10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

for the quarterly period ended JUNE 30, 2019

☐    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 

for the transition period from ___________ to___________

Commission file number 1-8339

NORFOLK SOUTHERN CORPORATION

(Exact name of registrant as specified in its charter) 

Virginia		52-1188014
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)
Three Commercial Place		23510-2191
Norfolk,	Virginia
(Address of principal executive offices)		(Zip Code)
(757)		629-2680
(Registrant’s telephone number, including area code)
No Change
(Former name, former address and former fiscal year, if changed since last report)

 Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Norfolk Southern Corporation Common Stock (Par Value $1.00)	NSC	New York Stock Exchange

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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐  No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding at June 30, 2019
Common Stock ($1.00 par value per share)	263,406,773	(excluding 20,320,777 shares held by the registrant’s
	consolidated subsidiaries)

TABLE OF CONTENTS

NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES

		Page
Part I.	Financial Information:
	Item 1.	Financial Statements:
		Consolidated Statements of Income Second Quarter and First Six Months of 2019 and 2018	3
		Consolidated Statements of Comprehensive Income Second Quarter and First Six Months of 2019 and 2018	4
		Consolidated Balance Sheets At June 30, 2019 and December 31, 2018	5
		Consolidated Statements of Cash Flows First Six Months of 2019 and 2018	6
		Consolidated Statements of Changes in Stockholders’ Equity Second Quarter and First Six Months of 2019 and 2018	7
		Notes to Consolidated Financial Statements	9
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26
	Item 4.	Controls and Procedures	26
Part II.	Other Information:
	Item 1.	Legal Proceedings	27
	Item 1A.	Risk Factors	27
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27
	Item 6.	Exhibits	28
		Signatures	29

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Income

(Unaudited)

	Second Quarter				First Six Months
	2019		2018		2019		2018
	($ in millions, except per share amounts)
Railway operating revenues	$	2,925	$	2,898	$	5,765	$	5,615
Railway operating expenses:
Compensation and benefits	712		706		1,439		1,443
Purchased services and rents	418		430		842		831
Fuel	254		272		504		538
Depreciation	284		273		567		545
Materials and other	192		191		382		397
Total railway operating expenses	1,860		1,872		3,734		3,754
Income from railway operations	1,065		1,026		2,031		1,861
Other income – net	22		29		66		37
Interest expense on debt	153		131		302		267
Income before income taxes	934		924		1,795		1,631
Income taxes	212		214		396		369
Net income	$	722	$	710	$	1,399	$	1,262
Earnings per share:
Basic	$	2.72	$	2.52	$	5.25	$	4.46
Diluted	2.70		2.50		5.21		4.43

 See accompanying notes to consolidated financial statements.

3

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income

(Unaudited)

	Second Quarter						First Six Months
	2019			2018			2019			2018
	($ in millions)
Net income	$	722		$	710		$	1,399		$	1,262
Other comprehensive income, before tax:
Pension and other postretirement benefits	5			8			10			1
Other comprehensive income (loss) of equity investees	—			1			(1		)	2
Other comprehensive income, before tax	5			9			9			3
Income tax expense related to items of
other comprehensive income	(2		)	(2		)	(3		)	—
Other comprehensive income, net of tax	3			7			6			3
Total comprehensive income	$	725		$	717		$	1,405		$	1,265

 See accompanying notes to consolidated financial statements.

4

Norfolk Southern Corporation and Subsidiaries

Consolidated Balance Sheets

(Unaudited)

	June 30, 2019			December 31, 2018
	($ in millions)
Assets
Current assets:
Cash and cash equivalents	$	274		$	358
Accounts receivable – net	1,039			1,009
Materials and supplies	256			207
Other current assets	345			288
Total current assets	1,914			1,862
Investments	3,301			3,109
Properties less accumulated depreciation of $12,372
and $12,374, respectively	31,201			31,091
Other assets	756			177
Total assets	$	37,172		$	36,239
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	1,407		$	1,505
Income and other taxes	270			255
Other current liabilities	373			246
Current maturities of long-term debt	401			585
Total current liabilities	2,451			2,591
Long-term debt	11,076			10,560
Other liabilities	1,738			1,266
Deferred income taxes	6,596			6,460
Total liabilities	21,861			20,877
Stockholders’ equity:
Common stock $1.00 per share par value, 1,350,000,000 shares
authorized; outstanding 263,406,773 and 268,098,472 shares,
respectively, net of treasury shares	265			269
Additional paid-in capital	2,226			2,216
Accumulated other comprehensive loss	(557		)	(563		)
Retained income	13,377			13,440
Total stockholders’ equity	15,311			15,362
Total liabilities and stockholders’ equity	$	37,172		$	36,239

 See accompanying notes to consolidated financial statements.

5

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

		First Six Months
		2019			2018
		($ in millions)
Cash flows from operating activities:
	Net income	$	1,399		$	1,262
	Reconciliation of net income to net cash provided by operating activities:
	Depreciation	567			546
	Deferred income taxes	133			89
	Gains and losses on properties	(7		)	(14		)
	Changes in assets and liabilities affecting operations:
	Accounts receivable	(30		)	(92		)
	Materials and supplies	(49		)	(38		)
	Other current assets	55			19
	Current liabilities other than debt	(30		)	134
	Other – net	(86		)	(80		)
	Net cash provided by operating activities	1,952			1,826
Cash flows from investing activities:
	Property additions	(979		)	(836		)
	Property sales and other transactions	214			48
	Investment purchases	(12		)	(4		)
	Investment sales and other transactions	(75		)	6
	Net cash used in investing activities	(852		)	(786		)
Cash flows from financing activities:
	Dividends	(458		)	(408		)
	Common stock transactions	18			15
	Purchase and retirement of common stock	(1,050		)	(700		)
	Proceeds from borrowings – net of issuance costs	1,054			543
	Debt repayments	(750		)	(750		)
	Net cash used in financing activities	(1,186		)	(1,300		)
	Net decrease in cash, cash equivalents,
	and restricted cash	(86		)	(260		)
Cash, cash equivalents, and restricted cash:
	At beginning of year	446			690
	At end of period	$	360		$	430
Supplemental disclosures of cash flow information:
	Cash paid during the period for:
	Interest (net of amounts capitalized)	$	271		$	246
	Income taxes (net of refunds)	215			126

 See accompanying notes to consolidated financial statements.

6

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity

(Unaudited)

	Common Stock			Additional Paid-in Capital			Accum. Other Comprehensive Loss			Retained Income			Total
	($ in millions, except per share amounts)
Balance at December 31, 2018	$	269		$	2,216		$	(563	)	$	13,440		$	15,362
Comprehensive income:
Net income										677			677
Other comprehensive income							3						3
Total comprehensive income													680
Dividends on common stock,
$0.86 per share										(230		)	(230		)
Share repurchases	(3		)	(22		)				(475		)	(500		)
Stock-based compensation	1			19						(1		)	19
Balance at March 31, 2019	267			2,213			(560		)	13,411			15,331
Comprehensive income:
Net income										722			722
Other comprehensive income							3						3
Total comprehensive income													725
Dividends on common stock,
$0.86 per share										(228		)	(228		)
Share repurchases	(2		)	(22		)				(526		)	(550		)
Stock-based compensation				35						(2		)	33
Balance at June 30, 2019	$	265		$	2,226		$	(557	)	$	13,377		$	15,311

 See accompanying notes to consolidated financial statements.

7

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity

(Unaudited)

	Common Stock			Additional Paid-in Capital			Accum. Other Comprehensive Loss			Retained Income			Total
	($ in millions, except per share amounts)
Balance at December 31, 2017	$	285		$	2,254		$	(356	)	$	14,176		$	16,359
Comprehensive income:
Net income										552			552
Other comprehensive loss							(4		)				(4		)
Total comprehensive income													548
Dividends on common stock,
$0.72 per share										(205		)	(205		)
Share repurchases	(2		)	(16		)				(282		)	(300		)
Stock-based compensation	1			17						(2		)	16
Reclassification of stranded
tax effects							(88		)	88			—
Balance at March 31, 2018	284			2,255			(448		)	14,327			16,418
Comprehensive income:
Net income										710			710
Other comprehensive income							7						7
Total comprehensive income													717
Dividends on common stock,
$0.72 per share										(203		)	(203		)
Share repurchases	(3		)	(20		)				(377		)	(400		)
Stock-based compensation				28						(1		)	27
Balance at June 30, 2018	$	281		$	2,263		$	(441	)	$	14,456		$	16,559

 See accompanying notes to consolidated financial statements.

