,
COVID-19-related global disruptions, and import restrictions. The decline in 2019 was a result of weak thermal
seaborne pricing and coal supply disruptions at certain mines.
For 2021, export coal tonnage is expected to increase due to the global recovery from COVID-19.
Domestic metallurgical coal tonnage was down in both years. The decline in 2020 was a reflection of continued
reduced domestic steel demand which led to idled customer facilities and lower production. The decline in 2019
was a reflection of challenging overall market conditions including softening domestic steel demand, customer
sourcing changes, and plant outages.
For 2021, domestic metallurgical coal tonnage is expected to increase due to the recovery from COVID-19.
K24
Industrial coal tonnage decreased in both years driven by pressure from natural gas conversions and customer
sourcing changes.
For 2021, industrial coal tonnage is expected to decrease as a result of continued pressure from natural gas
conversions and customer sourcing changes.
Railway Operating Expenses
Railway operating expenses summarized by major classifications were as follows:
2020
2019
($ in millions)
2018
2020
vs. 2019
2019
vs. 2018
(% change)
Compensation and benefits
Purchased services and rents
Fuel
Depreciation
Materials and other
Loss on asset disposal
$
2,373 $
1,687
535
1,154
653
385
2,751 $
1,725
953
1,138
740
—
2,925
1,730
1,087
1,102
655
—
(14%)
(2%)
(44%)
1%
(12%)
(6%)
—%
(12%)
3%
13%
Total
$
6,787 $
7,307 $
7,499
(7%)
(3%)
In 2020, expenses fell as our strategic initiatives to improve productivity and asset utilization resulted in lower
compensation and benefits expense, declines in fuel consumption, reduced purchased services, and lower materials
expense. Fuel expense also declined due to lower prices. These expense reductions were partially offset by a loss
on asset disposal of $385 million related to locomotives sold, and a $99 million impairment charge included in
purchased services and rents related to an equity method investment. In 2019, expenses fell as our strategic
initiatives to improve productivity resulted in lower compensation, equipment rents, and materials expense. These
decreases along with lower fuel prices and consumption were partially offset by lower gains on operating property
sales, increased depreciation, and a write-off of a $32 million receivable as a result of a legal dispute.
Compensation and benefits decreased in 2020, reflecting changes in:
•
•
•
•
•
•
•
employment levels (down $309 million),
health and welfare benefits for craft employees (down $77 million),
overtime and recrews (down $54 million),
incentive and stock-based compensation (down $38 million),
increased pay rates (up $50 million),
lower capitalized labor (additional expense of $51 million), and
other (down $1 million).
K25
In 2019, compensation and benefits decreased, a result of changes in:
•
•
•
•
•
•
•
employment levels (down $117 million),
incentive and stock-based compensation (down $83 million),
overtime and recrews (down $45 million),
higher capitalized labor (reduced expense of $9 million),
2018 employment tax refund ($31 million unfavorable in 2019),
pay rates (up $76 million), and
other (down $27 million).
Our employment averaged 20,200 in 2020, compared with 24,600 in 2019, and 26,700 in 2018.
Purchased services and rents includes the costs of services purchased from external vendors and contractors,
including the net costs of operating joint (or leased) facilities with other railroads and the net cost of equipment
rentals.
2020
2019
($ in millions)
2018
2020
vs. 2019
2019
vs. 2018
(% change)
Purchased services
Equipment rents
$
1,387 $
300
1,434 $
291
1,367
363
(3%)
3%
5%
(20%)
Total
$
1,687 $
1,725 $
1,730
(2%)
—%
The decrease in purchased services in 2020 resulted from volume-related declines and strategic initiatives to
improve productivity and asset utilization, partially offset by the $99 million impairment related to an equity
method investment. The increase in purchased services in 2019 was the result of increased technology-related costs,
expenses associated with our headquarters relocation, and increased intermodal-related costs partially offset by
decreased transportation activities.
Equipment rents, which includes our cost of using equipment (mostly freight cars) owned by other railroads or
private owners less the rent paid to us for the use of our equipment, increased in 2020, but decreased in 2019. In
2020, the increase was primarily the result of lower equity in TTX earnings and increased automotive equipment
expenses partially offset by decreased intermodal equipment expenses. In 2019, the decrease was largely due to
improved network velocity and the absence of short-term locomotive resource costs incurred in the prior year.
Fuel expense, which includes the cost of locomotive fuel as well as other fuel used in railway operations, decreased
in both periods. The change in both years was due to lower locomotive fuel prices (down 32% in 2020 and 8% in
2019) which decreased expenses by $235 million in 2020 and $82 million in 2019. Additionally, locomotive fuel
consumption decreased 18% in 2020 and 4% in 2019. We consumed approximately 368 million gallons of diesel
fuel in 2020, compared with 451 million gallons in 2019 and 472 million gallons in 2018.
Depreciation expense increased in both periods, a reflection of reinvestment in our infrastructure, rolling stock, and
technology.
K26
Materials and other expenses decreased in 2020 but increased in 2019 as shown in the following table.
Materials
Claims
Other
Total
2020
2019
($ in millions)
2018
2020
vs. 2019
2019
vs. 2018
(% change)
$
274 $
179
200
327 $
193
220
362
176
117
(16%)
(7%)
(9%)
(10%)
10%
88%
$
653 $
740 $
655
(12%)
13%
Materials expense decreased in 2020 and 2019 due primarily to lower maintenance requirements as a result of fewer
locomotives and freight cars in service.
Claims expense includes costs related to personal injury, property damage, and environmental matters. The 2020
expense declined, primarily the result of lower costs related to environmental remediation matters partially offset by
increased derailment costs. The 2019 expense increased, primarily due to higher costs related to environmental
remediation matters and personal injury claims.
Other expense decreased in 2020, largely due to the absence of the 2019 write-off of a $32 million receivable as a
result of a legal dispute. Additionally, 2020 benefited from reduced travel expenses resulting from the COVID-19
pandemic. These reductions were partially offset by lower gains from sales of operating property. Other expense
increased in 2019, primarily due to lower gains from sales of operating property and the $32 million write-off.
Gains from operating property sales amounted to $26 million, $64 million, and $158 million in 2020, 2019, and
2018, respectively.
Loss on asset disposal
During 2020, we recorded a $385 million charge related to the disposal of 703 locomotives, the sales of which were
completed during the fourth quarter. For more information on the impact of the charge, see Note 7.
Other income – net
Other income – net increased in 2020 and 2019. The increase in 2020 was driven by the absence of the prior year
$49 million impairment loss related to natural resource assets that were sold in 2020, lower pension and
postretirement benefit expenses, and higher returns on corporate-owned life insurance (“COLI”) investments, which
more than offset the absence of coal royalties and lower gains on sales of non-operating property. The increase in
2019 was driven by higher COLI returns and increased gains on sales of non-operating property, which more than
offset the aforementioned $49 million impairment loss.
Income taxes
The effective income tax rate was 20.4% in 2020, compared with 22.0% in 2019 and 23.1% in 2018. The current
year benefited from a reduction of taxes upon the resolution of our 2012 amended return (see Note 4). All three
years benefited from favorable tax benefits associated with stock-based compensation and COLI returns.
For 2021, we expect an effective income tax rate between 23% and 24%.
K27
FINANCIAL CONDITION, LIQUIDITY, AND CAPITAL RESOURCES
Cash provided by operating activities, our principal source of liquidity, was $3.6 billion in 2020, $3.9 billion in
2019, and $3.7 billion in 2018. The decline in 2020 reflects a decrease in income from railway operations offset in
part by lower income tax payments. The increase in 2019 was primarily the result of improved operating results.
We had working capital of $158 million and negative working capital of $219 million at December 31, 2020, and
2019, respectively. Cash and cash equivalents totaled $1.1 billion and $580 million at December 31, 2020, and
2019, respectively. We expect cash on hand combined with cash provided by operating activities will be sufficient
to meet our ongoing obligations. In addition, we believe our currently-available borrowing capacity, access to
additional financing, and ability to reduce property additions and shareholder distributions, including share
repurchases, provide additional flexibility to meet our ongoing obligations. Nonetheless, we continue to monitor the
ongoing impacts of the COVID-19 pandemic, which could lead to a reduction in cash flows from operations.
Contractual obligations at December 31, 2020, include long-term debt (Note 9), interest on fixed-rate long-term
debt, unconditional purchase obligations (Note 17), long-term advances from Conrail (Note 6), operating leases
(Note 10), agreements with Consolidated Rail Corporation (CRC) (Note 6), and unrecognized tax benefits (Note 4).
Total
2021
2022 -
2023
2024 -
2025
($ in millions)
2026 and
Subsequent Other
Long-term debt principal
Interest on fixed-rate long-term debt
Unconditional purchase obligations
Long-term advances from Conrail
Operating leases
Agreements with CRC
Unrecognized tax benefits*
$ 13,693 $
13,515
1,120
534
504
140
22
579 $ 1,156 $
568
600
—
101
41
—
1,062
329
—
143
82
—
958 $
997
76
—
115
17
—
11,000
10,888
115
534
145
—
—
—
—
—
—
—
—
22
Total
$ 29,528 $ 1,889 $ 2,772 $ 2,163 $
22,682 $
22
* This amount is shown in the Other column because the year of settlement cannot be reasonably estimated.
Off balance sheet arrangements consist primarily of unrecognized obligations, including unconditional purchase
obligations and future interest payments on fixed-rate long-term debt, which are included in the table above. In
addition, we entered into a synthetic lease during 2019 which is discussed further in Note 10.
Cash used in investing activities was $1.2 billion in 2020, compared with $1.8 billion in 2019, and $1.7 billion in
2018. The decrease in 2020 was primarily driven by lower property additions. In 2019, increased COLI activity
and higher property additions were partially offset by increased proceeds from property sales. We had the ability to
borrow up to $750 million against our COLI policies at December 31, 2020.
Capital spending and track and equipment statistics can be found within the “Railway Property” section of Part I of
this report on Form 10-K. For 2021, we expect capital spending will approximate $1.6 billion.
Cash used in financing activities was $1.9 billion in 2020, compared with $2.0 billion in 2019, and $2.3 billion in
2018. The change in 2020 reflects lower repurchases of Common Stock and debt repayments, partially offset by
reduced proceeds from borrowings. In 2019, the decrease was impacted by fewer repurchases of Common Stock,
higher debt repayments, and increased dividends.
Share repurchases of $1.4 billion in 2020, $2.1 billion in 2019, and $2.8 billion in 2018 resulted in the retirement of
7.4 million, 11.3 million, and 17.1 million shares, respectively. As of December 31, 2020, 20.7 million shares
K28
remain authorized by our Board of Directors for repurchase. 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.
In May 2020, we issued $800 million of 3.05% senior notes due 2050, resulting in $790 million in net proceeds.
In May 2020, we also issued $800 million of 3.155% senior notes due 2055 in exchange for $554 million of
previously issued notes ($450 million at 5.1% due 2118, $42 million at 6% due 2111, $29 million at 7.9% due 2097,
$26 million at 6% due 2105, and $7 million at 7.05% due 2037). As part of the debt exchange, a $4 million loss on
extinguishment was recognized in “Other income – net.”
In May 2020, we also renewed and amended our accounts receivable securitization program, reducing our
maximum borrowing capacity from $450 million to $400 million. The term expires in May 2021. We had no
amounts outstanding at December 31, 2020 or December 31, 2019, and our available borrowing capacity was $400
million and $429 million, respectively.
In March 2020, we renewed and amended our five-year credit agreement. We increased the program’s borrowing
capacity from $750 million to $800 million. The amended agreement expires in 2025 and provides for borrowings
at prevailing rates and includes covenants. We had no amounts outstanding under this facility at December 31,
2020 or December 31, 2019.
We discuss our credit agreement and our accounts receivable securitization program in Note 9, and we have
authority from our Board of Directors to issue an additional $1.6 billion of debt or equity securities through public
or private sale, all of which provide for access to additional liquidity should the need arise. Our debt-to-total
capitalization ratio was 46.2% at December 31, 2020, compared with 44.5% at December 31, 2019.
Upcoming annual debt maturities are disclosed in Note 9. 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 POLICIES
The preparation of financial statements in accordance with GAAP requires us to make estimates and assumptions
that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date
of the financial statements, and the reported amounts of revenues and expenses during the reporting period. These
estimates and assumptions may require judgment about matters that are inherently uncertain, and future events are
likely to occur that may require us to make changes to these estimates and assumptions. Accordingly, we regularly
review these estimates and assumptions based on historical experience, changes in the business environment, and
other factors we believe to be reasonable under the circumstances. The following critical accounting policies are a
subset of our significant accounting policies described in Note 1.
Pensions and Other Postretirement Benefits
Accounting for pensions and other postretirement benefit plans requires us to make several estimates and
assumptions (Note 12). These include the expected rate of return from investment of the plans’ assets 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 we deem
pertinent under the circumstances (for example, expectations of future stock market performance). We utilize an
independent actuarial consulting firm’s studies to assist us in selecting appropriate actuarial assumptions and
valuing related liabilities.
For 2020, we assumed a long-term investment rate of return of 8.25%, which was supported by our long-term total
rate of return on plan assets since inception, as well as our expectation of future returns. A one-percentage point
change to this rate of return assumption would result in a $24 million change in annual pension expense. We review
K29
assumptions related to our defined benefit plans annually, and while changes are likely to occur in assumptions
concerning retirement age, projected earnings, and mortality, they are not 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 discount rates that are 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. A one-percentage point change to this discount rate assumption would result in a $17 million change
in annual pension expense.
Properties and Depreciation
Most of our assets are long-lived railway properties (Note 7). “Properties” are stated principally at cost and are
depreciated 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. See Note 1 for a more detailed
discussion of assumptions and estimates.
Expenditures, including those on leased assets, that extend an asset’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 other direct costs, in addition to an allocable portion of indirect costs that relate to a capital project. A
significant portion of our annual capital spending relates to self-constructed assets. Costs related to repairs and
maintenance activities that, in our judgment, do not extend an asset’s useful life or increase its utility are expensed
when such repairs are performed.
Depreciation expense for 2020 totaled $1.2 billion. Our composite depreciation rates for 2020 are disclosed in Note
7; a one-year increase (or decrease) in the estimated average useful lives of depreciable assets would have resulted
in an approximate $40 million decrease (or increase) to annual depreciation expense.
Personal Injury
Claims expense, included in “Materials and other” in the Consolidated Statements of Income, includes our estimate
of costs for personal injuries.
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. The actuarial firm studies
our historical patterns of reserving for claims and subsequent settlements, taking into account relevant outside
influences. We adjust the liability quarterly based upon our assessment and the results of the study. The accuracy
of our estimate of the liability is subject to inherent limitation given the difficulty of predicting future events and, as
such, the ultimate loss sustained may vary from the estimated liability recorded.
See Note 17 for a more detailed discussion of the assumptions and estimates we use for personal injury.
Income Taxes
Our net deferred tax liability totaled $6.9 billion at December 31, 2020 (Note 4). 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 our 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 have a $57 million valuation allowance on $509 million of
deferred tax assets as of December 31, 2020, reflecting the expectation that almost all of these assets will be
realized.
K30
OTHER MATTERS
Labor Agreements
Approximately 80% of our railroad employees are covered by collective bargaining agreements with various labor
unions. Pursuant to the Railway Labor Act, these agreements remain in effect until new agreements are reached, or
until the bargaining procedures mandated by the Railway Labor Act are completed. We largely bargain nationally
in concert with other major railroads, represented by the National Carriers Conference Committee. Moratorium
provisions in the labor agreements govern when the railroads and unions may propose changes to the agreements.
The current round of bargaining commenced on November 1, 2019 with both management and the unions serving
their formal proposals for changes to the collective bargaining agreements and direct negotiations are ongoing.
Market Risks
At December 31, 2020, we had no outstanding debt subject to interest rate fluctuations. Market risk for fixed-rate
debt is estimated as the potential increase in fair value resulting from a one-percentage point decrease in interest
rates as of December 31, 2020 and amounts to an increase of approximately $2.0 billion to the fair value of our debt
at December 31, 2020. 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.
New Accounting Pronouncements
For a detailed discussion of new accounting pronouncements, see Note 1.
Inflation
In preparing financial statements, GAAP requires the use of historical cost that disregards the effects of inflation on
the replacement cost of property. As a capital-intensive company, we have most of our capital invested in long-
lived assets. The replacement cost of these assets, as well as the related depreciation expense, would be
substantially greater than the amounts reported on the basis of historical cost.
FORWARD-LOOKING STATEMENTS
Certain statements in Management’s Discussion and Analysis of Financial Condition and Results of Operations are
“forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation
Reform Act of 1995, as amended. These statements relate to future events or our future financial performance and
involve known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of
activity, performance, or our achievements or those of our industry to be materially different from those expressed
or implied by any forward-looking statements. In some cases, forward-looking statements can be identified by
terminology such as “may,” “will,” “could,” “would,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,”
“estimate,” “project,” “consider,” “predict,” “potential,” “feel,” or other comparable terminology. We have based
these forward-looking statements on our current expectations, assumptions, estimates, beliefs, and projections.
While we believe these expectations, assumptions, estimates, beliefs, and projections are reasonable, such forward-
looking statements are only predictions and involve known and unknown risks and uncertainties, many of which
involve factors or circumstances that are beyond our control. These and other important factors, including those
discussed in Item 1A “Risk Factors,” may cause actual results, performance, or achievements to differ materially
from those expressed or implied by these forward-looking statements. The forward-looking statements herein are
made only as of the date they were first issued, and unless otherwise required by applicable securities laws, we
disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new
information, future events, or otherwise.
K31
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The information required by this item is included in Item 7 “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” under the heading “Market Risks.”
K32
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, 2020, 2019, and 2018
Consolidated Statements of Comprehensive Income
Years ended December 31, 2020, 2019, and 2018
Consolidated Balance Sheets
At December 31, 2020 and 2019
Consolidated Statements of Cash Flows
Years ended December 31, 2020, 2019, and 2018
Consolidated Statements of Changes in Stockholders’ Equity
Years ended December 31, 2020, 2019, and 2018
Notes to Consolidated Financial Statements
Index to Financial Statement Schedule in Item 15
Page
K34
K35
K39
K40
K41
K42
K43
K44
K82
K33
Report of Management
February 4, 2021
To the Stockholders
Norfolk Southern Corporation:
Management is responsible for establishing and maintaining adequate internal control over financial reporting. In
order to ensure that Norfolk Southern’s internal control over financial reporting is effective, management regularly
assesses such controls and did so most recently as of December 31, 2020. This assessment was based on criteria for
effective internal control over financial reporting described in Internal Control – Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment,
management has concluded that we maintained effective internal control over financial reporting as of December
31, 2020.
KPMG LLP, independent registered public accounting firm, has audited our financial statements and issued an
attestation report on our internal control over financial reporting as of December 31, 2020.
/s/ James A. Squires
James A. Squires
Chairman, President and
Chief Executive Officer
/s/ Mark R. George
Mark R. George
Executive Vice President Finance
and Chief Financial Officer
/s/ Clyde H. Allison, Jr.
Clyde H. Allison, Jr.
Vice President and
Controller
K34
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
Norfolk Southern Corporation:
Opinion on Internal Control Over Financial Reporting
We have audited Norfolk Southern Corporation and subsidiaries’ (the Company) internal control over financial
reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company
maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020,
based on criteria established in Internal Control – Integrated Framework (2013) 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) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2020 and 2019, the
related consolidated statements of income, comprehensive income, cash flows, and changes in stockholders’ equity
for each of the years in the three-year period ended December 31, 2020, and the related notes and financial
statement schedule of valuation and qualifying accounts as listed in Item 15(A)2 (collectively, the consolidated
financial statements), and our report dated February 4, 2021, expressed an unqualified opinion on those consolidated
financial statements.
Basis for Opinion
The Company’s management 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. Our responsibility is to express an opinion on the Company’s internal control over financial
reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. 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 of internal control over financial reporting 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.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
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 company’s
assets that could have a material effect on the financial statements.
K35
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.
Atlanta, Georgia
February 4, 2021
/s/ KPMG LLP
KPMG LLP
K36
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
Norfolk Southern Corporation:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Norfolk Southern Corporation and subsidiaries
(the Company) as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive
income, cash flows, and changes in stockholders’ equity for each of the years in the three‑year period ended
December 31, 2020, and the related notes and financial statement schedule of valuation and qualifying accounts as
listed in Item 15(A)2 (collectively, the consolidated financial statements). In our opinion, the consolidated financial
statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020
and 2019, and the results of its operations and its cash flows for each of the years in the three‑year period ended
December 31, 2020, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based
on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission, and our report dated February 4, 2021 expressed an unqualified
opinion on the effectiveness of the Company’s internal control over financial reporting.
Change in Accounting Principle
As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting
for leases as of January 1, 2019, due to the adoption of Accounting Standards Update 2016-02, Leases (Topic 842)
and related amendments.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is
to express an opinion on these consolidated financial statements based on our audits. We are a public accounting
firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with
the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission
and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of
material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks
of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the
amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
K37
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated
financial statements that was communicated or required to be communicated to the audit committee and that: (1)
relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our
especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not
alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by
communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the
accounts or disclosures to which it relates.
Sufficiency of audit evidence related to the capitalization of property expenditures
As discussed in Note 1 to the consolidated financial statements, expenditures that extend an asset’s useful
life or increase its utility are capitalized. The Company has recorded $31,345 million in net book value of
properties at December 31, 2020 and has recorded $1,494 million in property additions for the year ended
December 31, 2020. Expenditures capitalized include those that are directly related to a capital project and
may include materials, labor and other direct costs, in addition to an allocable portion of indirect costs that
relate to a capital project. A significant portion of the Company’s annual capital spending relates to self-
constructed assets. Costs related to repair and maintenance activities, that in the Company’s judgment, do
not extend an asset’s useful life or increase its utility are expensed when such repairs are performed.
We identified the evaluation of the sufficiency of audit evidence related to capitalization of property
expenditures as a critical audit matter. Subjective auditor judgment was required in determining procedures
and evaluating audit results related to the capitalization of purchased services and compensation due to their
usage for both self-constructed assets and repairs and maintenance.
The following are the primary procedures we performed to address this critical audit matter. We applied
auditor judgment to determine the nature and extent of procedures to be performed over capitalized property
expenditures. We evaluated the design and tested the operating effectiveness of certain internal controls
over the Company’s process to capitalize property expenditures, including controls over the determination
of whether purchased services and compensation expenditures extend an asset’s useful life or increase its
utility. For a sample of property addition expenditures, we inquired and inspected support to evaluate that
the expenditure extended an asset’s useful life or increased its utility. We evaluated the sufficiency of audit
evidence obtained by assessing the results of the procedures performed, including the appropriateness of the
nature of such evidence.
/s/ KPMG LLP
KPMG LLP
We have served as the Company’s auditor since 1982.
Atlanta, Georgia
February 4, 2021
K38
Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Income
Years ended December 31,
2019
($ in millions, except per share amounts)
2020
2018
Railway operating revenues
$
9,789 $
11,296 $
11,458
Railway operating expenses:
Compensation and benefits
Purchased services and rents
Fuel
Depreciation
Materials and other
Loss on asset disposal
2,373
1,687
535
1,154
653
385
2,751
1,725
953
1,138
740
—
2,925
1,730
1,087
1,102
655
—
Total railway operating expenses
6,787
7,307
7,499
Income from railway operations
3,002
3,989
3,959
Other income – net
Interest expense on debt
153
625
106
604
67
557
Income before income taxes
2,530
3,491
3,469
Income taxes
Net income
Earnings per share:
Basic
Diluted
517
769
803
$
2,013 $
2,722 $
2,666
$
7.88 $
7.84
10.32 $
10.25
9.58
9.51
See accompanying notes to consolidated financial statements.
K39
Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Comprehensive Income
2020
Years ended December 31,
2019
($ in millions)
2018
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)
$
2,013 $
2,722 $
2,666
(140)
2
101
(4)
(148)
(9)
(138)
97
(157)
35
(25)
38
Other comprehensive income (loss), net of tax
(103)
72
(119)
Total comprehensive income
$
1,910 $
2,794 $
2,547
See accompanying notes to consolidated financial statements.
K40
Norfolk Southern Corporation and Subsidiaries
Consolidated Balance Sheets
Assets
Current assets:
Cash and cash equivalents
Accounts receivable – net
Materials and supplies
Other current assets
Total current assets
Investments
Properties less accumulated depreciation of $11,985 and
$11,982, respectively
Other assets
Total assets
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable
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
Stockholders’ equity:
Common Stock $1.00 per share par value, 1,350,000,000 shares
authorized; outstanding 252,095,082 and 257,904,956 shares,
respectively, net of treasury shares
Additional paid-in capital
Accumulated other comprehensive loss
Retained income
Total stockholders’ equity
At December 31,
2019
2020
($ in millions)
$
1,115 $
848
221
134
2,318
3,590
31,345
709
580
920
244
337
2,081
3,428
31,614
800
$
37,962 $
37,923
$
1,016 $
263
302
579
2,160
12,102
1,987
6,922
1,428
229
327
316
2,300
11,880
1,744
6,815
23,171
22,739
254
2,248
(594)
12,883
259
2,209
(491)
13,207
14,791
15,184
Total liabilities and stockholders’ equity
$
37,962 $
37,923
See accompanying notes to consolidated financial statements.
K41
Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Cash Flows
Years ended December 31,
2018
2019
2020
($ in millions)
Cash flows from operating activities:
Net income
Reconciliation of net income to net cash provided by operating activities:
$
2,013 $
2,722 $
2,666
Depreciation
Deferred income taxes
Gains and losses on properties
Loss on asset disposal
Impairment of investment
Changes in assets and liabilities affecting operations:
Accounts receivable
Materials and supplies
Other current assets
Current liabilities other than debt
Other – net
1,154
142
(39)
385
99
71
23
3
34
(248)
1,139
330
(42)
—
—
87
(37)
(4)
(185)
(118)
1,104
173
(171)
—
—
(70)
15
(46)
223
(168)
Net cash provided by operating activities
3,637
3,892
3,726
Cash flows from investing activities:
Property additions
Property sales and other transactions
Investment purchases
Investment sales and other transactions
Net cash used in investing activities
Cash flows from financing activities:
Dividends
Common Stock transactions
Purchase and retirement of Common Stock
Proceeds from borrowings – net of issuance costs
Debt repayments
Other
Net cash used in financing activities
Net increase (decrease) in cash, cash equivalents, and
restricted cash
Cash, cash equivalents, and restricted cash:
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)
See accompanying notes to consolidated financial statements.
K42
(1,494)
333
(13)
(1)
(2,019)
377
(18)
(104)
(1,951)
204
(10)
99
(1,175)
(1,764)
(1,658)
(960)
69
(1,439)
784
(381)
—
(949)
27
(2,099)
2,192
(1,188)
23
(844)
40
(2,781)
2,023
(750)
—
(1,927)
(1,994)
(2,312)
134
(244)
535
580
$
1,115 $
580 $
446
690
446
$
577 $
311
555 $
543
496
519
Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Changes in Stockholders’ Equity
Common
Stock
Accum. Other
Additional
Retained
Comprehensive
Paid-in
Capital
Income
Loss
($ in millions, except per share amounts)
Total
Balance at December 31, 2017
$
285 $
2,254 $
(356) $
14,176 $
16,359
Comprehensive income:
Net income
Other comprehensive loss
Total comprehensive income
Dividends on Common Stock,
$3.04 per share
Share repurchases
Stock-based compensation
Reclassification of stranded
tax effects
2,666
(119)
(17)
1
(125)
87
(844)
(2,639)
(7)
2,666
(119)
2,547
(844)
(2,781)
81
(88)
88
—
Balance at December 31, 2018
269
2,216
(563)
13,440
15,362
Comprehensive income:
Net income
Other comprehensive income
Total comprehensive income
Dividends on Common Stock,
$3.60 per share
Share repurchases
Stock-based compensation
2,722
72
(949)
(2,000)
(6)
2,722
72
2,794
(949)
(2,099)
76
(11)
1
(88)
81
Balance at December 31, 2019
259
2,209
(491)
13,207
15,184
Comprehensive income:
Net income
Other comprehensive loss
Total comprehensive income
Dividends on Common Stock,
$3.76 per share
Share repurchases
Stock-based compensation
2,013
(103)
(7)
2
(59)
98
(960)
(1,373)
(4)
2,013
(103)
1,910
(960)
(1,439)
96
Balance at December 31, 2020
$
254 $
2,248 $
(594) $
12,883 $
14,791
See accompanying notes to consolidated financial statements.
K43
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 19,300 route miles primarily in the Southeast, East, and Midwest. These consolidated financial
statements include Norfolk Southern and its majority-owned and controlled subsidiaries (collectively, NS, we, us,
and our). Norfolk Southern’s major subsidiary is 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 2020): intermodal (27%); agriculture,
forest and consumer products (22%); chemicals (18%); metals and construction (14%); coal (11%); and, automotive
(8%). 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 shipments) may be outside the
U.S. Approximately 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 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 revenues are recognized proportionally as a shipment moves from origin to destination, and related
expenses are recognized as incurred. Certain of our contract refunds (which are primarily volume-based incentives)
are recorded as a reduction to revenues on the basis of our best estimate of projected liability, which is based on
historical activity, current shipment counts and expectation of future activity. Certain ancillary services, such as
switching, demurrage and other incidental activities, may be provided to customers under their transportation
contracts. These are distinct performance obligations that are recognized at a point in time when the services are
performed or as contractual obligations are met.
Cash Equivalents
“Cash equivalents” are highly liquid investments purchased three months or less from maturity.
Allowance for Doubtful Accounts
Our allowance for doubtful accounts was $6 million and $9 million at December 31, 2020 and 2019,
respectively. 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.
K44
Materials and Supplies
“Materials and supplies,” consisting mainly of items for maintenance of property and equipment, are stated at the
lower of average cost or net realizable value. The cost of materials and supplies expected to be used in property
additions or improvements is included in “Properties.”
Investments
Investments in entities over which we have the ability to exercise significant influence 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
“Properties” are stated principally at cost and are depreciated 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
approximately 75 depreciable asset classes.
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 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. We adjust our rates based on the results of these studies and implement the changes
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.
Key factors that are considered in developing average service life and salvage estimates include:
•
•
•
•
•
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 composite depreciation rate for rail in high density corridors is derived based on consideration of annual gross
tons 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 the 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 (curved or straight).
We capitalize interest on major projects during the period of their construction. Expenditures, including those on
leased assets, that extend an asset’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 other direct costs, in
addition to an allocable portion of indirect costs that relate to a capital project. A significant portion of our annual
capital spending relates to self-constructed assets. Removal activities occur in conjunction with replacement and are
estimated based on the average percentage of time employees replacing assets spend on removal functions. Costs
related to repairs and maintenance activities that, in our judgment, do not extend an asset’s useful life or increase its
utility are expensed when such repairs are performed.
K45
When depreciable operating road and equipment assets are sold or retired in the ordinary course of business, the
cost of the assets, net of sales 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 most 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 operating land are included in “Materials and other” expenses. Gains and losses on disposal of
nonoperating land and nonrail assets are included in “Other income – net” since such income is not a product of our
railroad operations.