8

Norfolk Southern Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

In the opinion of management, the accompanying unaudited interim consolidated financial statements contain all adjustments (consisting of normal recurring accruals) necessary to present fairly Norfolk Southern Corporation (Norfolk Southern) and subsidiaries’ (collectively, NS, we, us, and our) financial position at June 30, 2019, and December 31, 2018, our results of operations, comprehensive income and changes in stockholders’ equity for the second quarters and first six months of 2019 and 2018, and our cash flows for the first six months of 2019 and 2018 in conformity with U.S. generally accepted accounting principles (GAAP).

These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in our latest Annual Report on Form 10-K.

1. Railway Operating Revenues

The following table disaggregates our revenues by major commodity group:

	Second Quarter				First Six Months
	2019		2018		2019		2018
Merchandise:	($ in millions)
Chemicals	$	473	$	465	$	925	$	919
Agriculture products	406		379		791		736
Metals and construction	416		413		801		769
Automotive	251		253		502		496
Forest and consumer	210		208		423		403
Merchandise	1,756		1,718		3,442		3,323
Intermodal	701		714		1,420		1,392
Coal	468		466		903		900
Total	$	2,925	$	2,898	$	5,765	$	5,615

At the beginning of 2019, we recategorized certain commodities within Merchandise major commodity groups to better align with how we internally manage these commodities. Prior period amounts have been reclassified to conform to the current presentation with no net impact to overall Merchandise revenue or total railway operating revenues. Specifically, certain commodities were shifted between Chemicals, Agriculture products, Metals and construction, and Forest and consumer.

We recognize the amount of revenue 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 NS for the transport of goods. These performance obligations are satisfied as the shipments move from origin to destination. As such, transportation revenue is 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 revenue associated with in-process shipments at period-end is recorded based on the estimated percentage of service completed to total transit days. We had no material remaining performance obligations as of June 30, 2019 or December 31, 2018.

Under the typical payment 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:

	June 30, 2019		December 31, 2018
	($ in millions)
Customer	$	767	$	740
Non-customer	272		269
Accounts receivable – net	$	1,039	$	1,009

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 $55 million at both June 30, 2019 and December 31, 2018.  We do not have any material contract assets or liabilities.

Certain ancillary services may be provided to customers under their transportation contracts such as switching, demurrage and other incidental service revenues. These are distinct performance obligations that are recognized at a point in time when the services are performed or as contractual obligations are met. This revenue is included within each of the commodity groups and represents approximately 4% of total “Railway operating revenues” on the Consolidated Statements of Income for both of the second quarters and first six months of 2019 and 2018.

2.  Stock-Based Compensation

	Second Quarter				First Six Months
	2019		2018		2019		2018
	($ in millions)
Stock-based compensation expense	$	20	$	13	$	36	$	29
Total tax benefit	8		6		31		20

During 2019, a committee of nonemployee members of our Board of Directors (and the Chief Executive Officer under delegated authority by such committee) granted stock options, restricted stock units (RSUs) and performance share units (PSUs) pursuant to the Long-Term Incentive Plan (LTIP), as follows:

	Second Quarter			First Six Months
	Granted	Weighted-Average Grant-Date Fair Value		Granted	Weighted-Average Grant-Date Fair Value
Stock options	1,540	$	54.83	43,920	$	45.93
RSUs	2,870	203.25		211,190	163.87
PSUs	3,060	189.57		96,770	160.24

Stock Options

	Second Quarter				First Six Months
	2019		2018		2019		2018
	($ in millions)
Stock options exercised	215,546		215,132		621,917		470,114
Cash received upon exercise	$	16	$	16	$	44	$	33
Related tax benefit realized	6		3		15		7

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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 Norfolk Southern common stock (Common Stock). RSUs granted in previous years 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 the regular quarterly dividends paid on Common Stock. 

	Second Quarter				First Six Months
	2019		2018		2019		2018
	($ in millions)
RSUs vested	506		—		166,055		160,200
Common Stock issued net of tax withholding	363		—		119,244		99,968
Related tax benefit realized	$	—	$	—	$	2	$	3

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. No PSUs were earned or paid out during the second quarters of 2019 or 2018.

	First Six Months
	2019		2018
	($ in millions)
PSUs earned	331,099		154,189
Common Stock issued net of tax withholding	221,241		94,399
Related tax benefit realized	$	9	$	3

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3.  Earnings Per Share

The following table sets forth the calculation of basic and diluted earnings per share:

	Basic						Diluted
	Second Quarter
	2019			2018			2019		2018
	($ in millions, except per share amounts, shares in millions)
Net income	$	722		$	710		$	722	$	710
Dividend equivalent payments	(2		)	(1		)	—		—
Income available to common stockholders	$	720		$	709		$	722	$	710
Weighted-average shares outstanding	264.8			281.3			264.8		281.3
Dilutive effect of outstanding options
and share-settled awards							2.3		2.4
Adjusted weighted-average shares outstanding							267.1		283.7
Earnings per share	$	2.72		$	2.52		$	2.70	$	2.50
	Basic						Diluted
	First Six Months
	2019			2018			2019		2018
	($ in millions, except per share amounts, shares in millions)
Net income	$	1,399		$	1,262		$	1,399	$	1,262
Dividend equivalent payments	(3		)	(2		)	—		(1		)
Income available to common stockholders	$	1,396		$	1,260		$	1,399	$	1,261
Weighted-average shares outstanding	265.9			282.4			265.9		282.4
Dilutive effect of outstanding options
and share-settled awards							2.4		2.4
Adjusted weighted-average shares outstanding							268.3		284.8
Earnings per share	$	5.25		$	4.46		$	5.21	$	4.43

During the second quarters and first six months of 2019 and 2018, dividend equivalent payments were made to certain holders of stock options and RSUs.  For purposes of computing basic earnings per share, dividend equivalent payments made to holders of stock options and RSUs were deducted from net income to determine income available to common stockholders. 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

11

to common stockholders. The dilution calculations exclude options having exercise prices exceeding the average market price of Common Stock of zero for the first six months ended June 30, 2019 and 2018.

4. Accumulated Other Comprehensive Loss

The 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 of Stranded Tax Effects			Reclassification Adjustments		Balance at End of Period
	($ in millions)
Six Months Ended June 30, 2019
Pensions and other
postretirement liabilities	$	(497	)	$	—		$	—		$	7	$	(490	)
Other comprehensive loss
of equity investees	(66		)	(1		)	—			—		(67		)
Accumulated other
comprehensive loss	$	(563	)	$	(1	)	$	—		$	7	$	(557	)
Six Months Ended June 30, 2018
Pensions and other
postretirement liabilities	$	(300	)	$	(11	)	$	(86	)	$	12	$	(385	)
Other comprehensive income
(loss) of equity investees	(56		)	2			(2		)	—		(56		)
Accumulated other
comprehensive loss	$	(356	)	$	(9	)	$	(88	)	$	12	$	(441	)

In February 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2018-02, “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” We adopted the provisions of ASU 2018-02 in the first quarter of 2018 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.”

5.  Stock Repurchase Program

We repurchased and retired 5.7 million shares and 4.8 million shares of Common Stock under our stock repurchase program in the first six months of 2019 and 2018, respectively, at a cost of $1.1 billion and $700 million, respectively.

Since the beginning of 2006, we have repurchased and retired 191.3 million shares at a total cost of $15.2 billion.

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6.  Investments

Investment in Conrail

Through a limited liability company, we and CSX Corporation (CSX) jointly own Conrail Inc. (Conrail), whose primary subsidiary is Consolidated Rail Corporation (CRC). We have a 58% economic and 50% voting interest in the jointly owned entity, and CSX has the remainder of the economic and voting interests. Our investment in Conrail was $1.4 billion at June 30, 2019, and $1.3 billion at December 31, 2018.

CRC owns and operates certain properties (the Shared Assets Areas) for the joint and exclusive benefit of Norfolk Southern Railway Company (NSR) and CSX Transportation, Inc. (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 amounts payable to CRC for the operation of the Shared Assets Areas totaling $38 million and $36 million for the second quarters of 2019 and 2018, respectively, and $75 million and $74 million for the first six months of 2019 and 2018, respectively. Our equity in the earnings of Conrail, net of amortization, included in “Purchased services and rents” was $15 million and $18 million for the second quarters of 2019 and 2018, respectively, and $23 million and $34 million for the first six months of 2019 and 2018, respectively.

“Other liabilities” includes $280 million at both June 30, 2019, and December 31, 2018, for long-term advances from Conrail, maturing 2044, that bear interest at an average rate of 2.9%.

Investment in TTX

NS and eight other North American railroads jointly own TTX Company (TTX).  NS has a 19.65% ownership interest in TTX, a railcar pooling company that provides its owner-railroads with standardized fleets of intermodal, automotive, and general use railcars at stated rates.

Amounts paid to TTX for use of equipment are included in “Purchased services and rents” and amounted to $60 million and $67 million of expense for the second quarters of 2019 and 2018, respectively, and $122 million and $133 million for the first six months of 2019 and 2018, respectively. Our equity in the earnings of TTX, also included in “Purchased services and rents,” totaled $12 million and $17 million for the second quarters of 2019 and 2018, respectively, and $25 million and $33 million for the first six months of 2019 and 2018, respectively.

7.  Debt

During the second quarter of 2019, we issued $200 million of 3.80% senior notes due 2028, $400 million of 4.10% senior notes due 2049, and $200 million of 5.10% senior notes due 2118.

In May 2019, we renewed and amended our accounts receivable securitization program, increasing borrowing capacity from $400 million to $450 million with a term expiring in May 2020. We had no amounts outstanding at June 30, 2019, and December 31, 2018.

The “Cash, cash equivalents, and restricted cash” line item in the Consolidated Statements of Cash Flows includes restricted cash of $86 million and $88 million at June 30, 2019 and December 31, 2018, respectively, reflecting deposits held by a third-party bond agent as collateral for certain debt obligations maturing in 2019. The restricted cash balance is included as part of “Other current assets” on the Consolidated Balance Sheets in both periods.

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8. 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 right-of-use (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. There were no adjustments to “Retained income” on adoption.

The new 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 Accounting Standards Codification (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.

The new 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 are committed under long-term lease agreements for equipment, lines of road, and other property. Some of these agreements contain variable 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. These variable lease agreements include usage-based payments for equipment under service contracts, lines of road, and other property. Our long-term lease agreements do not contain any material restrictive covenants.

Our equipment leases have remaining terms of less than 1 year to 9 years and our lines of road and land leases have remaining terms of less than 1 year to 138 years. Some of these leases may include options to extend the leases for up to 99 years, and some may 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. We do not separate lease and non-lease components.

Operating lease amounts included in the Consolidated Balance Sheet are as follows:

		June 30, 2019
Assets	Classification	($ in millions)
ROU assets	Other assets	$	586
Liabilities
Current lease liabilities	Other current liabilities	$	98
Non-current lease liabilities	Other liabilities	488
Total lease liabilities		$	586

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The components of total lease expense, primarily included in “Purchased services and rents,” were as follows:

	Second Quarter		First Six Months
	2019		2019
	($ in millions)
Operating lease expense	$	29	$	56
Variable lease expense	16		28
Short-term lease expense	1		3
Total lease expense	$	46	$	87

At June 30, 2019, we do not have any material finance lease assets or liabilities, nor do we have any material subleases.

During 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 2021. The initial term of the lease is five years, 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 was as follows:

	June 30, 2019
Weighted-average remaining lease term (years) on operating leases	8.43
Weighted-average discount rates on operating leases	3.51	%

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 of leases.

During the first six months of 2019, right-of-use assets obtained in exchange for new operating lease liabilities were $46 million. During the first six months of 2019, cash paid for amounts included in the measurement of lease liabilities was $56 million in operating cash flows from operating leases. During the first quarter, cash proceeds from a sale and leaseback transaction were $82 million and the gain on the transaction was $15 million.

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Future minimum lease payments under non-cancellable operating leases were as follows:

	June 30, 2019
	($ in millions)
2019 - 6 months	$	58
2020	110
2021	104
2022	79
2023	70
2024 and subsequent years	266
Total lease payments	687
Less: Interest	101
Present value of lease liabilities	$	586

Undiscounted future minimum lease payments under non-cancellable operating leases accounted for under ASC 840 “Leases” were as follows:

	December 31, 2018
	($ in millions)
2019	$	101
2020	95
2021	88
2022	75
2023	69
2024 and subsequent years	267
Total	$	695

9.  Pensions and Other Postretirement Benefits

We have both funded and unfunded defined benefit pension plans covering principally salaried employees. We also provide specified health care and life insurance 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, a defined percentage of health care expenses is covered for retired employees and their dependents, reduced by any deductibles, coinsurance, and, in some cases, coverage provided under other group insurance policies.  Those participants who are Medicare-eligible are not covered under the self-insured retiree health care plan, but instead are provided with an employer-funded health reimbursement account which can be used for reimbursement of health insurance premiums or eligible out-of-pocket medical expenses.

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

							Other Postretirement
	Pension Benefits						Benefits
	Second Quarter
	2019			2018			2019			2018
	($ in millions)
Service cost	$	8		$	10		$	1		$	2
Interest cost	23			22			5			4
Expected return on plan assets	(44		)	(45		)	(3		)	(4		)
Amortization of net losses	11			14			—			—
Amortization of prior service benefit	—			—			(6		)	(6		)
Net expense (benefit)	$	(2	)	$	1		$	(3	)	$	(4	)

							Other Postretirement
	Pension Benefits						Benefits
	First Six Months
	2019			2018			2019			2018
	($ in millions)
Service cost	$	17		$	20		$	3		$	4
Interest cost	46			42			9			8
Expected return on plan assets	(89		)	(89		)	(7		)	(8		)
Amortization of net losses	22			28			—			—
Amortization of prior service benefit	—			—			(12		)	(12		)
Net expense (benefit)	$	(4	)	$	1		$	(7	)	$	(8	)

The service cost component of defined benefit pension cost and postretirement benefit cost are reported within “Compensation and benefits” and all other components of net benefit cost are presented in “Other income – net” on the Consolidated Statements of Income.

10.  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 corporate-owned life insurance is recorded at cash surrender value and, accordingly, approximates fair value. There are no other assets or liabilities measured at fair value on a recurring basis at June 30, 2019 or December 31, 2018. The carrying amounts and estimated fair values, based on Level 1 inputs, of long-term debt consisted of the following:

	June 30, 2019						December 31, 2018
	Carrying Amount			Fair Value			Carrying Amount			Fair Value
	($ in millions)
Long-term debt, including current maturities	$	(11,477	)	$	(13,638	)	$	(11,145	)	$	(12,203	)

11.  Commitments and Contingencies

Lawsuits

We and/or certain subsidiaries are defendants in numerous lawsuits and other claims relating principally to railroad operations.  When we conclude that it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated, it is accrued through a charge to earnings.  While the ultimate amount of liability incurred in any of these lawsuits and claims is dependent on future developments, in our opinion, the recorded liability is adequate to cover the future payment of such liability and claims.  However, the final outcome of any of these lawsuits and claims cannot be predicted with certainty, and unfavorable or unexpected outcomes could result in additional accruals that could be significant to results of operations in a particular year or quarter.  Any adjustments to the recorded liability will be reflected in earnings in the periods in which such adjustments become known.

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 findings are subject to appeal. 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.