A retirement is considered abnormal if it does not occur in the ordinary 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 income from railway
operations.
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.
New Accounting Pronouncements
In February 2018, the FASB issued ASU 2018-02, “Reclassification of Certain Tax Effects from Accumulated Other
Comprehensive Income.” This update is intended to reclassify the stranded tax effects resulting from tax reform
from accumulated other comprehensive income (AOCI) to retained earnings. The amount of the reclassification is
the difference between the amount initially charged or credited directly to other comprehensive income at the
previously enacted U.S. federal corporate income tax rate that remains in AOCI and the amount that would have
been charged or credited directly to other comprehensive income using the U.S. federal corporate income tax rate
enacted in December 2017. In the first quarter of 2018, we adopted the provisions of ASU 2018-02 resulting in an
increase to “Accumulated other comprehensive loss” of $88 million and a corresponding increase to “Retained
income,” with no impact on “Total stockholders’ equity.”
In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842),” and subsequent amendments, which
replaced existing lease guidance in GAAP. We adopted the standard on January 1, 2019 using the modified
retrospective method and used the effective date as our date of initial application. See Note 10 for additional
information.
In June 2016, the FASB issued ASU 2016-13, “Credit Losses - Measurement of Credit Losses on Financial
Instruments,” which replaced the current incurred loss impairment method with a method that reflects expected
credit losses. Short-term and long-term financial assets, as defined by the standard, are impacted by immediate
recognition of estimated credit losses in the financial statements, reflecting the net amount expected to be collected.
Historically, losses associated from the inability to collect on accounts receivable have been insignificant, with little
divergence in collection trends through varying economic cycles. We adopted the standard on January 1, 2020 and
there was no material impact to the financial statements upon adoption.
In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes,” which adds
new guidance to simplify the accounting for income taxes, changes the accounting for certain income tax
transactions, and makes other minor changes. We adopted the standard on January 1, 2021 and do not expect it to
have a material effect on our financial statements.
K46
2. Railway Operating Revenues
The following table disaggregates our revenues by major commodity group:
Merchandise:
Agriculture, forest and consumer products
Chemicals
Metals and construction
Automotive
Merchandise
Intermodal
Coal
Total
2020
2019
($ in millions)
2018
$
2,116 $
1,809
1,333
830
6,088
2,654
1,047
2,256 $
2,092
1,461
994
6,803
2,824
1,669
2,188
2,083
1,482
991
6,744
2,893
1,821
$
9,789 $
11,296 $
11,458
At the beginning of 2020, we combined the agriculture products and forest and consumer commodity groups. In
addition, we also made changes in the categorization of certain other commodity groups within Merchandise.
Specifically, certain commodities were shifted between agriculture, forest and consumer products; chemicals; and,
metals and construction. We made these changes to better align our commodity groups as a result of an
organizational realignment. Prior period railway operating revenues have been reclassified to conform to the
current presentation.
We recognize the amount of revenues we expect to be entitled to for the transfer of promised goods or services to
customers. A performance obligation is created when a customer under a transportation contract or public tariff
submits a bill of lading to us for the transport of goods. These performance obligations are satisfied as the
shipments move from origin to destination. As such, transportation revenues are recognized proportionally as a
shipment moves, and related expenses are recognized as incurred. These performance obligations are generally
short-term in nature with transit days averaging approximately one week or less for each commodity group. The
customer has an unconditional obligation to pay for the service once the service has been completed. Estimated
revenues associated with in-process shipments at period-end are recorded based on the estimated percentage of
service completed. We had no material remaining performance obligations at December 31, 2020 and 2019.
We may provide customers ancillary services, such as switching, demurrage and other incidental activities, under
their transportation contracts. These are distinct performance obligations that are recognized at a point in time when
the services are performed or as contractual obligations are met. These revenues are included within each of the
commodity groups and represent approximately 5% of total “Railway operating revenues” on the Consolidated
Statements of Income for the years ended December 31, 2020 and 2019, and approximately 4% for the year ended
December 31, 2018.
Revenues related to interline transportation services that involve another railroad are reported on a net basis.
Therefore, the portion of the amount that relates to another party is not reflected in revenues.
K47
Under the typical terms of our freight contracts, payment for services is due within fifteen days of billing the
customer, thus there are no significant financing components. “Accounts receivable – net” on the Consolidated
Balance Sheets includes both customer and non-customer receivables as follows:
Customer
Non-customer
Accounts receivable – net
December 31,
2020
2019
($ in millions)
$
$
629 $
219
682
238
848 $
920
Non-customer receivables include non-revenue-related amounts due from other railroads, governmental entities, and
others. “Other assets” on the Consolidated Balance Sheets includes non-current customer receivables of $23 million
at both December 31, 2020 and 2019. In 2019, we wrote off a $32 million non-current customer receivable
resulting from a legal dispute and this expense is included in “Materials and other” on the Consolidated Statements
of Income. We do not have any material contract assets or liabilities at December 31, 2020 and 2019.
3. Other Income – Net
2020
2019
($ in millions)
2018
$
91 $
85
(23)
63 $
69
(26)
61
(10)
16
$
153 $
106 $
67
2020
2019
($ in millions)
2018
$
307 $
68
375
356 $
83
439
111
31
142
280
50
330
499
131
630
156
17
173
$
517 $
769 $
803
Pension and other postretirement benefits (Note 12)
Corporate-owned life insurance – net
Other
Total
4. Income Taxes
Current:
Federal
State
Total current taxes
Deferred:
Federal
State
Total deferred taxes
Income taxes
K48
Reconciliation of Statutory Rate to Effective Rate
“Income taxes” on the Consolidated Statements of Income differs from the amounts computed by applying the
statutory federal corporate tax rate as follows:
2020
2019
Amount % Amount % Amount %
($ in millions)
2018
Federal income tax at statutory rate
State income taxes, net of federal tax effect
Excess tax benefits on stock-based compensation
Other, net
$
531
85
(39)
(60)
21.0 $
3.3
(1.5)
(2.4)
733
110
(29)
(45)
21.0 $
3.1
(0.8)
(1.3)
728
120
(22)
(23)
21.0
3.5
(0.7)
(0.7)
Income taxes
$
517
20.4 $
769
22.0 $
803
23.1
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 benefits
Accruals, including casualty and other claims
Other
Total gross deferred tax assets
Less valuation allowance
Net deferred tax assets
Deferred tax liabilities:
Property
Other
Total deferred tax liabilities
Deferred income taxes
December 31,
2020
2019
($ in millions)
$
218 $
93
198
509
(57)
452
222
89
202
513
(54)
459
(6,820)
(554)
(7,374)
(6,714)
(560)
(7,274)
$
(6,922) $
(6,815)
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 and
state investment tax credits that may not be utilized prior to their expiration. The total valuation allowance
increased by $3 million in 2020, $4 million in 2019, and $6 million in 2018.
K49
Uncertain Tax Positions
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
December 31,
2020
2019
($ in millions)
Balance at beginning of year
$
24 $
21
Additions based on tax positions related to the current year
Settlements with taxing authorities
Lapse of statutes of limitations
4
(4)
(2)
4
—
(1)
Balance at end of year
$
22 $
24
Included in the balance of unrecognized tax benefits at December 31, 2020 are potential benefits of $17 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.
The statute of limitations on Internal Revenue Service (IRS) examinations has expired for all years prior to 2017.
The IRS accepted our 2012 amended income tax return. As a result, we received a refund of $46 million and
recognized a tax benefit of $19 million in 2020. State income tax returns generally are subject to examination for a
period of three to four years after filing 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 appeal, or litigation.
5. Fair Value Measurements
FASB ASC 820-10, “Fair Value Measurements,” 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:
• quoted prices for similar assets or liabilities in active markets,
• quoted prices for identical or similar assets or liabilities in inactive markets,
• inputs other than quoted prices that are observable for the asset or liability, and
• 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.
The asset or liability’s fair value measurement level within the hierarchy is based on the lowest level of any input
that is significant to the fair value measurement.
K50
Fair Values of Financial Instruments
The fair values of “Cash and cash equivalents,” “Accounts receivable – net,” and “Accounts payable” approximate
carrying values because of the short maturity of these financial instruments. The carrying value of COLI is
recorded at cash surrender value and, accordingly, approximates fair value. There are no other assets or liabilities
measured at fair value on a recurring basis at December 31, 2020 or 2019. The carrying amounts and estimated fair
values, based on Level 1 inputs, of long-term debt consist of the following at December 31:
2020
2019
Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
($ in millions)
Long-term debt, including current maturities
$
(12,681) $
(16,664) $
(12,196) $
(14,806)
6. Investments
Long-term investments:
Equity method investments:
Conrail Inc.
TTX Company
Other
Total equity method investments
Corporate-owned life insurance at net cash surrender value
Other investments
Total long-term investments
Investment in Conrail
December 31,
2020
2019
($ in millions)
$ 1,446 $ 1,387
749
510
2,646
798
418
2,662
902
26
767
15
$ 3,590 $ 3,428
Through a limited liability company, we and CSX jointly own Conrail Inc. (Conrail), whose primary subsidiary is
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 the excess of the purchase price over Conrail’s net equity
using the principles of purchase accounting, based primarily on the estimated useful lives of Conrail’s depreciable
property and equipment, including the related deferred tax effect of the differences in book and tax accounting bases
for such assets, as all of the purchase price at acquisition was allocable to Conrail’s tangible assets and liabilities.
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. “Purchased
services and rents” and “Fuel” include expenses payable to CRC for operation of the Shared Assets Areas totaling
$129 million in 2020, $149 million in 2019, and $150 million in 2018. Future payments for access fees due to CRC
under the Shared Assets Areas agreements are as follows: $41 million in each of 2021 through 2023, and $17
million in 2024. 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 $6 million annually.
K51
In 2020, we converted $254 million of accounts payable into long-term advances from Conrail included in “Other
liabilities.” “Accounts payable” includes $56 million at December 31, 2020, and $264 million at December 31,
2019, due to Conrail for the operation of the Shared Assets Areas. “Other liabilities” includes $534 million and
$280 million at December 31, 2020 and 2019, respectively, for long-term advances from Conrail, maturing in 2050
that bear interest at an average rate of 1.31%.
At December 31, 2020, the difference between our investment in Conrail and our share of Conrail’s underlying net
equity was $494 million. Our equity in Conrail’s earnings, net of amortization, was $58 million for 2020, $53
million for 2019, and $55 million for 2018. These amounts offset the costs of operating the Shared Assets Areas
and are included in “Purchased services and rents.” Equity in Conrail’s earnings is included in the “Other – net”
line item within operating activities in the Consolidated Statements of Cash Flows.
Investment in TTX
We and eight other North American railroads jointly own TTX Company (TTX), a railcar pooling company that
provides its owner-railroads with standardized fleets of intermodal, automotive, and general use railcars at stated
rates. We have a 19.65% ownership interest in TTX.
Expenses incurred for use of TTX equipment are included in “Purchased services and rents.” This amounted to
$250 million, $244 million, and $262 million, respectively, for the years ended December 31, 2020, 2019 and 2018.
Our equity in TTX’s earnings offsets these costs and totaled $48 million for 2020, $58 million for 2019, and $61
million for 2018. Equity in TTX’s earnings is included in the “Other – net” line item within operating activities in
the Consolidated Statements of Cash Flows.
Impairment of Investment
In 2020, we recorded an other-than-temporary impairment of $99 million related to the carrying value of an equity
method investment. This non-cash impairment charge is recorded in “Purchased services and rents” on the 2020
Consolidated Statement of Income and had a $74 million impact on net income.
K52
7. Properties
December 31, 2020
Cost
Accumulated
Depreciation
($ in millions)
Net Book
Value
Depreciation
Rate (1)
Land
Roadway:
Rail and other track material
Ties
Ballast
Construction in process
Other roadway
Total roadway
Equipment:
Locomotives
Freight cars
Computers and software
Construction in process
Other equipment
Total equipment
$
2,394 $
— $
2,394
—
7,153
5,685
2,973
297
14,320
30,428
5,478
2,780
732
333
1,094
10,417
(1,892)
(1,601)
(774)
—
(3,926)
(8,193)
(1,911)
(1,023)
(391)
—
(399)
(3,724)
2.35%
3.41%
2.76%
—
2.71%
3.56%
2.59%
9.86%
—
4.70%
5,261
4,084
2,199
297
10,394
22,235
3,567
1,757
341
333
695
6,693
Other property
91
(68)
23
2.24%
Total properties
$
43,330 $
(11,985) $
31,345
K53
December 31, 2019
Cost
Accumulated
Depreciation
($ in millions)
Net Book
Value
Depreciation
Rate (1)
Land
Roadway:
Rail and other track material
Ties
Ballast
Construction in process
Other roadway
Total roadway
Equipment:
Locomotives
Freight cars
Computers and software
Construction in process
Other equipment
Total equipment
$
2,385 $
— $
2,385
—
7,024
5,536
2,868
360
14,261
30,049
5,973
2,988
732
291
1,082
11,066
(1,905)
(1,496)
(723)
—
(3,786)
(7,910)
(2,112)
(1,148)
(355)
—
(388)
(4,003)
2.30%
3.37%
2.72%
—
2.71%
3.66%
2.45%
9.68%
—
4.89%
5,119
4,040
2,145
360
10,475
22,139
3,861
1,840
377
291
694
7,063
Other property
96
(69)
27
1.05%
Total properties
$
43,596 $
(11,982) $
31,614
(1) Composite annual depreciation rate for the underlying assets, excluding the effects of the amortization of any
deficiency (or excess) that resulted from our depreciation studies.
In 2020, we sold $88 million of natural resource assets that were included in “Other current assets” on the
Consolidated Balance Sheet at December 31, 2019. We recorded a $49 million impairment loss in 2019 related to
these assets, which is reflected in “Gains and losses on properties” in the Consolidated Statement of Cash Flows for
the year ended December 31, 2019.
Loss on Asset Disposal
In 2020, we sold 703 locomotives deemed excess and no longer needed for railroad operations. We evaluated these
locomotive retirements and concluded they were abnormal (see Note 1). Accordingly, we recorded a $385 million
loss to adjust their carrying amount to their estimated fair value, which resulted in a $97 million tax benefit.
Capitalized Interest
Total interest cost incurred on debt was $639 million, $620 million, and $574 million during 2020, 2019 and 2018,
respectively, of which $14 million, $16 million, and $17 million was capitalized during 2020, 2019 and 2018,
respectively.
K54
8. Current Liabilities
Accounts payable:
Accounts and wages payable
Casualty and other claims (Note 17)
Vacation liability
Due to Conrail (Note 6)
Other
Total
Other current liabilities:
Interest payable
Current operating lease liability (Note 10)
Pension benefit obligations (Note 12)
Other
Total
9. Debt
Debt maturities are presented below:
Notes and debentures, with weighted-average interest rates as of December 31, 2020:
3.65% maturing to 2025
4.32% maturing 2026 to 2031
4.11% maturing 2037 to 2055
6.07% maturing 2097 to 2118
Finance leases
Discounts, premiums, and debt issuance costs
Total debt
Less current maturities
December 31,
2020
2019
($ in millions)
$
552 $
182
121
56
105
710
212
136
264
106
$
1,016 $
1,428
$
141 $
89
19
53
149
97
18
63
$
302 $
327
December 31,
2020
2019
($ in millions)
$
2,673 $
2,714
7,497
784
25
(1,012)
12,681
3,048
2,714
5,904
1,331
8
(809)
12,196
(579)
(316)
Long-term debt excluding current maturities
$
12,102 $
11,880
K55
Long-term debt maturities subsequent to 2021 are as follows:
2022
2023
2024
2025
2026 and subsequent years
Total
$
553
603
403
555
9,988
$
12,102
In May 2020, we issued $800 million of 3.05% senior notes due 2050, resulting in $790 million in net proceeds.