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 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 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 casualties and other claims expense is employee personal injury costs.  The independent actuarial firm engaged by us provides quarterly studies to aid in valuing our employee personal injury liability and estimating personal injury expense.  The actuarial firm studies our historical patterns of reserving for claims and subsequent settlements, taking into account relevant outside influences.  The actuarial firm uses the results of these analyses to estimate the ultimate amount of liability. We adjust the liability quarterly based upon our assessment and the results of the study. 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, exposure to repetitive motion resulting in various musculoskeletal disorders, and exposure to excessive noise resulting in hearing loss. 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

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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.

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 $63 million and $55 million at June 30, 2019 and December 31, 2018, respectively, of which $15 million is classified as a current liability at both dates. At June 30, 2019, the liability represents our estimates of the probable cleanup, investigation, and remediation costs based on available information at 113 known locations and projects compared with 114 locations and projects at December 31, 2018. At June 30, 2019, sixteen sites accounted for $44 million of the liability, and no individual site was considered to be material. We anticipate that much of this liability will be paid out over five years; however, some costs will be paid out over a longer period.

At 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.

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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.

Insurance

We obtain on behalf of ourself and our subsidiaries insurance for potential losses for third-party liability and first-party property damages.  We are currently self-insured up to $50 million and above $1.1 billion ($1.5 billion for specific perils) per occurrence and/or policy year for bodily injury and property damage to third parties and up to $25 million and above $200 million per occurrence and/or policy year for property owned by us or in our care, custody, or control.

12. New Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, “Credit Losses - Measurement of Credit Losses on Financial Instruments,” which replaces the current incurred loss impairment method with a method that reflects expected credit losses. The new standard is effective as of January 1, 2020, and early adoption is permitted as of January 1, 2019. Because credit losses associated from our accounts receivables have historically been insignificant, we do not expect this standard to have a material effect on our financial statements. We will not adopt the standard early.

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Item 2.  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 19,500 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 chemicals, agriculture, 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.

Our second quarter 2019 results reflect the commitment to the implementation of our new strategic plan that we unveiled in February. We achieved a record low second-quarter operating ratio (a measure of the amount of operating revenues consumed by operating expenses) of 63.6%, in addition to second-quarter records for income from railway operations, net income, and diluted earnings per share.

SUMMARIZED RESULTS OF OPERATIONS

($ in millions, except per share amounts)

	Second Quarter					First Six Months
	2019		2018		% change	2019		2018		% change
Income from railway operations	$	1,065	$	1,026	4%	$	2,031	$	1,861	9%
Net income	$	722	$	710	2%	$	1,399	$	1,262	11%
Diluted earnings per share	$	2.70	$	2.50	8%	$	5.21	$	4.43	18%
Railway operating ratio (percent)	63.6		64.6		(2%)	64.8		66.9		(3%)

Income from railway operations increased in both periods, primarily a result of increased railway operating revenues, driven by higher average revenue per unit, reflecting pricing gains. Traffic volumes were down 4% for the second quarter and 2% for the first six months. Railway operating expenses decreased as declines in fuel prices and lower expenses due to increased network velocity were offset by an increase in depreciation. Our share repurchase program resulted in diluted earnings per share growth that exceeded that of net income.

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DETAILED RESULTS OF OPERATIONS

Railway Operating Revenues

The following tables present a comparison of revenues ($ in millions), volumes (units in thousands), and average revenue per unit ($ per unit) by commodity group. At the beginning of 2019, we made changes in the categorization of certain 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 1).

	Second Quarter					First Six Months
Revenues	2019		2018		% change	2019		2018		% change
Merchandise:
Chemicals	$	473	$	465	2%	$	925	$	919	1%
Agriculture products	406		379		7%	791		736		7%
Metals and construction	416		413		1%	801		769		4%
Automotive	251		253		(1%)	502		496		1%
Forest and consumer	210		208		1%	423		403		5%
Merchandise	1,756		1,718		2%	3,442		3,323		4%
Intermodal	701		714		(2%)	1,420		1,392		2%
Coal	468		466		—%	903		900		—%
Total	$	2,925	$	2,898	1%	$	5,765	$	5,615	3%

Units
Merchandise:
Chemicals	129.8	133.0	(2%)	255.7	259.6	(2%)
Agriculture products	141.3	137.4	3%	272.2	267.3	2%
Metals and construction	196.7	206.8	(5%)	370.6	382.7	(3%)
Automotive	101.8	104.7	(3%)	199.9	207.5	(4%)
Forest and consumer	68.6	73.6	(7%)	138.0	144.5	(4%)
Merchandise	638.2	655.5	(3%)	1,236.4	1,261.6	(2%)
Intermodal	1,048.5	1,091.8	(4%)	2,119.5	2,141.0	(1%)
Coal	258.3	273.6	(6%)	494.6	522.7	(5%)
Total	1,945.0	2,020.9	(4%)	3,850.5	3,925.3	(2%)

Revenue per Unit
Merchandise:
Chemicals	$	3,646	$	3,495	4%	$	3,617	$	3,539	2%
Agriculture products	2,870		2,759		4%	2,906		2,752		6%
Metals and construction	2,112		1,997		6%	2,161		2,009		8%
Automotive	2,471		2,421		2%	2,513		2,392		5%
Forest and consumer	3,057		2,825		8%	3,064		2,790		10%
Merchandise	2,751		2,621		5%	2,784		2,634		6%
Intermodal	668		654		2%	670		650		3%
Coal	1,815		1,704		7%	1,826		1,723		6%
Total	1,504		1,434		5%	1,497		1,430		5%

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Railway operating revenues increased $27 million in the second quarter and $150 million for the first six months compared with the same periods last year. The table below reflects the components of the revenue change by major commodity group ($ in millions).

	Second Quarter									First Six Months
	Increase (Decrease)									Increase (Decrease)
	Merchandise			Intermodal			Coal			Merchandise			Intermodal			Coal
Volume	$	(45	)	$	(28	)	$	(26	)	$	(66	)	$	(14	)	$	(48	)
Fuel surcharge   revenue	—			(5		)	(8		)	14			4			(9		)
Rate, mix and   other	83			20			36			171			38			60
Total	$	38		$	(13	)	$	2		$	119		$	28		$	3

Most of our contracts include negotiated fuel surcharges, typically tied to either On-Highway Diesel (OHD) or West Texas Intermediate Crude Oil (WTI).  Approximately 90% of our revenue base is covered by these negotiated fuel surcharges, with over 75% tied to OHD. In the second quarter and first six months of 2019, contracts tied to OHD accounted for about 95% of our fuel surcharge revenue. Revenues associated with these surcharges totaled $144 million and $157 million in the second quarters of 2019 and 2018, respectively, and $297 million and $288 million for the first six months of 2019 and 2018, respectively.

Merchandise

Merchandise revenue grew in both periods, as higher average revenue per unit was driven by pricing gains. The first six months also benefited from increased fuel surcharge revenue. Overall volumes fell, as gains in agriculture products were more than offset by declines in the remaining groups.

Chemicals volume decreased in both periods driven by reduced shipments of natural gas liquids and plastics, which were partially offset by gains in municipal waste shipments.

Agriculture products volume rose in both periods, with increases in corn and feed shipments. These increases were partially offset by declines in fertilizer traffic during the second quarter. During the first six months, the growth was tempered by decreased ethanol shipments.

Metals and construction volume fell in both periods, largely the result of decreases in shipments of iron and steel, coil, and frac sand. These declines were partially offset by higher aggregates traffic due to improved service and an extended shipping season.

Automotive volume declined in the second quarter due to flooding. The first six months were also impacted by decreased U.S. light vehicle production and railcar availability during the first quarter due to disruptions across the U.S. multilevel network.

Forest and consumer volume declined in both periods, reflecting decreases in pulpboard, kaolin, lumber, and graphic paper traffic.

Merchandise revenues for the remainder of the year are expected to increase, reflecting higher average revenue per unit, driven by pricing gains, and modest volume growth in the fourth quarter.

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Intermodal

Intermodal revenue decreased for the quarter but increased in the first six months. Both periods benefited from higher average revenue per unit, a result of pricing gains. Volume declined in both periods.

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

	Second Quarter			First Six Months
	2019	2018	% change	2019	2018	% change
Domestic	635.8	706.5	(10%)	1,292.1	1,378.2	(6%)
International	412.7	385.3	7%	827.4	762.8	8%
Total	1,048.5	1,091.8	(4%)	2,119.5	2,141.0	(1%)

Domestic volumes fell in both periods, the result of stronger over-the-road competition, weaker customer demand, and severe weather in the Midwest. The first six months were also impacted by trailer lane rationalizations. International volumes rose in both periods due to increased demand from existing and new accounts.

Intermodal revenues for the remainder of the year are expected to increase, driven by modest volume growth in addition to higher average revenue per unit due to pricing gains.

Coal

Coal revenues were flat in both periods, as higher average revenue per unit, the result of pricing gains, was offset by volume decreases.

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

	Second Quarter			First Six Months
	2019	2018	% change	2019	2018	% change
Utility	17,129	16,695	3%	32,884	32,560	1%
Export	6,626	7,916	(16%)	13,014	15,154	(14%)
Domestic metallurgical	3,851	4,251	(9%)	6,782	7,398	(8%)
Industrial	1,181	1,457	(19%)	2,403	2,717	(12%)
Total	28,787	30,319	(5%)	55,083	57,829	(5%)

Utility coal tonnage grew in both periods due to increased network velocity and customer demand to replenish low stockpiles. Gains in the first six months were partially offset due to plant issues and inclement weather along with declining natural gas prices. Export coal tonnage dropped in both periods as a result of coal supply issues and weak thermal seaborne pricing. Domestic metallurgical coal and coke tonnage fell in both periods due to softening domestic steel demand, customer sourcing changes, and plant outages. Industrial coal tonnage decreased in both periods as a result of customer sourcing changes and pressure from natural gas conversions.

Coal revenues for the remainder of the year are expected to decline. Utility demand continues to be impacted by lower natural gas prices and increased renewable energy generating capacity.  Export will be impacted by a lower average revenue per unit, mainly the result of softening seaborne metallurgical prices, and reduced volume due to weak thermal seaborne pricing and supply issues. Domestic metallurgical coal and coke volumes will continue to be impacted by softening domestic steel demand.

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Railway Operating Expenses

Railway operating expenses summarized by major classifications were as follows ($ in millions):

	Second Quarter					First Six Months
	2019		2018		% change	2019		2018		% change
Compensation and benefits	$	712	$	706	1%	$	1,439	$	1,443	—%
Purchased services and rents	418		430		(3%)	842		831		1%
Fuel	254		272		(7%)	504		538		(6%)
Depreciation	284		273		4%	567		545		4%
Materials and other	192		191		1%	382		397		(4%)
Total	$	1,860	$	1,872	(1%)	$	3,734	$	3,754	(1%)

Compensation and benefits expense increased in the second quarter, but decreased for the first six months as follows:

• 2018 employment tax refund ($31 million unfavorable in both the quarter and first six months),

• increased pay rates (up $22 million for the quarter and $42 million for the first six months),

• incentive and stock-based compensation (down $19 million for the quarter and $22 million for the first six months),

• employment levels (down $13 million for the quarter and $24 million for the first six months),

• overtime and recrews (down $11 million for the quarter and $17 million for the first six months),

• higher capitalized labor ($3 million for the quarter and $11 million for the first six months), and

• other (down $1 million for the quarter and $3 million for the first six months).

Average rail headcount for the quarter was down by about 1,500 compared with the second quarter 2018 and down by about 1,200 sequentially. We expect headcount to continue to decline for the remainder of the year.

Purchased services and rents declined in the second quarter, but increased for the first six months as follows ($ in millions):

	Second Quarter					First Six Months
	2019		2018		% change	2019		2018		% change
Purchased services	$	347	$	342	1%	$	693	$	660	5%
Equipment rents	71		88		(19%)	149		171		(13%)
Total	$	418	$	430	(3%)	$	842	$	831	1%

The rise in purchased services in both periods was largely the result of increased technology-related expenses, and lower earnings in equity affiliates. Additionally, there were higher intermodal-related costs for the first six months. Equipment rents fell in both periods, primarily the result of increased network velocity.

Fuel expense, which includes the cost of locomotive fuel as well as other fuel used in railway operations, decreased in both periods primarily due to lower locomotive fuel prices (down 6% in the second quarter and 5% in the first six months), as well as decreased consumption (down 1% in both the second quarter and the first six months).

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Materials and other expenses increased slightly in the second quarter, but decreased for the first six months as follows ($ in millions):  

	Second Quarter					First Six Months
	2019		2018		% change	2019		2018		% change
Materials	$	82	$	92	(11%)	$	169	$	182	(7%)
Casualties and other claims	50		38		32%	99		85		16%
Other	60		61		(2%)	114		130		(12%)
Total	$	192	$	191	1%	$	382	$	397	(4%)

Materials costs decreased in both periods, due primarily to lower locomotive repair costs as a result of fewer locomotives in service. Casualties and other claims expenses increased in the second quarter driven by higher environmental and derailment costs. For the first six months, the increase is largely a result of higher costs related to environmental remediation matters. Other expense decreased for the first six months, reflecting higher gains from the sale of operating property.

Other Income – Net

Other income – net decreased $7 million in the second quarter and increased $29 million for the first six months. We seek to monetize assets that are no longer core to our business in support of our strategic plan.  During the second quarter, we recorded a $28 million impairment loss related to our natural resource assets that we are actively marketing to sell.  In addition, we recognized gains on the sale of non-operating property and, when coupled with higher investment returns on corporate-owned life insurance, helped partially offset the impairment loss.  The increase for the first six months was driven by higher investment returns on corporate-owned life insurance, which more than offset the impairment loss.

Income Taxes

The second-quarter effective tax rates were 22.7% and 23.2% for 2019 and 2018, respectively. The current quarter reflects increased tax benefits on stock-based compensation and higher returns on corporate-owned life insurance. The year-to-date effective tax rates were 22.1% and 22.6% for the first six months of 2019 and 2018, respectively.  The current year-to-date effective rate reflects increased tax benefits on stock-based compensation and higher returns on corporate-owned life insurance, while the prior year benefited from certain 2017 tax credits that were retroactively enacted and signed into law in early 2018.

FINANCIAL CONDITION AND LIQUIDITY

Cash provided by operating activities, our principal source of liquidity, was $2.0 billion for the first six months of 2019, compared with $1.8 billion for the same period of 2018, primarily due to improved operating results. We had working capital deficits of $537 million at June 30, 2019, compared with $729 million at December 31, 2018. Cash and cash equivalents totaled $274 million at June 30, 2019. We expect cash on hand combined with cash provided by operating activities will be sufficient to meet our ongoing obligations.

In May 2019, we issued $200 million of 3.80% senior notes due 2028, $400 million of 4.10% senior notes due 2049, and $200 million of 5.10% senior notes due 2118. There have been no material changes to the information on future contractual obligations contained in our Form 10-K for the year ended December 31, 2018, with the exception of additional senior notes (see Note 7) and lease obligations (see Note 8).

Cash used in investing activities was $852 million for the first six months of 2019, compared with $786 million in the same period last year, reflecting higher property additions and increased corporate owned life insurance activity partially offset by higher property sales and other transactions.

24

Cash used in financing activities was $1.2 billion in the first six months of 2019, compared with $1.3 billion in the same period last year, largely the result of higher proceeds from borrowing, partially offset by higher repurchases of Common Stock. We repurchased 5.7 million shares of Common Stock, totaling $1.1 billion, in the first six months of 2019, compared to 4.8 million shares, totaling $700 million, in the same period last year.  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. 

Our total-debt-to-total capitalization ratio was 42.8% at June 30, 2019, and 42.0% at December 31, 2018.

We have in place and available a $750 million credit agreement expiring in May 2021, which provides for borrowings at prevailing rates and includes covenants. We had no amounts outstanding under this facility at both June 30, 2019, and December 31, 2018, and are in compliance with all of its covenants. In May 2019, we renewed and amended our accounts receivable securitization program, increasing borrowing capacity from $400 million to $450 million with a term expiring in May 2020.  We had no amounts outstanding under this program at June 30, 2019, and December 31, 2018. 