In May 2020, we also issued $800 million of 3.155% senior notes due 2055 in exchange for $554 million of
previously issued notes ($450 million at 5.1% due 2118, $42 million at 6% due 2111, $29 million at 7.9% due 2097,
$26 million at 6% due 2105, and $7 million at 7.05% due 2037). As part of the debt exchange, a $4 million loss on
extinguishment was recognized in “Other income – net.”
In May 2020, we also renewed and amended our accounts receivable securitization program, reducing our
maximum borrowing capacity from $450 million to $400 million. The term expires in May 2021. We had no
amounts outstanding at either December 31, 2020 or 2019, and our available borrowing capacity was $400 million
and $429 million, respectively.
The January 1, 2019 and December 31, 2018 “Cash, cash equivalents, and restricted cash” line item in the
Consolidated Statements of Cash Flows includes restricted cash of $88 million, which reflects deposits held by a
third-party bond agent as collateral for certain debt obligations which matured on October 1, 2019.
Credit Agreement and Debt Covenants
In March 2020, we renewed and amended our five-year credit agreement. We increased the program’s borrowing
capacity from $750 million to $800 million. The amended agreement expires in 2025 and provides for borrowings
at prevailing rates and includes covenants. We had no amounts outstanding under this facility at either
December 31, 2020, or 2019.
10. Leases
In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842),” and subsequent amendments, which
replaced existing lease guidance in GAAP and requires lessees to recognize ROU assets and lease liabilities on the
balance sheet for leases greater than twelve months and disclose key information about leasing arrangements. We
adopted the standard on January 1, 2019 using the modified retrospective method and used the effective date as our
date of initial application. Financial information will not be updated and the disclosures required under the new
standard will not be provided for dates and periods before January 1, 2019. Upon adoption of the standard, we
recognized ROU assets and corresponding lease liabilities of $586 million on the Consolidated Balance Sheet as of
January 1, 2019. There were no adjustments to “Retained income” on adoption.
The standard provides a number of optional practical expedients for transition. We elected the package of practical
expedients under the transition guidance which permitted us not to reassess under the new standard our prior
conclusions for lease identification and lease classification on expired or existing contracts and whether initial direct
costs previously capitalized would qualify for capitalization under FASB ASC 842. We also elected the practical
expedient related to land easements, which allowed us to not reassess our current accounting treatment for existing
agreements on land easements, which are not accounted for as leases. We did not elect the hindsight practical
expedient to determine the reasonably certain lease term for existing leases.
K56
The standard also provides practical expedients and recognition exemptions for an entity’s ongoing accounting
policy elections. We elected the short-term lease recognition exemption for all leases that qualify. This means, for
those leases that qualify, we do not recognize ROU assets or lease liabilities. We also elected the practical
expedient not to separate lease and non-lease components for all of our leases.
We are committed under long-term lease agreements for equipment, lines of road, and other property. Some of
these agreements are variable lease agreements that include usage-based payments. These agreements contain
payment provisions that depend on an index or rate, initially measured using the index or rate at the lease
commencement date, and are therefore not included in our future minimum lease payments. Our long-term lease
agreements do not contain any material restrictive covenants.
Our equipment leases have remaining terms of less than 1 year to 5 years and our lines of road and land leases have
remaining terms of less than 1 year to 137 years. Some of these leases include options to extend the leases for up to
99 years and some include options to terminate the leases within 30 days. Because we are not reasonably certain to
exercise these renewal options, the options are not considered in determining the lease term, and associated
payments are excluded from future minimum lease payments.
Leases with an initial term of twelve months or less are not recorded on the balance sheet. We recognize lease
expense for these leases on a straight-line basis over the lease term.
Operating lease amounts included on the Consolidated Balance Sheets are as follows:
Assets
ROU assets
Liabilities
Classification
Other assets
Current lease liabilities
Non-current lease liabilities
Other current liabilities
Other liabilities
Total lease liabilities
December 31,
2020
2019
($ in millions)
$
$
$
433 $
539
89 $
344
97
441
433 $
538
The components of total lease expense, primarily included in “Purchased services and rents,” are as follows:
Operating lease expense
Variable lease expense
Short-term lease expense
Total lease expense
2020
2019
($ in millions)
$
109 $
42
9
114
57
5
$
160 $
176
In March 2019, we entered into a non-cancellable lease for an office building with an estimated construction cost of
$550 million. The lease will commence upon completion of the construction (for which we are a construction
agent) of the office building which is expected to be in the second half of 2021. The initial lease term is five years
K57
with options to renew, purchase, or sell the office building at the end of the lease term. Upon lease commencement,
the ROU asset and lease liability will be determined and recorded. The lease also contains a residual value
guarantee of up to ninety percent of the total construction cost.
Other information related to operating leases is as follows:
December 31,
2020
2019
Weighted-average remaining lease term (years) on operating leases
8.18
8.25
Weighted-average discount rates on operating leases
3.50%
3.52%
As the rates implicit in most of our leases are not readily determinable, we use a collateralized incremental
borrowing rate based on the information available at the lease commencement date in determining the present value
of future payments. We use the portfolio approach and group leases into short-, medium-, and long-term categories,
applying the corresponding incremental borrowing rates to these categories.
During 2020 and 2019, respectively, ROU assets obtained in exchange for new operating lease liabilities were $22
million and $49 million. Cash paid for amounts included in the measurement of lease liabilities was $109 million
and $114 million in 2020 and 2019, respectively, and is included in operating cash flows. During 2019, cash
proceeds from a sale and leaseback transaction were $82 million and the gain on the transaction was $15 million.
Future minimum lease payments under non-cancellable operating leases are as follows:
2021
2022
2023
2024
2025
2026 and subsequent years
Total lease payments
Less: Interest
Present value of lease liabilities
December 31, 2020
($ in millions)
$
$
101
76
67
58
57
145
504
71
433
K58
2020
2021
2022
2023
2024
2025 and subsequent years
Total lease payments
Less: Interest
Present value of lease liabilities
December 31, 2019
($ in millions)
$
$
110
104
79
70
61
206
630
92
538
Operating lease expense accounted for under ASC 840 “Leases” in 2018 included $102 million for minimum rents
and $102 million for contingent rents. Contingent rents are primarily comprised of usage-based payments for
equipment under service contracts.
11. Other Liabilities
Long-term advances from Conrail (Note 6)
Non-current operating lease liability (Note 10)
Net pension benefit obligations (Note 12)
Net other postretirement benefit obligations (Note 12)
Casualty and other claims (Note 17)
Deferred compensation
Other
Total
12. Pensions and Other Postretirement Benefits
December 31,
2020
2019
($ in millions)
$
534 $
344
340
306
169
107
187
280
441
302
287
171
104
159
$
1,987 $
1,744
We have both funded and unfunded defined benefit pension plans covering eligible employees. We also provide
specified health care benefits to eligible retired employees; these plans can be amended or terminated at our option.
Under our self-insured retiree health care plan, for those participants who are not Medicare-eligible, certain health
care expenses are covered for retired employees and their dependents, reduced by any deductibles, coinsurance, and,
in some cases, coverage provided under other group insurance policies. Eligible retired participants and their
spouses who are Medicare-eligible are not covered under the self-insured retiree health care plan, but instead are
provided with an employer-funded health reimbursement account which can be used for reimbursement of health
insurance premiums or eligible out-of-pocket medical expenses.
K59
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
Plan amendment
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
2019
2020
Other Postretirement
Benefits
2020
2019
($ in millions)
$
2,588 $
40
74
294
—
(151)
2,845
2,371 $
35
93
235
—
(146)
2,588
2,462
345
19
(151)
2,675
2,105
485
18
(146)
2,462
457 $
6
12
35
—
(39)
471
170
21
13
(39)
165
466
6
17
28
(18)
(42)
457
158
34
20
(42)
170
Funded status at end of year
$
(170) $
(126) $
(306) $
(287)
Amounts recognized in the Consolidated
Balance Sheets:
Other assets
Other current liabilities
Other liabilities
$
189 $
(19)
(340)
194 $
(18)
(302)
— $
—
(306)
—
—
(287)
Net amount recognized
$
(170) $
(126) $
(306) $
(287)
Amounts included in accumulated other comprehensive
loss (before tax):
Net loss
Prior service cost (benefit)
$
869 $
—
781 $
1
57 $
(228)
29
(253)
Our accumulated benefit obligation for our defined benefit pension plans is $2.6 billion and $2.3 billion at
December 31, 2020 and 2019, respectively. Our unfunded pension plans, included above, which in all cases have
no assets, had projected benefit obligations of $359 million and $320 million at December 31, 2020 and 2019,
respectively, and had accumulated benefit obligations of $330 million and $292 million at December 31, 2020 and
2019, respectively.
K60
Pension and Other Postretirement Benefit Cost Components
Pension benefits:
Service cost
Interest cost
Expected return on plan assets
Amortization of net losses
Amortization of prior service cost
Net cost (benefit)
Other postretirement benefits:
Service cost
Interest cost
Expected return on plan assets
Amortization of prior service benefit
2020
2019
($ in millions)
2018
$
$
$
40 $
74
(190)
51
1
35 $
93
(179)
43
1
39
83
(177)
57
—
(24) $
(7) $
2
6 $
12
(14)
(25)
6 $
17
(14)
(24)
7
15
(15)
(24)
Net benefit
$
(21) $
(15) $
(17)
Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income
Net loss arising during the year
Amortization of net losses
Amortization of prior service (cost) benefit
Total recognized in other comprehensive income
Total recognized in net periodic cost and other comprehensive income
2020
Pension
Benefits
Other
Postretirement
Benefits
($ in millions)
$
$
$
139 $
(51)
(1)
87 $
63 $
28
—
25
53
32
Net losses arising during the year for both pension benefits and other postretirement benefits were due primarily to
decreases in discount rates, partially offset by higher actual returns on plan assets.
The estimated net losses for the pension plans that will be amortized from accumulated other comprehensive loss
into net periodic cost over the next year are $66 million. The estimated net losses and prior service benefit for the
other postretirement benefit plans that will be amortized from accumulated other comprehensive loss into net
periodic benefit over the next year is $23 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 - service cost
Discount rate - interest cost
Return on assets in plans
Future salary increases
Other postretirement benefits cost:
Discount rate - service cost
Discount rate - interest cost
Return on assets in plans
Health care trend rate
2020
2019
2018
2.67%
4.21%
3.38%
4.21%
4.33%
4.21%
2.27%
3.13%
4.18%
3.71%
2.92%
8.25%
4.21%
3.41%
2.69%
8.00%
6.25%
4.55%
3.99%
8.25%
4.21%
4.39%
3.83%
8.00%
6.50%
4.01%
3.33%
8.25%
4.21%
3.83%
3.13%
8.00%
6.30%
To determine the discount rates used to measure our benefit obligations, 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.
We use a spot rate approach to estimate the service cost and interest cost components of net periodic benefit cost for
our pension and other postretirement benefit plans.
Health Care Cost Trend Assumptions
For measurement purposes at December 31, 2020, increases in the per capita cost of pre-Medicare covered health
care benefits were assumed to be 6.00% for 2021. We assume the rate will ratably decrease to an ultimate rate of
5.0% for 2025 and remain at that level thereafter.
Assumed health care cost trend rates affect the amounts reported in the financial statements. To illustrate, a one-
percentage point change in the assumed health care cost trend would have the following effects:
Increase (decrease) in:
Total service and interest cost components
Postretirement benefit obligation
K62
One-percentage Point
Increase
Decrease
($ in millions)
$
1 $
8
(1)
(8)
Asset Management
Eleven investment firms manage our defined benefit pension plan’s assets under investment guidelines approved by
our Benefits Investment Committee that is composed 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’s assets. Fixed income
investments must consist predominantly of securities rated investment grade or higher. Equity investments must be
in liquid securities listed on national exchanges. No investment is permitted in our securities (except through
commingled pension trust funds).
Our pension plan’s 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,
2019
2020
52%
24%
22%
2%
50%
24%
24%
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, 2020 of 68% in equity securities and 32% in debt securities compared with 67% in
equity securities and 33% in debt securities at December 31, 2019. The target asset allocation for equity is between
50% and 75% of the plan’s assets.
The plans’ assumed future returns are based principally on the asset allocations and historical returns for the plans’
asset classes determined from both actual plan returns and, over longer time periods, expected market returns for
those asset classes. For 2021, we assume an 8.00% return on pension plan assets.
K63
Fair Value of Plan Assets
The 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 the security at the close of the active market.
Common collective trusts: The readily determinable fair value is based on the published fair value per unit
of the trusts. The common collective trusts hold equity securities, fixed income securities and cash and cash
equivalents.
Fixed income securities: Valued based on quotes received from independent pricing services or at an
estimated price at which a dealer would pay for the security at year end using observable market-based
inputs.
Commingled funds: The readily determinable fair value is based on the published fair value per unit of the
funds. The commingled funds hold equity securities.
Cash and cash equivalents: Short-term Treasury 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.
The following table sets forth the pension plan’s assets by valuation technique level, within the fair value hierarchy.
There were no level 3 valued assets at December 31, 2020 or 2019.
Common stock
Common collective trusts:
International equity securities
Debt securities
Fixed income securities:
Government and agencies securities
Corporate bonds
Mortgage and other asset-backed securities
Commingled funds
Cash and cash equivalents
Total investments
Level 1
December 31, 2020
Level 2
($ in millions)
Total
$
1,483 $
— $
1,483
—
—
—
—
—
—
60
399
297
146
117
24
149
—
399
297
146
117
24
149
60
$
1,543 $
1,132 $
2,675
K64
Common stock
Common collective trusts:
International equity securities
Debt securities
Fixed income securities:
Government and agencies securities
Corporate bonds
Mortgage and other asset-backed securities
Commingled funds
Cash and cash equivalents
Total investments
Level 1
December 31, 2019
Level 2
($ in millions)
Total
$
1,329 $
— $
1,329
—
—
—
—
—
—
50
377
303
172
84
26
121
—
377
303
172
84
26
121
50
$
1,379 $
1,083 $
2,462
The 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 but may retain cash at times as well. The U.S. stock account and U.S. bond account are
valued based on readily determinable fair values.
The other postretirement benefit plan assets consisted of trust-owned life insurance with fair values of $165 million
and $170 million at December 31, 2020 and 2019, respectively, and are valued under level 2 of the fair value
hierarchy. There were no level 1 or level 3 valued assets.
Contributions and Estimated Future Benefit Payments
In 2021, we expect to contribute approximately $19 million to our unfunded pension plans for payments to
pensioners and approximately $36 million to our other postretirement benefit plans for retiree health and death
benefits. We do not expect to contribute to our funded pension plan in 2021.
Benefit payments, which reflect expected future service, as appropriate, are expected to be paid as follows:
Pension
Benefits
Other
Postretirement
Benefits
($ in millions)
$
147 $
146
145
145
144
719
36
35
33
32
31
142
2021
2022
2023
2024
2025
Years 2026 – 2030
K65
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 craft
employees. Premiums under this plan are expensed as incurred and totaled $22 million in 2020, $31 million in
2019, and $35 million in 2018.
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, totaled $21 million in 2020, $22 million in 2019, and $23 million in 2018.
13. Stock-Based Compensation
Under the stockholder-approved LTIP, the Compensation Committee (Committee), which is made up of
nonemployee members of the Board, or the Chief Executive Officer (when delegated authority by such 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 104,125,000 shares of our Common
Stock, of which 8,995,582 remain available for future grants as of December 31, 2020.
The number of shares remaining for issuance under the LTIP is 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 6,000,000 shares of Common Stock. We use newly issued shares to satisfy any exercises and
awards under the LTIP and the TSOP.
The LTIP also permits the payment, on a current or a deferred basis and in cash or in stock, 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, we have no further obligation to make any dividend equivalent
payments unless employment of the participant is terminated as a result of qualifying retirement or disability.
Should an employee terminate employment, they are not required to forfeit dividend equivalent payments already
received. Outstanding PSUs do not receive dividend equivalent payments.
The Committee granted stock options, RSUs and PSUs pursuant to the LTIP for the last three years as follows:
2020
2019
2018
Granted
Granted
Granted
Weighted-
Average
Grant-Date
Fair Value
52.05
210.11
212.66
43,770 $
178,190
78,830
Weighted-
Average
Grant-Date
Fair Value
45.74
164.47
160.97
47,360 $
219,710
102,250
Weighted-
Average
Grant-Date
Fair Value
41.70
148.37
147.47
40,960 $
217,290
92,314
Stock options
RSUs
PSUs
Beginning in 2018, recipients of certain RSUs and PSUs pursuant to the LTIP who retire prior to October 1st will
forfeit awards received in the current year. Receipt of certain LTIP awards is contingent on the recipient having
executed a non-compete agreement with the company.
K66
We account for our grants of stock options, RSUs, PSUs, and dividend equivalent payments in accordance with
FASB ASC 718, “Compensation - Stock Compensation.” 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. Compensation cost for the awards is recognized on a straight-line basis over the requisite service period for
the entire award. Related compensation costs and tax benefits during the years were:
2020
2019
($ in millions)
2018
Stock-based compensation expense
Total tax benefit
$
28 $
44
53 $
37
47
33
Stock Options
Option exercise prices 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. Holders of the
options granted under the LTIP 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.
For all years, options granted under the LTIP and the TSOP 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 the grant date or the date of the optionee’s retirement or death.
The fair value of each option awarded was measured on the date of grant using the Black-Scholes valuation model.
Expected volatility is based on implied volatility 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.
Historical exercise data is used to estimate the average expected option term. The average risk-free interest rate is
based on the U.S. Treasury yield curve in effect at the time of grant. A dividend yield of zero was used for the LTIP
options during the vesting period. For 2020, 2019, and 2018, a dividend yield of 1.76%, 2.06%, and 1.94%,
respectively, was used for all vested LTIP options.
The assumptions for the LTIP grants for the last three years are shown in the following table:
Average expected volatility
Average risk-free interest rate
Average expected option term
2020
2019
2018
22%
1.47%
7.5 years
23%
2.56%
7.2 years
24%
2.55%
7.2 years
K67
A summary of changes in stock options is presented below:
Outstanding at December 31, 2019
Granted
Exercised
Forfeited
Stock
Options
Weighted-
Average
Exercise
Price
2,677,449 $
43,770
(1,171,786)
(23,308)
91.51
213.54
86.12
156.02
Outstanding at December 31, 2020
1,526,125
98.17
The aggregate intrinsic value of options outstanding at December 31, 2020 was $213 million with a weighted-
average remaining contractual term of 4.6 years. Of these options outstanding, 1,220,685 were exercisable and had
an aggregate intrinsic value of $183 million with a weighted-average exercise price of $87.75 and a weighted-
average remaining contractual term of 2.9 years.
The following table provides information related to options exercised for the last three years:
Options exercised
Total intrinsic value
Cash received upon exercise
Related tax benefits realized
2020
2019
($ in millions)
2018
1,171,786
770,597
$
144 $
98
29
86 $
53
18
840,175
72
58
16
At December 31, 2020, total unrecognized compensation related to options granted under the LTIP was $1 million,
and is expected to be recognized over a weighted-average period of approximately 2.4 years.
Restricted Stock Units
Beginning in 2018, RSUs granted primarily have a four-year ratable restriction period and will be settled through
the issuance of shares of Common Stock. RSUs granted prior to 2018 have a five-year restriction period and will
also be settled through the issuance of shares of Common Stock. Certain RSU grants include cash dividend
equivalent payments during the restriction period in an amount equal to regular quarterly dividends paid on
Common Stock.
RSUs vested
Common Stock issued net of tax withholding
Related tax benefit realized
204,665
146,047
166,197
119,346
$
4 $
2 $
160,200
99,968
3
2020
2019
($ in millions)
2018
K68
A summary of changes in RSUs is presented below:
Nonvested at December 31, 2019
Granted
Vested
Forfeited
Nonvested at December 31, 2020
Weighted-
Average
Grant-Date
Fair Value
RSUs
666,172 $
178,190
(204,665)
(39,457)
127.77
210.11
130.87
171.33
600,240
148.29
At December 31, 2020, total unrecognized compensation related to RSUs was $29 million, and is expected to be
recognized over a weighted-average period of approximately 2.4 years.
Performance Share Units
PSUs provide for awards based on the achievement of certain predetermined corporate performance goals at the end
of a three-year cycle and are settled through the issuance of shares of Common Stock. All PSUs will earn out based
on the achievement of performance conditions and some will also earn out based on a market condition. The market
condition fair value was measured on the date of grant using a Monte Carlo simulation model.
2020
2019
($ in millions)
2018
PSUs earned
Common Stock issued net of tax withholding
Related tax benefit realized
235,935
156,477
331,099
221,241
$
7 $
9 $
154,189
94,399
3
A summary of changes in PSUs is presented below:
Balance at December 31, 2019
Granted
Earned
Unearned
Forfeited
Balance at December 31, 2020
Weighted-
Average
Grant-Date
Fair Value
PSUs
456,510 $
78,830
(235,935)
(33,705)
(25,600)
114.04
212.66
89.70
58.77
177.41
240,100
171.34
At December 31, 2020, total unrecognized compensation related to PSUs granted under the LTIP was $5 million,
and is expected to be recognized over a weighted-average period of approximately 1.7 years.
K69
Shares Available and Issued
Shares of Common Stock available for future grants and issued in connection with all features of the LTIP and the
TSOP at December 31, were as follows:
Available for future grants:
LTIP
TSOP
Issued:
LTIP
TSOP
14. Stockholders’ Equity
Common Stock
2020
2019
2018
8,995,582
435,699
9,294,726
434,401
8,644,108
422,973
1,270,208
204,102
852,869
258,315
820,746
213,796
Common Stock is reported net of shares held by our consolidated subsidiaries (Treasury Shares). Treasury Shares
at December 31, 2020 and 2019 amounted to 20,320,777, with a cost of $19 million at both dates.
Accumulated Other Comprehensive Loss
The components of “Other comprehensive income (loss)” reported in the Consolidated Statements of
Comprehensive Income and changes in the cumulative balances of “Accumulated other comprehensive loss”
reported in the Consolidated Balance Sheets consisted of the following:
Balance
at
Beginning
of Year
Net
Income
(Loss)
Reclassification
Adjustments
Balance
at End
of Year
($ in millions)
Year ended December 31, 2020
Pensions and other postretirement liabilities
Other comprehensive income of equity investees
$
(421) $
(70)
(125) $
2
20 $
—
(526)
(68)
Accumulated other comprehensive loss
$
(491) $
(123) $
20 $
(594)
Year ended December 31, 2019
Pensions and other postretirement liabilities
Other comprehensive loss of equity investees
$
(497) $
(66)
$
61
(4)
15 $
—
(421)
(70)
Accumulated other comprehensive loss
$
(563) $
57
$
15 $
(491)
K70
Other Comprehensive Income (Loss)
“Other comprehensive income (loss)” reported in the Consolidated Statements of Comprehensive Income consisted
of the following:
Year ended December 31, 2020
Net 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
Pretax
Amount
Tax
(Expense)
Benefit
($ in millions)
Net-of-Tax
Amount
$
(167) $
27
42 $
(7)
(140)
2
35
—
(125)
20
(105)
2
Other comprehensive loss
$
(138) $
35 $
(103)
Year ended December 31, 2019
Net gain arising during the year:
Pensions and other postretirement benefits
Reclassification adjustments for costs included in net income
Subtotal
Other comprehensive loss of equity investees
$
81 $
20
(20) $
(5)
101
(25)
(4)
—
61
15
76
(4)
Other comprehensive income
$
97 $
(25) $
72
Year ended December 31, 2018
Net 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
$
(181) $
33
45 $
(8)
(148)
(9)
37
1
(136)
25
(111)
(8)
Other comprehensive loss
$
(157) $
38 $
(119)
15. Stock Repurchase Programs
We repurchased and retired 7.4 million, 11.3 million, and 17.1 million shares of Common Stock under our stock
repurchase programs in 2020, 2019, and 2018, respectively, at a cost of $1.4 billion, $2.1 billion, and $2.8 billion,
respectively.
K71
On September 26, 2017, our Board of Directors authorized the repurchase of up to an additional 50 million shares of
Common Stock through December 31, 2022. As of December 31, 2020, 20.7 million shares remain authorized for
repurchase.
16. Earnings Per Share
The following table sets forth the calculation of basic and diluted earnings per share:
Basic
2019
Diluted
2019
2018
2020
($ in millions except per share amounts, shares in millions)
2018
2020
Net income
Dividend equivalent payments
$ 2,013 $ 2,722 $ 2,666 $ 2,013 $ 2,722 $ 2,666
(1)
(6)
(5)
(2)
(3)
—
Income available to common stockholders
$ 2,010 $ 2,717 $ 2,660 $ 2,011 $ 2,722 $ 2,665
Weighted-average shares outstanding
Dilutive effect of outstanding options
and share-settled awards
Adjusted weighted-average shares outstanding
255.1
263.3
277.7
255.1
263.3
277.7
1.5
256.6
2.3
265.6
2.5
280.2
Earnings per share
$ 7.88 $ 10.32 $ 9.58 $ 7.84 $ 10.25 $ 9.51
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 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. There are no options
excluded from the dilution calculations due to exercise prices exceeding the average market price of Common Stock
for each of the years ended December 31, 2020, 2019, and 2018.
17. Commitments and Contingencies
Lawsuits
We and/or certain subsidiaries are defendants in numerous lawsuits and other claims relating principally to railroad
operations. When we conclude that it is probable that a liability has been incurred and the amount of the liability
can be reasonably estimated, it is accrued through a charge to earnings and, if material, disclosed below. While the
ultimate amount of liability incurred in any of these lawsuits and claims is dependent on future developments, in our
opinion, the recorded liability is adequate to cover the future payment of such liability and claims. However, the
final outcome of any of these lawsuits and claims cannot be predicted with certainty, and unfavorable or unexpected
outcomes could result in additional accruals that could be significant to results of operations in a particular year or
quarter. Any adjustments to the recorded liability will be reflected in earnings in the periods in which such
adjustments become known. For lawsuits and other claims where a loss may be reasonably possible, but not
probable, or is probable but not reasonably estimable, no accrual is established but the matter, if potentially
material, is disclosed below. We routinely review relevant information with respect to our lawsuits and other claims
and update our accruals, disclosures and estimates of reasonably possible loss based on such reviews.
K72
In 2007, various antitrust class actions filed against us and other Class I railroads in various Federal district courts
regarding fuel surcharges were consolidated in the District of Columbia by the Judicial Panel on Multidistrict
Litigation. In 2012, the court certified the case as a class action. The defendant railroads appealed this certification,
and the Court of Appeals for the District of Columbia vacated the District Court’s decision and remanded the case
for further consideration. On October 10, 2017, the District Court denied class certification. The decision was
upheld by the Court of Appeals on August 16, 2019. Since that decision, various individual cases have been filed in
multiple jurisdictions and also consolidated in the District of Columbia. We believe the allegations in the
complaints are without merit and intend to vigorously defend the cases. We do not believe the outcome of these
proceedings will have a material effect on our financial position, results of operations, or liquidity.
In 2018, a lawsuit was filed against one of our subsidiaries by the minority owner in a jointly-owned terminal
railroad company in which our subsidiary has the majority ownership. The lawsuit alleged violations of various
state laws and federal antitrust laws. It is reasonably possible that we could incur a loss in the case; however, we
intend to vigorously defend the case and believe that we will prevail. The potential range of loss cannot be estimated
at this time.
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 personal injury and occupational claims are subject to FELA, which is applicable only to railroads. FELA’s
fault-based tort system produces results that are unpredictable and inconsistent as compared with a no-fault
workers’ compensation 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
reasonably estimable.
Employee personal injury claims – The largest component of claims expense is employee personal injury
costs. The independent actuarial firm we engage provides quarterly studies to aid in valuing our employee personal
injury liability and estimating personal injury expense. The actuarial firm studies our historical patterns of reserving
for claims and subsequent settlements, taking into account relevant outside influences. The actuarial firm uses the
results of these analyses to estimate the ultimate amount of liability. We adjust the liability quarterly based upon
our assessment and the results of the study. The accuracy of our estimate of the liability is subject to inherent
limitation given the difficulty of predicting future events such as jury decisions, court interpretations, or legislative
changes. As a result, actual claim settlements may vary from the estimated liability recorded.
Occupational claims – Occupational claims include injuries and illnesses alleged to be caused by exposures which
occur over time as opposed to injuries or illnesses caused by a specific accident or event. Types of occupational
claims commonly seen allege exposure to asbestos and other claimed toxic substances resulting in respiratory
diseases or cancer. Many such claims are being asserted by former or retired employees, some of whom have not
been employed in the rail industry for decades. The independent actuarial firm provides an estimate of the
occupational claims 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. The actuarial firm’s estimate of ultimate loss includes a provision for
those claims that have been incurred but not reported. This provision is derived by analyzing industry data and
projecting our experience. We adjust the liability quarterly based upon our assessment and the results of the
study. However, it is possible that the recorded liability may not be adequate to cover the future payment of
claims. Adjustments to the recorded liability are reflected in operating expenses in the periods in which such
adjustments become known.
K73
Third-party claims – We record a liability for third-party claims including those for highway crossing accidents,
trespasser and other injuries, property damage, and lading damage. The actuarial firm assists us with the calculation
of potential liability for third-party claims, except lading damage, based upon our experience including the number
and timing of incidents, amount of payments, settlement rates, number of open claims, and legal defenses. We
adjust the liability quarterly based upon our assessment and the results of the study. Given the inherent uncertainty
in regard to the ultimate outcome of third-party claims, it is possible that the actual loss may differ from the
estimated liability recorded.
Environmental Matters
We are subject to various jurisdictions’ environmental laws and regulations. We record a liability where such
liability or loss is probable and reasonably estimable. Environmental specialists regularly participate in ongoing
evaluations of all known sites and in determining any necessary adjustments to liability estimates.
Our Consolidated Balance Sheets include liabilities for environmental exposures of $54 million at December 31,
2020, and $56 million at December 31, 2019, of which $15 million is classified as a current liability at the end of
both 2020 and 2019. At December 31, 2020, the liability represents our estimates of the probable cleanup,
investigation, and remediation costs based on available information at 100 known locations and projects compared
with 110 locations and projects at December 31, 2019. At December 31, 2020, seventeen sites accounted for $40
million of the liability, and no individual site was considered to be material. We anticipate that most of this liability
will be paid out over five years; however, some costs will be paid out over a longer period.
At eleven 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 Environmental Protection Agency or
comparable state authorities), estimates of our ultimate potential financial exposure for a given site or in the
aggregate for all such sites can change over time because of the widely varying costs of currently available cleanup
techniques, unpredictable contaminant recovery and reduction rates associated with available cleanup technologies,
the likely development of new cleanup technologies, the difficulty of determining in advance the nature and full
extent of contamination and each potential participant’s share of any estimated loss (and that participant’s ability to
bear it), and evolving statutory and regulatory standards governing liability.