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 revenue and expenses during the reporting period. These estimates and assumptions may require judgment about matters that are inherently uncertain, and future events are likely to occur that may require us to make changes to these estimates and assumptions. 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.  There have been no significant changes to the application of the critical accounting policies disclosure contained in our Form 10-K at December 31, 2018. 

OTHER MATTERS

Labor Agreements

Over 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.

New Accounting Pronouncements

For a detailed discussion of new accounting pronouncements, see Note 12.

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 with 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.

25

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 under “Risk Factors” in our latest Form 10-K, as well as our subsequent filings with the Securities and Exchange Commission, 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.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

The information required by this item is included in Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the heading “Financial Condition and Liquidity.”

Item 4.  Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer, with the assistance of management, evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (Exchange Act)) at June 30, 2019.  Based on such evaluation, our officers have concluded that, at June 30, 2019, our disclosure controls and procedures were effective in alerting them on a timely basis to material information required to be included in our periodic filings under the Exchange Act.

Changes in Internal Control Over Financial Reporting

During the second quarter of 2019, we have not identified any changes in internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 

26

PART II. OTHER INFORMATION

Item 1.  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 findings are subject to appeal. 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.

Item 1A. Risk Factors.

The risk factors included in our 2018 Form 10-K remain unchanged and are incorporated herein by reference.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds.

	(a) Total Number of Shares (or Units)	(b) Average Price Paid per Share	(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or	(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that may yet be purchased under the Plans or
Period	Purchased (1)	(or Unit)	Programs (2)	Programs (2)
April 1-30, 2019	850,568	196.64	842,318	35,621,167
May 1-31, 2019	1,003,400	200.80	1,002,633	34,618,534
June 1-30, 2019	930,227	197.03	928,945	33,689,589
Total	2,784,195		2,773,896

⁽¹⁾  Of this amount, 10,299 represent shares tendered by employees in connection with the exercise of options under the stockholder-approved Long-Term Incentive Plan.

⁽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 June 30, 2019, 33.7 million shares remain authorized for repurchase.

27

Item 6. Exhibits.

4.1	Third Supplemental Indenture, dated as of May 8, 2019, between Norfolk Southern Corporation and U.S. Bank National Association, is incorporated by reference herein to Exhibit 4.1 to Norfolk Southern Corporation’s Form 8-K filed on May 8, 2019.
10.1	Amendment No. 14, dated as of May 31, 2019, to Transfer and Administration Agreement, dated as of November 8, 2007, is incorporated by reference herein to Exhibit 10.1 to Norfolk Southern Corporation’s Form 8-K filed on June 3, 2019.
31-A*	Rule 13a-14(a)/15d-014(a) CEO Certifications.
31-B*	Rule 13a-14(a)/15d-014(a) CFO Certifications.
32*	Section 1350 Certifications.
101*	The following financial information from Norfolk Southern Corporation’s Quarterly Report on Form 10-Q for the second quarter of 2019, formatted in Inline Extensible Business Reporting Language (iXBRL) includes (i) the Consolidated Statements of Income for the second quarter and first six months of 2019 and 2018; (ii) the Consolidated Statements of Comprehensive Income for the second quarter and first six months of 2019 and 2018; (iii) the Consolidated Balance Sheets at June 30, 2019 and December 31, 2018; (iv) the Consolidated Statements of Cash Flows for the first six months of 2019 and 2018; (v) the Consolidated Statements of Changes in Stockholders’ Equity for the second quarter and first six months of 2019 and 2018; and (vi) the Notes to Consolidated Financial Statements.
*   Filed herewith.

28

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		NORFOLK SOUTHERN CORPORATION Registrant
Date:	July 24, 2019	/s/ Jason A. Zampi
		Jason A. Zampi Vice President and Controller (Principal Accounting Officer) (Signature)
Date:	July 24, 2019	/s/ Denise W. Hutson
		Denise W. Hutson Corporate Secretary (Signature)

29

EX-31.A

Exhibit 31-A

CERTIFICATIONS

I, James A. Squires, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Norfolk Southern Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: July 24, 2019

/s/ James A. Squires

James A. Squires

Chairman, President and Chief Executive Officer

EX-31.B

Exhibit 31-B

CERTIFICATIONS

I, Cynthia C. Earhart, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Norfolk Southern Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: July 24, 2019

/s/ Cynthia C. Earhart

Cynthia C. Earhart

Executive Vice President Finance and Chief Financial Officer

EX-32

Exhibit 32

CERTIFICATIONS OF CEO AND CFO REQUIRED BY RULE 13a-14(b) OR RULE

15d-14(b) AND SECTION 1350 OF CHAPTER 63 OF TITLE 18 OF THE U.S. CODE

I certify, to the best of my knowledge, that the Quarterly Report on Form 10-Q for the period ended

June 30, 2019, of Norfolk Southern Corporation fully complies with the requirements of Section 13(a) or

15(d) of the Securities Exchange Act of 1934 and that the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Norfolk Southern Corporation.

Signed:	/s/ James A. Squires
	James A. Squires
	Chairman, President and Chief Executive Officer
	Norfolk Southern Corporation

Dated: July 24, 2019

I certify, to the best of my knowledge, that the Quarterly Report on Form 10-Q for the period ended

June 30, 2019, of Norfolk Southern Corporation fully complies with the requirements of Section 13(a) or

15(d) of the Securities Exchange Act of 1934 and that the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Norfolk Southern Corporation.

Signed:	/s/ Cynthia C. Earhart
	Cynthia C. Earhart
	Executive Vice President Finance and Chief Financial Officer
	Norfolk Southern Corporation

Dated: July 24, 2019

XML

Cover Page	6 Months Ended
	Jun. 30, 2019 shares
Cover page.
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Jun. 30, 2019
Document Transition Report	false
Entity File Number	1-8339
Entity Registrant Name	NORFOLK SOUTHERN CORPORATION
Entity Incorporation, State or Country Code	VA
Entity Tax Identification Number	52-1188014
Entity Address, Address Line One	Three Commercial Place
Entity Address, City or Town	Norfolk,
Entity Address, State or Province	VA
Entity Address, Postal Zip Code	23510-2191
City Area Code	(757)
Local Phone Number	629-2680
Title of 12(b) Security	Norfolk Southern Corporation Common Stock (Par Value $1.00)
Trading Symbol	NSC
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding	263,406,773
Entity Central Index Key	0000702165
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q2
Amendment Flag	false

XML

Consolidated Statements of Income - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Income Statement [Abstract]
Railway operating revenues	$ 2,925	$ 2,898	$ 5,765	$ 5,615
Railway operating expenses:
Compensation and benefits	712	706	1,439	1,443
Purchased services and rents	418	430	842	831
Fuel	254	272	504	538
Depreciation	284	273	567	545
Materials and other	192	191	382	397
Total railway operating expenses	1,860	1,872	3,734	3,754
Income from railway operations	1,065	1,026	2,031	1,861
Other income – net	22	29	66	37
Interest expense on debt	153	131	302	267
Income before income taxes	934	924	1,795	1,631
Income taxes	212	214	396	369
Net income	$ 722	$ 710	$ 1,399	$ 1,262
Earnings per share:
Basic (in dollars per share)	$ 2.72	$ 2.52	$ 5.25	$ 4.46
Diluted (in dollars per share)	$ 2.70	$ 2.50	$ 5.21	$ 4.43

XML

Consolidated Statements of Comprehensive Income - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Net income	$ 722	$ 710	$ 1,399	$ 1,262
Other comprehensive income, before tax:
Pension and other postretirement benefits	5	8	10	1
Other comprehensive income (loss) before tax	5	9	9	3
Income tax expense related to items of other comprehensive income	(2)	(2)	(3)	0
Other comprehensive income, net of tax	3	7	6	3
Total comprehensive income	725	717	1,405	1,265
Accumulated Other Comprehensive Loss Equity Investees
Other comprehensive income, before tax:
Other comprehensive income (loss) before tax	$ 0	$ 1	$ (1)	$ 2

XML

Consolidated Balance Sheets - USD ($) $ in Millions	Jun. 30, 2019	Dec. 31, 2018
Assets
Cash and cash equivalents	$ 274	$ 358
Accounts receivable – net	1,039	1,009
Materials and supplies	256	207
Other current assets	345	288
Total current assets	1,914	1,862
Investments	3,301	3,109
Properties less accumulated depreciation of $12,372 and $12,374, respectively at both periods	31,201	31,091
Other assets	756	177
Total assets	37,172	36,239
Current liabilities:
Accounts payable	1,407	1,505
Income and other taxes	270	255
Other current liabilities	373	246
Current maturities of long-term debt	401	585
Total current liabilities	2,451	2,591
Long-term debt	11,076	10,560
Other liabilities	1,738	1,266
Deferred income taxes	6,596	6,460
Total liabilities	21,861	20,877
Stockholders’ equity:
Common stock $1.00 per share par value, 1,350,000,000 shares authorized; outstanding 263,406,773 and 268,098,472 shares, respectively, net of treasury shares	265	269
Additional paid-in capital	2,226	2,216
Accumulated other comprehensive loss	(557)	(563)
Retained income	13,377	13,440
Total stockholders’ equity	15,311	15,362
Total liabilities and stockholders’ equity	$ 37,172	$ 36,239

XML

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Millions	Jun. 30, 2019	Dec. 31, 2018
Statement of Financial Position [Abstract]
Properties, accumulated depreciation	$ 12,372	$ 12,374
Common stock, par or stated value per share (in dollars per share)	$ 1.00	$ 1.00
Common stock, shares authorized (in shares)	1,350,000,000	1,350,000,000
Common stock, shares outstanding, net of treasury shares (in shares)	263,406,773	268,098,472

XML

Consolidated Statements of Cash Flows - USD ($) $ in Millions	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Cash flows from operating activities:
Net income	$ 1,399	$ 1,262
Reconciliation of net income to net cash provided by operating activities:
Depreciation	567	546
Deferred income taxes	133	89
Gains and losses on properties	(7)	(14)
Changes in assets and liabilities affecting operations:
Accounts receivable	(30)	(92)
Materials and supplies	(49)	(38)
Other current assets	55	19
Current liabilities other than debt	(30)	134
Other – net	(86)	(80)
Net cash provided by operating activities	1,952	1,826
Cash flows from investing activities:
Property additions	(979)	(836)
Property sales and other transactions	214	48
Investment purchases	(12)	(4)
Investment sales and other transactions	(75)	6
Net cash used in investing activities	(852)	(786)
Cash flows from financing activities:
Dividends	(458)	(408)
Common stock transactions	18	15
Purchase and retirement of common stock	(1,050)	(700)
Proceeds from borrowings – net of issuance costs	1,054	543
Debt repayments	(750)	(750)
Net cash used in financing activities	(1,186)	(1,300)
Net decrease in cash, cash equivalents, and restricted cash	(86)	(260)
Cash, cash equivalents, and restricted cash:
At beginning of year	446	690
At end of period	360	430
Supplemental disclosures of cash flow information:
Interest (net of amounts capitalized)	271	246
Income taxes (net of refunds)	$ 215	$ 126

XML

Consolidated Statements of Changes in Stockholders' Equity - USD ($) $ in Millions	Total	Common Stock	Additional Paid-In Capital	Accumulated Other Comprehensive Loss	Retained Income
Beginning Balance at Dec. 31, 2017	$ 16,359	$ 285	$ 2,254	$ (356)	$ 14,176
Comprehensive income:
Net income	552				552
Other comprehensive income (loss)	(4)			(4)
Total comprehensive income	548
Dividends on common stock ($0.86 and $0.72 for years ended 2019 and 2018, respectively)	(205)				(205)
Share repurchases	(300)	(2)	(16)		(282)
Stock-based compensation	16	1	17		(2)
Reclassification of stranded tax effects				(88)	88
Ending Balance at Mar. 31, 2018	16,418	284	2,255	(448)	14,327
Beginning Balance at Dec. 31, 2017	16,359	285	2,254	(356)	14,176
Comprehensive income:
Net income	1,262
Other comprehensive income (loss)	3
Total comprehensive income	1,265
Share repurchases	(700)
Reclassification of stranded tax effects	(88)
Ending Balance at Jun. 30, 2018	16,559	281	2,263	(441)	14,456
Beginning Balance at Mar. 31, 2018	16,418	284	2,255	(448)	14,327
Comprehensive income:
Net income	710				710
Other comprehensive income (loss)	7			7
Total comprehensive income	717
Dividends on common stock ($0.86 and $0.72 for years ended 2019 and 2018, respectively)	(203)				(203)
Share repurchases	(400)	(3)	(20)		(377)
Stock-based compensation	27		28		(1)
Ending Balance at Jun. 30, 2018	16,559	281	2,263	(441)	14,456
Beginning Balance at Dec. 31, 2018	15,362	269	2,216	(563)	13,440
Comprehensive income:
Net income	677				677
Other comprehensive income (loss)	3			3
Total comprehensive income	680
Dividends on common stock ($0.86 and $0.72 for years ended 2019 and 2018, respectively)	(230)				(230)
Share repurchases	(500)	(3)	(22)		(475)
Stock-based compensation	19	1	19		(1)
Ending Balance at Mar. 31, 2019	15,331	267	2,213	(560)	13,411
Beginning Balance at Dec. 31, 2018	15,362	269	2,216	(563)	13,440
Comprehensive income:
Net income	1,399
Other comprehensive income (loss)	6
Total comprehensive income	1,405
Share repurchases	(1,100)
Reclassification of stranded tax effects	0
Ending Balance at Jun. 30, 2019	15,311	265	2,226	(557)	13,377
Beginning Balance at Mar. 31, 2019	15,331	267	2,213	(560)	13,411
Comprehensive income:
Net income	722				722
Other comprehensive income (loss)	3			3
Total comprehensive income	725
Dividends on common stock ($0.86 and $0.72 for years ended 2019 and 2018, respectively)	(228)				(228)
Share repurchases	(550)	(2)	(22)		(526)
Stock-based compensation	33		35		(2)
Ending Balance at Jun. 30, 2019	$ 15,311	$ 265	$ 2,226	$ (557)	$ 13,377

XML

Consolidated Statements of Changes in Stockholders' Equity (Parenthetical) - $ / shares	3 Months Ended
	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2018	Mar. 31, 2018
Statement of Stockholders' Equity [Abstract]
Common stock, dividends, per share, declared (in dollars per share)	$ 0.86	$ 0.86	$ 0.72	$ 0.72

XML

Railway Operating Revenues

6 Months Ended

Jun. 30, 2019

Revenue from Contract with Customer [Abstract]

Railway Operating Revenues

Railway Operating Revenues

The following table disaggregates our revenues by major commodity group:

	Second Quarter				First Six Months
	2019		2018		2019		2018
Merchandise:	($ in millions)
Chemicals	$	473	$	465	$	925	$	919
Agriculture products	406		379		791		736
Metals and construction	416		413		801		769
Automotive	251		253		502		496
Forest and consumer	210		208		423		403
Merchandise	1,756		1,718		3,442		3,323
Intermodal	701		714		1,420		1,392
Coal	468		466		903		900
Total	$	2,925	$	2,898	$	5,765	$	5,615

At the beginning of 2019, we recategorized certain commodities within Merchandise major commodity groups to better align with how we internally manage these commodities. Prior period amounts have been reclassified to conform to the current presentation with no net impact to overall Merchandise revenue or total railway operating revenues. Specifically, certain commodities were shifted between Chemicals, Agriculture products, Metals and construction, and Forest and consumer.

We recognize the amount of revenue 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 NS for the transport of goods. These performance obligations are satisfied as the shipments move from origin to destination. As such, transportation revenue is 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 revenue associated with in-process shipments at period-end is recorded based on the estimated percentage of service completed to total transit days. We had no material remaining performance obligations as of June 30, 2019 or December 31, 2018.