The risk of incurring environmental liability for acts and omissions, past, present, and future, is inherent in the
railroad business. Some of the commodities we transport, particularly those classified as hazardous materials, pose
special risks that we work diligently to reduce. In addition, several of our subsidiaries own, or have owned, land
used as operating property, or which is leased and operated by others, or held for sale. Because environmental
problems that are latent or undisclosed may exist on these properties, there can be no assurance that we will not
incur environmental liabilities or costs with respect to one or more of them, the amount and materiality of which
cannot be estimated reliably at this time. Moreover, lawsuits and claims involving these and potentially other
unidentified environmental sites and matters are likely to arise from time to time. The resulting liabilities could
have a significant effect on financial position, results of operations, or liquidity in a particular year or quarter.
Based on our assessment of the facts and circumstances now known, we believe we have recorded the probable and
reasonably estimable costs for dealing with those environmental matters of which we are aware. Further, we
believe that it is unlikely that any known matters, either individually or in the aggregate, will have a material
adverse effect on our financial position, results of operations, or liquidity.
K74
Insurance
We purchase insurance covering legal liabilities for bodily injury and property damage to third parties. This
insurance provides coverage above $75 million and below $800 million ($1.1 billion for specific perils) per
occurrence and/or policy year. In addition, we purchase insurance covering damage to property owned by us or in
our care, custody, or control. This insurance covers approximately 85% of potential losses above $75 million and
below $275 million per occurrence and/or policy year.
Purchase Commitments
At December 31, 2020, we had outstanding purchase commitments totaling approximately $1.1 billion for
locomotives, locomotive diesel fuel, track material, long-term service contracts, track and yard expansion projects in
connection with our capital programs, freight cars and containers through 2030.
Change-In-Control Arrangements
We have compensation agreements with certain officers and key employees that become operative only upon a
change in control of Norfolk Southern, as defined in those agreements. The agreements provide generally for
payments based on compensation at the time of a covered individual’s involuntary or other specified termination
and for certain other benefits.
Indemnifications
In a number of instances, we have agreed to indemnify lenders for additional costs they may bear as a result of
certain changes in laws or regulations applicable to their loans. Such changes may include impositions or
modifications with respect to taxes, duties, reserves, liquidity, capital adequacy, special deposits, and similar
requirements relating to extensions of credit by, deposits with, or the assets or liabilities of such lenders. The nature
and timing of changes in laws or regulations applicable to our financings are inherently unpredictable, and therefore
our exposure in connection with the foregoing indemnifications cannot be quantified. No liability has been
recorded related to these indemnifications.
K75
NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES
QUARTERLY FINANCIAL DATA
(Unaudited)
2020
Railway operating revenues
Income from railway operations
Net income
Earnings per share:
Basic
Diluted
2019
Railway operating revenues
Income from railway operations
Net income
Earnings per share:
Basic
Diluted
Three Months Ended
March 31
June 30
September 30 December 31
($ in millions, except per share amounts)
$
$
2,625 $
568
381
2,085 $
610
392
1.48
1.47
1.53
1.53
2,840 $
966
677
2,925 $
1,065
722
2.53
2.51
2.72
2.70
2,506 $
840
569
2.23
2.22
2,841 $
996
657
2.50
2.49
2,573
984
671
2.65
2.64
2,690
962
666
2.56
2.55
K76
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
Item 9A. Controls and Procedures
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, 2020. Based on such
evaluation, our officers have concluded that, at December 31, 2020, our disclosure controls and procedures were
effective to ensure that information required to be disclosed in our reports under the Exchange Act is recorded,
processed, summarized, and reported, within the time period specified in the SEC’s rules and 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.
Management’s Annual Report on 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.
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 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, 2020. These reports appear in Item 8 of this report on Form 10-K.
Changes in Internal Control Over Financial Reporting
During the fourth quarter of 2020, 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.
K77
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 appearing under the caption “Election of Directors,” under the caption “Delinquent
Section 16(a) Reports,” under the caption “Committees of the Board,” under the caption “Shareholder
Recommendations and Nominations,” and under the caption “The Thoroughbred Code of Ethics” in our definitive
Proxy Statement for our 2021 Annual Meeting of Stockholders, 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 hereof beginning under “Information about our Executive
Officers.”
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:
•
•
•
under the caption “Compensation of Directors;”
under the caption “Compensation Discussion and Analysis,” the information appearing in the “Summary
Compensation Table” and the “2020 Grants of Plan-Based Awards” table, including the narrative to such
tables, the “Outstanding Equity Awards at Fiscal Year-End 2020” and “Option Exercises and Stock Vested
in 2020” tables, and the tabular and narrative information appearing under the subcaptions “Retirement
Benefits,” “Deferred Compensation,” and “Potential Payments Upon a Change in Control or Other
Termination of Employment;” and,
under the captions “Compensation Committee Interlocks and Insider Participation,” “Compensation Policy
Risk Assessment,” and “Compensation Committee Report,”
in each case included in our definitive Proxy Statement for our 2021 Annual Meeting of Stockholders, which
definitive Proxy Statement will be filed electronically with the SEC pursuant to Regulation 14A.
K78
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 Part III, Item 12, is incorporated herein by reference from the information appearing
under the caption “Beneficial Ownership of Stock” in our definitive Proxy Statement for our 2021 Annual Meeting
of Stockholders, which definitive Proxy Statement will be filed electronically with the SEC pursuant to Regulation
14A.
Equity Compensation Plan Information (at December 31, 2020)
Plan
Category
Equity compensation plans
approved by securities holders(2)
Equity compensation plans
not approved by securities holders
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 (1)
(c)
2,387,953 (3) $
100.09 (5)
8,995,582
258,359 (4)
88.72
435,699 (6)
Total
2,646,312
9,431,281
Includes options, RSUs and PSUs granted under LTIP that will be settled in shares of Common Stock.
(1) Excludes securities reflected in column (a).
(2) LTIP.
(3)
(4) TSOP.
(5) Calculated without regard to 1,120,187 outstanding RSUs and PSUs at December 31, 2020.
(6) Reflects shares remaining available for grant under TSOP.
Norfolk Southern Corporation Long-Term Incentive Plan
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 Norfolk Southern Corporation (the
Corporation). The Board of Directors amended LTIP on January 23, 2015, which amendment was approved by
shareholders on May 14, 2015, to include the reservation for issuance of an additional 8,000,000 shares of
authorized but unissued Common Stock.
The amended LTIP 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 SAR, or (ii) by 1.61 for an award made in the form other than an option or stock-settled
SAR. 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.
K79
Non-employee Directors, officers, and other key employees residing in the United States of America or Canada are
eligible for selection to receive LTIP awards. Under LTIP, the Committee, or the Corporation’s chief executive
officer to the extent the Committee delegates award-making authority pursuant to LTIP, may grant incentive stock
options, nonqualified stock options, SARs, RSUs, restricted shares, PSUs, and performance shares. In addition,
dividend equivalent payments may be awarded for options, RSUs, and PSUs. Awards under LTIP may be made
subject to forfeiture under certain circumstances and the Committee may establish such other terms and conditions
for the awards as provided in LTIP.
The option price is 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 that adjustments may be made in the event of changes in our
capital structure or Common Stock.
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 2020 PSU awards, corporate performance will be based directly on return
on average capital invested, with total return to stockholders serving as a modifier, and will be settled in shares of
Common Stock.
RSUs are payable in cash or in shares of Common Stock at the end of a restriction period. 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. RSUs will be settled in shares of Common Stock.
Norfolk Southern Corporation Thoroughbred Stock Option Plan
Our Board of Directors adopted TSOP on January 26, 1999, to promote the success of our company by providing an
opportunity for management employees to acquire a proprietary interest in our company and thereby to provide an
additional incentive to management 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 management employees residing in the U.S. or Canada are eligible for selection to receive TSOP
awards. Under TSOP, the Committee, or the Corporation’s chief executive officer to the extent the Committee
delegates award-making authority pursuant to TSOP, 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.
K80
Norfolk Southern Corporation Directors’ Restricted Stock Plan (Plan)
The Plan was adopted on January 1, 1994, and was 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.
Effective January 23, 2015, the Board amended the Plan to provide that no additional awards will be made under the
Plan. Prior to that amendment, only non-employee Directors who are not and never have been employees of our
company were eligible to participate in the Plan. Upon becoming a Director, each eligible Director received a one-
time grant of 3,000 restricted shares of Common Stock. No additional shares may be granted under the Plan. No
individual member of the Board exercised 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 ends
on the earlier of the recipient’s death or the day after 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
forfeit the restricted shares if they cease to serve as a Director of our company for reasons other than their disability,
retirement, or death.
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
reference from the information appearing under the caption “Related Persons Transactions” and under the caption
“Director Independence” in our definitive Proxy Statement for our 2021 Annual Meeting of Stockholders, which
definitive Proxy Statement will be filed electronically with the SEC pursuant to Regulation 14A.
Item 14. Principal Accounting 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 caption “Ratification of Appointment of Independent Registered
Public Accounting Firm” in our definitive Proxy Statement for our 2021 Annual Meeting of Stockholders, which
definitive Proxy Statement will be filed electronically with the SEC pursuant to Regulation 14A.
K81
Page
K34
K35
K39
K40
K41
K42
K43
K44
K95
PART IV
NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES
Item 15. Exhibits and Financial Statement Schedule
(A)
The following documents are filed as part of this report:
1.
Index to Financial Statements
Report of Management
Reports of Independent Registered Public Accounting Firm
Consolidated Statements of Income, Years ended December 31, 2020, 2019, and 2018
Consolidated Statements of Comprehensive Income, Years ended December 31, 2020,
2019, and 2018
Consolidated Balance Sheets at December 31, 2020 and 2019
Consolidated Statements of Cash Flows, Years ended December 31, 2020, 2019, and
2018
Consolidated Statements of Changes in Stockholders’ Equity, Years ended December 31,
2020, 2019, and 2018
Notes to Consolidated Financial Statements
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 – Valuation and Qualifying Accounts
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.
3. Exhibits
Description
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 by reference to Exhibit 2.1 to Norfolk Southern
Corporation’s Form 8-K filed on September 2, 2004. (SEC File No. 001-08339)
Articles of Incorporation and Bylaws –
The Restated Articles of Incorporation of Norfolk Southern Corporation are incorporated
by reference to Exhibit 3(i) to Norfolk Southern Corporation’s 10-K filed on March 5,
2001. (SEC File No. 001-08339)
An amendment to the Articles of Incorporation of Norfolk Southern Corporation is
incorporated by reference to Exhibit 3(i) to Norfolk Southern Corporation’s Form 8-K
filed on May 18, 2010. (SEC File No. 001-08339)
An amendment to the Articles of Incorporation of Norfolk Southern Corporation is
incorporated by reference to Exhibit 3(i) to Norfolk Southern Corporation’s Form 10-Q
filed on July 29, 2020. (SEC File No. 001-08339)
The Bylaws of Norfolk Southern Corporation, as amended September 24, 2019, are
incorporated by reference to Exhibit 3(ii) to Norfolk Southern Corporation’s Form 8-K
filed on March 24, 2020. (SEC File No. 001-08339)
K82
Exhibit
Number
2.1
3
(i)(a)
(i)(b)
(i)(c)
(ii)
4
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
(k)
(l)
(m)
Instruments Defining the Rights of Security Holders, Including Indentures:
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
Southern Corporation’s Registration Statement on Form S-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 by reference to Exhibit 1.1(d) to Norfolk Southern
Corporation’s Form 8-K filed on May 21, 1997. (SEC File No. 001-08339)
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 by reference to Exhibit 4.1 to Norfolk
Southern Corporation’s Form 8-K filed on February 7, 2001. (SEC File No. 001-08339)
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 by
reference to Exhibit 4(1) to Norfolk Southern Corporation’s Form 10-Q filed on October 28, 2004.
(SEC File No. 001-08339)
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 by
reference to Exhibit 4(m) to Norfolk Southern Corporation’s Form 10-Q filed on October 28, 2004.
(SEC File No. 001-08339)
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 by reference to Exhibit 4.1 to Norfolk Southern
Corporation’s Form 8-K filed on March 15, 2005. (SEC File No. 001-08339)
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 by reference to Exhibit 99.1 to Norfolk
Southern Corporation’s Form 8-K filed on May 18, 2005. (SEC File No. 001-08339)
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 by reference to Exhibit 99.2 to Norfolk
Southern Corporation’s Form 8-K filed on May 18, 2005. (SEC File No. 001-08339)
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 by reference to Exhibit 4.2 to Norfolk
Southern Corporation’s Form 8-K filed on August 26, 2010. (SEC File No. 001-08339)
Indenture, dated as of June 1, 2009, between Norfolk Southern Corporation and U.S. Bank Trust
National Association, as Trustee, is incorporated by reference to Exhibit 4.1 to Norfolk Southern
Corporation’s Form 8-K filed on June 1, 2009. (SEC File No. 001-08339)
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 by reference to Exhibit 4.2 to Norfolk Southern
Corporation’s Form 8-K filed on June 1, 2009. (SEC File No. 001-08339)
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, is incorporated by reference to Exhibit 4.1 to Norfolk Southern Corporation’s Form
8-K filed on May 23, 2011. (SEC File No. 001-08339)
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 Corporation’s Form 8-K filed on
September 15, 2011. (SEC File No. 001-08339)
K83
(n)
(o)
(p)
(q)
(r)
(s)
(t)
(u)
(v)
(w)
(x)
(y)
(z)
(aa)
(bb)
(cc)
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
Corporation’s Form 8-K filed on September 15, 2011. (SEC File No. 001-08339)
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 by reference to Exhibit 4.1 to Norfolk Southern Corporation’s Form 8-K filed on
November 17, 2011. (SEC File No. 001-08339)
Indenture, dated as of March 15, 2012, between the Registrant and U.S. Bank Trust National
Association, as Trustee, is incorporated by reference to Exhibit 4.1 to Norfolk Southern
Corporation’s Form 8-K filed on March 15, 2012. (SEC File No. 001-08339)
First Supplemental Indenture, dated as of March 15, 2012, between the Registrant and U.S. Bank
Trust National Association, as Trustee, is incorporated by reference to Exhibit 4.2 to Norfolk
Southern Corporation’s Form 8-K filed on March 15, 2012. (SEC File No. 001-08339)
Indenture, dated as of August 20, 2012, between the Registrant and U.S. Bank Trust National
Association, as Trustee, is incorporated by reference to Exhibit 4.1 to the Registrant’s Form 8-K
filed on August 21, 2012. (SEC File No. 001-08339)
Second Supplemental Indenture, dated as of September 7, 2012, between the Registrant and U.S.
Bank Trust National Association, as Trustee, is incorporated by reference to Exhibit 4.1 to Norfolk
Southern Corporation’s Form 8-K filed on September 7, 2012. (SEC File No. 001-08339)
Third Supplemental Indenture, dated as of August 13, 2013, between the Registrant and U.S. Bank
Trust National Association, as Trustee, related to the issuance of notes in the principal amount of
$500,000,000, is incorporated by reference to Exhibit 4.1 to Norfolk Southern Corporation’s Form
8-K filed on August 13, 2013. (SEC File No. 001-08339)
Fourth Supplemental Indenture, dated as of November 21, 2013, between the Registrant and U.S.
Bank Trust National Association, as Trustee, related to the issuance of notes in the principal
amount of $400,000,000, is incorporated by reference to Exhibit 4.1 to Norfolk Southern
Corporation’s Form 8-K filed on November 21, 2013. (SEC File No. 001-08339)
Indenture, dated as of June 2, 2015, between Registrant and U.S. Bank National Association, as
Trustee, is incorporated by reference to Exhibit 4.1 to Norfolk Southern Corporation’s Form 8-K
filed on June 2, 2015. (SEC File No. 001-08339)
First Supplemental Indenture, dated as of June 2, 2015, between the Registrant and U.S. Bank
National Association, as Trustee, is incorporated by reference to Exhibit 4.2 to Norfolk Southern
Corporation’s Form 8-K filed on June 2, 2015. (SEC File No. 001-08339)
Second Supplemental Indenture, dated as of November 3, 2015, between the Registrant and U.S.
Bank National Association, as Trustee, is incorporated by reference to Exhibit 4.1 to Norfolk
Southern Corporation’s Form 8-K filed on November 3, 2015. (SEC File No. 001-08339)
Third Supplemental Indenture, dated as of June 3, 2016, between the Registrant and U.S. Bank
National Association, as Trustee, is incorporated by reference to Exhibit 4.1 to Norfolk Southern
Corporation’s Form 8-K filed on June 3, 2016. (SEC File No. 001-08339)
Fourth Supplemental Indenture, dated as of May 31, 2017, between the Registrant and U.S. Bank
National Association, as Trustee, is incorporated by reference to Exhibit 4.1 to the Corporation’s
Form 8-K filed May 31, 2017. (SEC File No. 001-08339)
Indenture, dated as of August 15, 2017, between the Registrant and U.S. Bank National
Association, as Trustee, is incorporated by reference herein to Exhibit 4.1 to Norfolk Southern
Corporation’s Form 8-K filed August 15, 2017. (SEC File No. 001-08339)
Indenture, dated as of November 16, 2017, between the Registrant and U.S. Bank National
Association, as Trustee, is incorporated by reference herein to Exhibit 4.1 to Norfolk Southern
Corporation’s Form 8-K filed November 16, 2017. (SEC File No. 001-08339)
Indenture, dated as of February 28, 2018 between the Registrant and U.S. Bank National
Association, as Trustee. The Indenture is incorporated by reference herein to Exhibit 4.1 to
Norfolk Southern Corporation’s Form 8-K filed February 28, 2018. (SEC File No. 001-08339)
K84
(dd)
(ee)
(ff)
(gg)
(hh)
(ii)
(jj)
10
(a)
(b)
(c)
(d)
(e)
First Supplemental Indenture, dated as of February 28, 2018, between the Registrant and U.S. Bank
National Association, as Trustee. The Indenture is incorporated by reference herein to Exhibit 4.2
to Norfolk Southern Corporation’s Form 8-K filed February 28, 2018. (SEC File No. 001-08339)
Second Supplemental Indenture, dated as of August 2, 2018, between the Registrant and U.S. Bank
National Association, as Trustee. The Indenture is incorporated by reference herein to Exhibit 4.1
to Norfolk Southern Corporation’s Form 8-K filed August 2, 2018. (SEC File No. 001-08339)
Third Supplemental Indenture, dated as of May 8, 2019, between the Registrant and U.S. Bank
National Association, as Trustee, is incorporated by reference to Exhibit 4.1 to the Registrant’s
Form 8-K filed on May 8, 2019 (SEC File No. 001-08339).
Fourth Supplemental Indenture, dated as of October 24, 2019, between the Registrant and U.S.
Bank National Association, as Trustee, is incorporated by reference to Exhibit 4.1 to the
Registrant’s Form 8-K filed on November 4, 2019. (SEC File No. 001-08339)
Description of the Registrant’s Common Stock Registered Under Section 12 of the Securities
Exchange Act of 1934, is incorporated by reference to Exhibit 4(hh) to Norfolk Southern
Corporation's Form 10-K filed on February 6, 2020. (SEC File No. 001-08339)
Fifth Supplemental Indenture, dated as of May 11, 2020, between the Registrant and U.S. Bank
National Association, as Trustee, is incorporated by reference to Exhibit 4.1 to the Registrant’s
Form 8-K filed on May 11, 2020. (SEC File No. 001-08339)
Indenture dated as of May 15, 2020, between the Registrant and U.S. Bank National Association,
as Trustee is incorporated by reference to Exhibit 4.1 to the Registrant’s Form 8-K filed on May
15, 2020. (SEC File No. 001-08339)
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.
Material Contracts -
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
incorporated by reference to Exhibit 10(a) to Norfolk Southern Corporation’s Form 10-K filed on
February 24, 2003. (SEC File No. 001-08339)
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 by reference from Exhibit 10.1 to Norfolk Southern Corporation’s
Form 10-Q filed on August 11, 1999. (SEC File No. 001-08339)
Amendment No. 2 dated as of June 1, 1999, 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 by reference from Exhibit 10.2 to Norfolk Southern Corporation’s Form 10-Q
filed on August 11, 1999. (SEC File No. 001-08339)
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 by reference from Exhibit 10(dd) to
Norfolk Southern Corporation’s Form 10-Q filed on July 30, 2004. (SEC File No. 001-08339)
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
by reference to Exhibit 10.1 to Norfolk Southern Corporation’s Form 8-K filed on September 2,
2004. (SEC File No. 001-08339)
K85
(f)
(g)
(h)
(i)
(j)
(k)
(l)
(m)
(n)
(o)
(p)
(q)
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 by reference
to Exhibit 10.5 to Norfolk Southern Corporation’s Form 10-Q filed on July 27, 2007. (SEC File
No. 001-08339)
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 by reference from Exhibit 10.4 to Norfolk Southern
Corporation’s Form 10-Q filed on August 11, 1999. (SEC File No. 001-08339)
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 by reference from Exhibit 10.6 to Norfolk Southern
Corporation’s Form 10-Q filed on August 11, 1999. (SEC File No. 001-08339)
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 by reference from Exhibit 10.5 to Norfolk
Southern Corporation’s Form 10-Q filed on August 11, 1999. (SEC File No. 001-08339)
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 by reference to Exhibit 10(h) to Norfolk Southern
Corporation’s Form 10-K filed on March 5, 2001. (SEC File No. 001-08339)
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 by reference to Exhibit 10(j) to Norfolk Southern
Corporation’s Form 10-K filed on February 21, 2002. (SEC File No. 001-08339)
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 by reference to Exhibit 10(k) to
Norfolk Southern Corporation’s Form 10-K filed on February 24, 2003. (SEC File No. 001-08339)
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 by reference to Exhibit 99 to
Norfolk Southern Corporation’s Form 8-K filed on July 1, 2005. (SEC File No. 001-08339)
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 by reference from -Exhibit 10.7 to Norfolk Southern
Corporation’s Form 10-Q filed on August 11, 1999. (SEC File No. 001-08339)
The Agreement, entered into as of July 27, 1999, between North Carolina Railroad Company and
Norfolk Southern Railway Company, is incorporated by reference from Exhibit 10(i) to Norfolk
Southern Corporation’s Form 10-K filed on March 6, 2000. (SEC File No. 001-08339)
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
incorporated by reference to Exhibit 10(q) to Norfolk Southern Corporation’s Form 10-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). (SEC File No. 001-08339)
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) –
extending and amending a Lease, dated as of October 11, 1881 – is incorporated by reference to
Exhibit 10(k) to Norfolk Southern Corporation’s Form 10-K filed on March 5, 2001. (SEC File
No. 001-08339)
K86
(r)*
(s)*
(t)*
(u)*
Norfolk Southern Corporation Executive Management Incentive Plan, as approved by shareholders
May 14, 2015, and as amended effective March 27, 2018, and November 17, 2020, is incorporated
by reference to Exhibit 10.1 to Norfolk Southern Corporation’s Form 8-K filed on January 8, 2021.
(SEC File No. 001-08339)
The Norfolk Southern Corporation Officers’ Deferred Compensation Plan, as amended effective
July 26, 2019, is incorporated by reference to Exhibit 10.2 to Norfolk Southern Corporation’s Form
10-Q filed on October 23, 2019. (SEC File No. 001-08339)
The Norfolk Southern Corporation Directors’ Restricted Stock Plan, adopted January 1, 1994, and
amended and restated effective as of January 23, 2015, is incorporated by reference to Exhibit 10.1
to Norfolk Southern Corporation’s Form 10-Q filed on October 25, 2017. (SEC File No.
001-08339)
Supplemental Benefit Plan of Norfolk Southern Corporation and Participating Subsidiary
Companies, adopted June 1, 1982, as amended and restated effective as of June 26, 2015, is
incorporated by reference to Exhibit 10.2 to Norfolk Southern Corporation’s Form 10-Q filed on
October 25, 2017. (SEC File No. 001-08339)
(v)*,**
Retirement Plan of Norfolk Southern Corporation and Participating Subsidiary Companies
effective June 1, 1982, as amended and restated effective October 1, 2020. (SEC File No.
001-08339)
(w)*
(x)
(y)*
(z)*
(aa)*
(bb)
(cc)
(dd)
(ee)
The Norfolk Southern Corporation Directors’ Charitable Award Program, as amended effective
July 2007, is incorporated by reference to Exhibit 10.6 to Norfolk Southern Corporation’s Form
10-Q filed on July 27, 2007. (SEC File No. 001-08339)
The Norfolk Southern Corporation Thoroughbred Stock Option Plan, as amended effective July 22,
2013, is incorporated by reference to Exhibit 10.2 to Norfolk Southern Corporation’s Form 10-Q
filed on July 24, 2013. (SEC File No. 001-08339)
The Norfolk Southern Corporation Executive Life Insurance Plan, as amended and restated
effective December 1, 2018, is incorporated by reference to Exhibit 10(y) to Norfolk Southern
Corporation's Form 10-K filed on February 8, 2019. (SEC File No. 001-08339)
The description of Norfolk Southern Corporation’s optional executive physical reimbursement
program, as amended effective July 26, 2019, is incorporated by reference to Exhibit 10.1 to
Norfolk Southern Corporation’s Form 10-Q filed on October 23, 2019. (SEC File No. 001-08339)
The Norfolk Southern Corporation Long-Term Incentive Plan, as approved by shareholders May
14, 2015, and as amended July 29, 2016, November 29, 2016, November 28, 2017, November 27,
2018, and November 19, 2019, is incorporated by referenced to Exhibit 10(aa) to Norfolk Southern
Corporation’s Form 10-K filed on February 6, 2020. (SEC File No. 001-08339)
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 by reference to Exhibit 10(II) to Norfolk
Southern Corporation’s Form 10-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). (SEC File No. 001-08339)
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 Railroad , is incorporated by reference to Exhibit 10(mm) to Norfolk Southern
Corporation’s Form 10-K filed on February 23, 2006. (SEC File No. 001-08339)
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
by reference to Exhibit 10.1 to Norfolk Southern Corporation’s Form 8-K filed on May 4, 2006.
(SEC File No. 001-08339)
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 by
reference to Exhibit 10.2 to Norfolk Southern Corporation’s Form 8-K filed on May 4, 2006. (SEC
File No. 001-08339)
K87
(ff)
(gg)
(hh)
(ii)
(jj)
(kk)
(ll)
Transfer and Administration Agreement dated as of November 8, 2007, is incorporated by
reference to Exhibit 99 to Norfolk Southern Corporation’s Form 8-K filed on November 14, 2007.
(SEC File No. 001-08339)
Amendment No. 1 to Transfer and Administration Agreement dated as of November 8, 2007, and
effective as of October 22, 2008, is incorporated by reference to Exhibit 99 to Norfolk Southern
Corporation’s Form 8-K filed on October 23, 2008. (SEC File No. 001-08339)
Amendment No. 2, dated as of May 19, 2009, to Transfer and Administration Agreement dated as
of November 8, 2007, is incorporated by reference to Exhibit 10.1 to Norfolk Southern
Corporation’s Form 10-Q filed on July 31, 2009. (SEC File No. 001-08339)
Amendment No. 3, dated as of August 21, 2009, to Transfer and Administration Agreement dated
as of November 8, 2007, is incorporated by reference to Exhibit 10.1 to Norfolk Southern
Corporation’s Form 10-Q filed on October 30, 2009. (SEC File No. 001-08339)
Amendment No. 4, dated as of October 22, 2009, to Transfer and Administration Agreement dated
as of November 8, 2007, is incorporated by reference to Exhibit 99 to Norfolk Southern
Corporation’s Form 8-K filed on October 22, 2009. (SEC File No. 001-08339)
Amendment No. 5, dated as of January 5, 2010, to Transfer and Administration Agreement dated
as of November 8, 2007, is incorporated by reference to Exhibit 10(xx) to Norfolk Southern
Corporation’s Form 10-K filed on February 17, 2010. (SEC File No. 001-08339)
Amendment No. 6, dated as of August 30, 2010, to Transfer and Administration Agreement dated
as of November 8, 2007, is incorporated by reference to Exhibit 10.1 to Norfolk Southern
Corporation’s Form 10-Q filed on October 29, 2010. (SEC File No. 001-08339)
(mm)
Amendment No. 7, dated as of October 21, 2010, to Transfer and Administration Agreement dated
as of November 8, 2007, is incorporated by reference to Exhibit 99 to Norfolk Southern
Corporation’s Form 8-K filed on October 22, 2010. (SEC File No. 001-08339)
(nn)
(oo)
(pp)
(qq)
(rr)
(ss)
(tt)
(uu)
Amendment No. 8, dated as of October 20, 2011, to Transfer and Administration Agreement dated
as of November 8, 2007, is incorporated by reference to Exhibit 99 to Norfolk Southern
Corporation’s Form 8-K filed on October 20, 2011. (SEC File No. 001-08339)
Amendment No. 9, dated as of October 18, 2012, to Transfer and Administration Agreement dated
as of November 8, 2007, is incorporated by reference to Exhibit 99 to Norfolk Southern
Corporation’s Form 8-K filed on October 22, 2012. (SEC File No. 001-08339)
Amendment No. 10, dated as of October 17, 2013, to Transfer and Administration Agreement
dated as of November 8, 2007, is incorporated by reference to Exhibit 10.1 to Norfolk Southern
Corporation’s Form 8-K filed on October 18, 2013. (SEC File No. 001-08339)
Amendment No. 11 to Transfer and Administration Agreement dated as of October 16, 2014, is
hereby incorporated by reference to Exhibit 10.1 to Norfolk Southern Corporation’s Form 8-K filed
on October 17, 2014. (SEC File No. 001-08339)
Amendment No. 12 to Transfer and Administration Agreement dated as of June 3, 2016
(Schedules III and IV omitted. The Registrant will furnish supplementary copies of such materials
to the SEC upon request), is incorporated by reference to Exhibit 10.1 to Norfolk Southern
Corporation’s Form 8-K filed on June 6, 2016. (SEC File No. 001-08339)
Amendment No. 13 to Transfer and Administration Agreement dated as of June 1, 2018 is hereby
incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed on June 4, 2018 (SEC
File No. 001-8339)
Amendment No. 14 to Transfer and Administration Agreement dated as of May 31, 2019 is hereby
incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed on June 3, 2019 (SEC
File No. 001-8339)
Amendment No. 15 to Transfer and Administration Agreement dated as of May 29, 2020 is
incorporated by referenced to Exhibit 10.1 to the Registrant’s Form 8-K filed on June 1, 2020.
(SEC File No. 001-8339)
K88
(vv)
(ww)
(xx)*
(yy)*
(zz)*
(aaa)*
(bbb)
(ccc)*,**
(ddd)*,**
(eee)*,**
(fff)*,**
(ggg)*,**
(hhh)*
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 by reference to Exhibit 10.1 to Norfolk
Southern Corporation’s Form 10-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). (SEC File No. 001-08339)
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 by
reference to Exhibit 10(rrr) to Norfolk Southern Corporation’s Form 10-K filed on February 18,
2009. (SEC File No. 001-08339)
Directors’ Deferred Fee Plan of Norfolk Southern Corporation, adopted June 1, 1982 and as
amended and restated effective December 1, 2019, is incorporated by referenced to Exhibit 10(xx)
to Norfolk Southern Corporation’s Form 10-K filed on February 6, 2020. (SEC File No.
001-08339)
Norfolk Southern Corporation Executives’ Deferred Compensation Plan, as amended and restated
effective January 1, 2019, is incorporated by reference to Exhibit 10(ww) to Norfolk Southern
Corporation's Form 10-K filed on February 8, 2019. (SEC File No. 001-08339)
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 by reference to Exhibit 10.1 to
Norfolk Southern Corporation’s Form 10-Q filed on October 24, 2008. (SEC File No. 001-08339)
Form of Amended and Restated Change in Control Agreement between Norfolk Southern Form of
Amended and Restated Change in Control Agreement between Norfolk Southern Corporation and
the Corporation’s Chairman, President and Chief Executive Officer, is incorporated by reference
to Exhibit 10(aaaa) to Norfolk Southern Corporation’s Form 10-K filed on February 18, 2009.
(SEC File No. 001-08339)
Limited Liability Company Agreement of Pan Am Southern LLC, dated as of April 9, 2009, is
incorporated by reference to Exhibit 10.1 to Norfolk Southern Corporation’s Form 8-K filed on
April 9, 2009 (exhibits, annexes, and schedules omitted – the Registrant will furnish supplementary
copies of such materials to the SEC upon request). (SEC File No. 001-08339)
Form of Norfolk Southern Corporation Long-Term Incentive Plan, Award Agreement for Outside
Directors for restricted stock units and deferral election form as approved by the Compensation
Committee on November 16, 2020.
Form of Norfolk Southern Corporation Long-Term Incentive Plan, Award Agreement for
performance share units approved by the Compensation Committee on November 16, 2020.
Form of Norfolk Southern Corporation Long-Term Incentive Plan, Award Agreement for non-
qualified stock options approved by the Compensation Committee on November 16, 2020.
Form of Norfolk Southern Corporation Long-Term Incentive Plan, Award Agreement for restricted
stock units approved by the Compensation Committee on November 16, 2020.
Form of Norfolk Southern Corporation Long-Term Incentive Plan, Non-Compete Agreement
Associated with Award Agreement, approved by the Compensation Committee on November 16,
2020.
Performance Criteria for bonuses payable in 2022 for the 2021 incentive year. On November 16,
2020, the Compensation Committee of the Norfolk Southern Corporation Board of Directors
adopted the following performance criteria for determining bonuses payable in 2022 for the 2021
incentive year under the Norfolk Southern Corporation Executive Management Incentive Plan:
60% based on operating ratio, 20% based on operating income, and 20% based on strategic plan
objectives.
(iii)
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 by reference to Exhibit 10.1 to Norfolk Southern Corporation’s Form
10-Q filed on April 27, 2012. (SEC File No. 001-08339)
K89
(jjj)*
(kkk)*
(lll)
(mmm)*,
**
(nnn)*,**
(ooo)*,**
(ppp)*
(qqq)*
(rrr)*
(sss)*
(ttt)
(uuu)
(vvv)
(www)
(xxx)*
21**
23**
Form of Amendment to Amended and Restated Change in Control Agreement between Norfolk
Southern Corporation and the Corporation’s Chairman, President and Chief Executive Officer, to
eliminate the excise tax gross-up provision in the Agreement, is incorporated by reference to
Exhibit 10.1 to Norfolk Southern Corporation’s Form 8-K filed on January 23, 2013. (SEC File
No. 001-08339)
Form of Change in Control Agreement between Norfolk Southern Corporation and executive
officers who entered into a change in control agreement after 2015 is incorporated by reference to
Exhibit 10.2 to Norfolk Southern Corporation’s Form 10-Q filed on July 29, 2020. (SEC File No.
001-08339)
Credit Agreement dated as of March 27, 2020 establishing a 5 year, $800 million, unsecured
revolving credit facility of the Registrant, is incorporated by reference to Exhibit 10.1 to Norfolk
Southern Corporation’s Form 8-K filed on March 30, 2020. (SEC File No. 001-08339)
Form of Norfolk Southern Corporation Long-Term Incentive Plan, Off-Cycle Award Agreement
for Non-Qualified Stock Options as approved by the Compensation Committee on November 16,
2020.
Form of Norfolk Southern Corporation Long-Term Incentive Plan, Off-Cycle Award Agreement
for Performance Share Units as approved by the Compensation Committee on November 16, 2020.
Form of Norfolk Southern Corporation Long-Term Incentive Plan, Off-Cycle Award Agreement
for Restricted Stock Units as approved by the Compensation Committee on November 16, 2020.
Offer Letter for Mark R. George, dated August 26, 2019, is incorporated by reference to Exhibit
99.1 to Norfolk Southern Corporation’s Form 8-K filed on August 28, 2019. (SEC File No.
001-08339)
Norfolk Southern Corporation Long-Term Incentive Plan Inducement Award Agreement for
Performance-Based Restricted Stock Units is incorporated by reference to Exhibit 99.2 to Norfolk
Southern Corporation’s Form 8-K filed on August 28, 2019. (SEC File No. 001-08339)
Norfolk Southern Corporation Long-Term Incentive Plan Inducement Award Agreement for
Restricted Stock Units is incorporated by reference to Exhibit 99.3 to Norfolk Southern
Corporation’s Form 8-K filed on August 28, 2019. (SEC File No. 001-08339)
Norfolk Southern Corporation Long-Term Incentive Plan Inducement Award Agreement for Non-
Qualified Stock Options is incorporated by reference to Exhibit 99.4 to Norfolk Southern
Corporation’s Form 8-K filed on August 28, 2019. (SEC File No. 001-08339)
A Construction Agency Agreement, dated March 1, 2019, between Norfolk Southern Railway
Company (“NSRC”) and BA Leasing BSC, LLC. This Agreement is incorporated by reference
herein to Exhibit 10.1 to Norfolk Southern Corporation’s Form 8-K filed March 5, 2019. (See SEC
File No. 001-08339).
A Lease Agreement, dated March 1, 2019, between NSRC and BA Leasing BSC, LLC. This
Agreement is incorporated by reference herein to Exhibit 10.2 to Norfolk Southern Corporation’s
Form 8-K filed March 5, 2019. (See SEC File No. 001-08339).
A Participation Agreement, dated March 1, 2019, between NSRC, BA Leasing BSC, LLC, Bank of
America, N.A. as Administrative Agent, and each of the Rent Assignees listed on Schedule II
thereto. This Agreement is incorporated by reference herein to Exhibit 10.3 to Norfolk Southern
Corporation’s Form 8-K filed March 5, 2019. (See SEC File No. 001-08339).
Guaranty of NSRC’s obligations under the Participation Agreement, Construction Agency
Agreement, Lease Agreement and related documents by Norfolk Southern Corporation. This
Agreement is incorporated by reference herein to Exhibit 10.4 to Norfolk Southern Corporation’s
Form 8-K filed March 5, 2019. (See SEC File No. 001-08339).
Norfolk Southern Executive Severance Plan as adopted on May 14, 2020, and as amended July 28,
2020, is incorporated by reference to Exhibit 10.1 to Norfolk Southern Corporation Form 10-Q
filed on July 29, 2020. (SEC File No. 001-08339).
Subsidiaries of the Registrant.
Consent of Independent Registered Public Accounting Firm.
K90
31-A**
31-B**
32**
101**
Rule 13a-14(a)/15d-014(a) CEO Certification.
Rule 13a-14(a)/15d-014(a) CFO Certification.
Section 1350 Certifications.
The following financial information from Norfolk Southern Corporation’s Annual Report on Form
10-K for the year ended December 31, 2020, formatted in Inline Extensible Business Reporting
Language (iXBRL) includes: (i) the Consolidated Statements of Income for each of the years
ended December 31, 2020, 2019, and 2018; (ii) the Consolidated Statements of Comprehensive
Income for each of the years ended December 31, 2020, 2019, and 2018; (iii) the Consolidated
Balance Sheets at December 31, 2020 and 2019; (iv) the Consolidated Statements of Cash Flows
for each of the years ended December 31, 2020, 2019, and 2018; (v) the Consolidated Statements
of Changes in Stockholders’ Equity for each of the years ended December 31, 2020, 2019, and
2018; and (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 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, and 32 are included in copies assembled for public dissemination. All
exhibits are included in the 2020 Form 10-K posted on our website at
www.norfolksouthern.com under “Invest in NS” and “SEC Filings” or you may request
copies by writing to:
Office of Corporate Secretary
Norfolk Southern Corporation
Three Commercial Place
Norfolk, Virginia 23510-9219
K91
Item 16. Form 10-K Summary
Not applicable.
K92
POWER OF ATTORNEY
Each person whose signature appears on the next page under SIGNATURES hereby authorizes Vanessa Allen
Sutherland and Mark R. George, or any one of them, to execute in the name of each such person, and to file, any
amendments to this report, and hereby appoints Vanessa Allen Sutherland and Mark R. George, 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 4th day of February, 2021.
/s/ James A. Squires
By: James A. Squires
(Chairman, President and Chief Executive Officer)
K93
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on this 4th
day of February, 2021, by the following persons on behalf of Norfolk Southern Corporation and in the capacities
indicated.
Signature
Title
/s/ James A. Squires
(James A. Squires)
Chairman, President and Chief Executive Officer and Director
(Principal Executive Officer)
/s/ Mark R. George
(Mark R. George)
Executive Vice President Finance and Chief Financial Officer
(Principal Financial Officer)
/s/ Clyde H. Allison, Jr.
(Clyde H. Allison, Jr.)
Vice President and Controller
(Principal Accounting Officer)
/s/ Thomas D. Bell, Jr.
(Thomas D. Bell, Jr.)
Director
/s/ Mitchell E. Daniels, Jr.
(Mitchell E. Daniels, Jr.)
Director
/s/ Marcela E. Donadio
(Marcela E. Donadio)
Director
/s/ John C. Hufford, Jr.
(John C. Hufford, Jr.)
Director
/s/ Christopher T. Jones
(Christopher T. Jones)
Director
/s/ Thomas C. Kelleher
(Thomas C. Kelleher)
Director
/s/ Steven F. Leer
(Steven F. Leer)
Director
/s/ Michael D. Lockhart
(Michael D. Lockhart)
Director
/s/ Amy E. Miles
(Amy E. Miles)
/s/ Claude Mongeau
(Claude Mongeau)
Director
Director
/s/ Jennifer F. Scanlon
(Jennifer F. Scanlon)
Director
/s/ John R. Thompson
(John R. Thompson)
Director
K94
Norfolk Southern Corporation and Subsidiaries
Valuation and Qualifying Accounts
Years ended December 31, 2020, 2019, and 2018
($ in millions)
Schedule II
Additions charged to:
Beginning
Balance
Expenses
Other
Accounts
Deductions
Ending
Balance
Year ended December 31, 2020
Current portion of casualty and
other claims included in
accounts payable
Casualty and other claims
included in other liabilities
Year ended December 31, 2019
Current portion of casualty and
other claims included in
accounts payable
Casualty and other claims
included in other liabilities
Year ended December 31, 2018
Current portion of casualty and
other claims included in
accounts payable
Casualty and other claims
included in other liabilities
$
212
$
27
$
81 (2) $
138 (3) $
182
171
80 (1)
—
82 (4)
169
$
213
$
22
$
131 (2) $
154 (3) $
212
158
89 (1)
—
76 (4)
171
$
187
$
32
$
145 (2) $
151 (3) $
213
179
85 (1)
—
106 (4)
158
(1)
(2)
Includes adjustments for changes in estimates for prior years’ claims.
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.
K95
SHAREHOLDER INFORMATION
COMMON STOCK
Ticker symbol: NSC
Our common stock is listed and traded
on the New York Stock Exchange.
DIVIDENDS
At its January 2021 meeting, our board
of directors declared a quarterly dividend
of 99 cents per share on the company’s
common stock, payable on March 10, 2021,
to shareholders of record on Feb. 5, 2021.
We usually pay quarterly dividends on
our common stock on or about March 10,
June 10, Sept. 10, and Dec. 10, when and
if declared by our board of directors to
shareholders of record. Through the end of
2020, we have paid 154 consecutive quarterly
dividends since our inception in 1982.
ACCOUNT ASSISTANCE
For assistance with lost stock certificates,
transfer requirements, the INVESTORS CHOICE
Plan, address changes, dividend checks,
and direct deposit of dividends, contact:
American Stock Transfer
& Trust Company LLC
6201 15th Avenue
Brooklyn, N.Y. 11219
877.864.4750
FINANCIAL
INQUIRIES
Mark R. George
Executive Vice
President Finance and
Chief Financial Officer
Norfolk Southern Corp.
1200 Peachtree St., N.E.
Atlanta, Ga. 30309
470.867.4833
INVESTOR
INQUIRIES
Meghan Achimasi
Senior Director
Investor Relations
Norfolk Southern Corp.
Three Commercial Place
Norfolk, Va. 23510
470.867.4807
CORPORATE
OFFICE
Norfolk Southern Corp.
Three Commercial Place
Norfolk, Va. 23510
757.629.2600
855.NORFOLK or
855.667.3655
REGIONAL
OFFICE
Norfolk Southern Corp.
1200 Peachtree St., N.E.
Atlanta, Ga. 30309
SHAREHOLDER
SERVICES
INFORMATION
Norfolk Southern Corp.
Requests & Information
shareholder@nscorp.com
800.531.6757
INVESTORS CHOICE
We and our transfer agent, American Stock Transfer & Trust
Company LLC (AST), offer the INVESTORS CHOICE Plan for investors
wishing to purchase or sell Norfolk Southern Corporation common
stock. This plan is available to both present shareholders of record
and individual investors wishing to make an initial purchase of
Norfolk Southern Corporation common stock. Once enrolled in the
plan, you can invest cash dividends when paid and make optional
cash investments simply and conveniently.
To take advantage of the INVESTORS CHOICE Plan, contact AST
at 877.864.4750 or visit http://astfinancial.mobular.net/amstock/NSC/
to access information about the INVESTORS CHOICE Plan.
PUBLICATIONS
The following reports and publications
are available on our website at
www.norfolksouthern.com and, upon
written request, will be furnished in printed
form to shareholders free of charge:
● Annual Reports on Form 10-K
● Quarterly Reports on Form 10-Q
● Corporate Governance Guidelines
● Board Committee Charters
● Thoroughbred Code of Ethics
● Code of Ethical Conduct
for Senior Financial Officers
● Categorical Independence
Standards for Directors
● Norfolk Southern Corporation Bylaws
Shareholders desiring a printed copy
of one or more of these reports and
publications should send their request
to our corporate secretary:
Denise W. Hutson
Corporate Secretary
Norfolk Southern Corporation
Three Commercial Place
Norfolk, Va. 23510
757.823.5567
A notice and proxy statement for the annual
meeting of shareholders are furnished to
shareholders in advance of the meeting.
Amendments to or waivers of the
Thoroughbred Code of Ethics and/or the
Code of Ethical Conduct for Senior
Financial Officers that are required to be
disclosed pursuant to Item 5.05 of the
current report on Form 8-K will be disclosed
on our website.
ETHICS & COMPLIANCE
HOTLINE
High ethical standards always have been
key to our success. Anyone who might be
aware of a violation of our corporation’s
Thoroughbred Code of Ethics is
encouraged to contact our Ethics &
Compliance Hotline at 800.732.9279.
FPO
N
O
R
F
O
L
K
S
O
U
T
H
E
R
N
C
O
R
P
O
R
A
T
I
O
N
2
0
2
0
A
N
N
U
A
L
R
E
P
O
R
T
www.norfolksouthern.com
2020
ANNUAL
REPORT
© 2021 Norfolk Southern Corporation
All Rights Reserved
10.032021.133802.22K