Under the typical payment 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:

	June 30, 2019		December 31, 2018
	($ in millions)
Customer	$	767	$	740
Non-customer	272		269
Accounts receivable – net	$	1,039	$	1,009

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 $55 million at both June 30, 2019 and December 31, 2018.  We do not have any material contract assets or liabilities.

Certain ancillary services may be provided to customers under their transportation contracts such as switching, demurrage and other incidental service revenues. These are distinct performance obligations that are recognized at a point in time when the services are performed or as contractual obligations are met. This revenue is included within each of the commodity groups and represents approximately 4% of total “Railway operating revenues” on the Consolidated Statements of Income for both of the second quarters and first six months of 2019 and 2018.

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Stock-Based Compensation

6 Months Ended

Jun. 30, 2019

Share-based Payment Arrangement [Abstract]

Stock-Based Compensation

Stock-Based Compensation

	Second Quarter				First Six Months
	2019		2018		2019		2018
	($ in millions)
Stock-based compensation expense	$	20	$	13	$	36	$	29
Total tax benefit	8		6		31		20

During 2019, a committee of nonemployee members of our Board of Directors (and the Chief Executive Officer under delegated authority by such committee) granted stock options, restricted stock units (RSUs) and performance share units (PSUs) pursuant to the Long-Term Incentive Plan (LTIP), as follows:

	Second Quarter			First Six Months
	Granted	Weighted-Average Grant-Date Fair Value		Granted	Weighted-Average Grant-Date Fair Value
Stock options	1,540	$	54.83	43,920	$	45.93
RSUs	2,870	203.25		211,190	163.87
PSUs	3,060	189.57		96,770	160.24

Stock Options

	Second Quarter				First Six Months
	2019		2018		2019		2018
	($ in millions)
Stock options exercised	215,546		215,132		621,917		470,114
Cash received upon exercise	$	16	$	16	$	44	$	33
Related tax benefit realized	6		3		15		7

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 Norfolk Southern common stock (Common Stock). RSUs granted in previous years 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 the regular quarterly dividends paid on Common Stock. 

	Second Quarter				First Six Months
	2019		2018		2019		2018
	($ in millions)
RSUs vested	506		—		166,055		160,200
Common Stock issued net of tax withholding	363		—		119,244		99,968
Related tax benefit realized	$	—	$	—	$	2	$	3

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. No PSUs were earned or paid out during the second quarters of 2019 or 2018.

	First Six Months
	2019		2018
	($ in millions)
PSUs earned	331,099		154,189
Common Stock issued net of tax withholding	221,241		94,399
Related tax benefit realized	$	9	$	3

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Earnings Per Share

6 Months Ended

Jun. 30, 2019

Earnings Per Share [Abstract]

Earnings Per Share

Earnings Per Share

The following table sets forth the calculation of basic and diluted earnings per share:

	Basic						Diluted
	Second Quarter
	2019			2018			2019		2018
	($ in millions, except per share amounts, shares in millions)
Net income	$	722		$	710		$	722	$	710
Dividend equivalent payments	(2		)	(1		)	—		—
Income available to common stockholders	$	720		$	709		$	722	$	710
Weighted-average shares outstanding	264.8			281.3			264.8		281.3
Dilutive effect of outstanding options
and share-settled awards							2.3		2.4
Adjusted weighted-average shares outstanding							267.1		283.7
Earnings per share	$	2.72		$	2.52		$	2.70	$	2.50
	Basic						Diluted
	First Six Months
	2019			2018			2019		2018
	($ in millions, except per share amounts, shares in millions)
Net income	$	1,399		$	1,262		$	1,399	$	1,262
Dividend equivalent payments	(3		)	(2		)	—		(1		)
Income available to common stockholders	$	1,396		$	1,260		$	1,399	$	1,261
Weighted-average shares outstanding	265.9			282.4			265.9		282.4
Dilutive effect of outstanding options
and share-settled awards							2.4		2.4
Adjusted weighted-average shares outstanding							268.3		284.8
Earnings per share	$	5.25		$	4.46		$	5.21	$	4.43

During the second quarters and first six months of 2019 and 2018, dividend equivalent payments were made to certain holders of stock options and RSUs.  For purposes of computing basic earnings per share, dividend equivalent payments made to holders of stock options and RSUs were deducted from net income to determine income available to common stockholders. 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. The dilution calculations exclude options having exercise prices exceeding the average market price of Common Stock of zero for the first six months ended June 30, 2019 and 2018.

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Accumulated Other Comprehensive Loss

6 Months Ended

Jun. 30, 2019

Equity [Abstract]

Accumulated Other Comprehensive Loss

Accumulated Other Comprehensive Loss

The 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 of Stranded Tax Effects			Reclassification Adjustments		Balance at End of Period
	($ in millions)
Six Months Ended June 30, 2019
Pensions and other
postretirement liabilities	$	(497	)	$	—		$	—		$	7	$	(490	)
Other comprehensive loss
of equity investees	(66		)	(1		)	—			—		(67		)
Accumulated other
comprehensive loss	$	(563	)	$	(1	)	$	—		$	7	$	(557	)
Six Months Ended June 30, 2018
Pensions and other
postretirement liabilities	$	(300	)	$	(11	)	$	(86	)	$	12	$	(385	)
Other comprehensive income
(loss) of equity investees	(56		)	2			(2		)	—		(56		)
Accumulated other
comprehensive loss	$	(356	)	$	(9	)	$	(88	)	$	12	$	(441	)

In February 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2018-02, “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” We adopted the provisions of ASU 2018-02 in the first quarter of 2018 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.”

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Stock Repurchase Program

6 Months Ended

Jun. 30, 2019

Stock Repurchase Program [Abstract]

Stock Repurchase Program

Stock Repurchase Program

We repurchased and retired 5.7 million shares and 4.8 million shares of Common Stock under our stock repurchase program in the first six months of 2019 and 2018, respectively, at a cost of $1.1 billion and $700 million, respectively.

Since the beginning of 2006, we have repurchased and retired 191.3 million shares at a total cost of $15.2 billion.

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Investments

6 Months Ended

Jun. 30, 2019

Investments [Abstract]

Investments

Investments

Investment in Conrail

Through a limited liability company, we and CSX Corporation (CSX) jointly own Conrail Inc. (Conrail), whose primary subsidiary is Consolidated Rail Corporation (CRC). We have a 58% economic and 50% voting interest in the jointly owned entity, and CSX has the remainder of the economic and voting interests. Our investment in Conrail was $1.4 billion at June 30, 2019, and $1.3 billion at December 31, 2018.

CRC owns and operates certain properties (the Shared Assets Areas) for the joint and exclusive benefit of Norfolk Southern Railway Company (NSR) and CSX Transportation, Inc. (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 amounts payable to CRC for the operation of the Shared Assets Areas totaling $38 million and $36 million for the second quarters of 2019 and 2018, respectively, and $75 million and $74 million for the first six months of 2019 and 2018, respectively. Our equity in the earnings of Conrail, net of amortization, included in “Purchased services and rents” was $15 million and $18 million for the second quarters of 2019 and 2018, respectively, and $23 million and $34 million for the first six months of 2019 and 2018, respectively.

“Other liabilities” includes $280 million at both June 30, 2019, and December 31, 2018, for long-term advances from Conrail, maturing 2044, that bear interest at an average rate of 2.9%.

Investment in TTX

NS and eight other North American railroads jointly own TTX Company (TTX).  NS has a 19.65% ownership interest in TTX, a railcar pooling company that provides its owner-railroads with standardized fleets of intermodal, automotive, and general use railcars at stated rates.

Amounts paid to TTX for use of equipment are included in “Purchased services and rents” and amounted to $60 million and $67 million of expense for the second quarters of 2019 and 2018, respectively, and $122 million and $133 million for the first six months of 2019 and 2018, respectively. Our equity in the earnings of TTX, also included in “Purchased services and rents,” totaled $12 million and $17 million for the second quarters of 2019 and 2018, respectively, and $25 million and $33 million for the first six months of 2019 and 2018, respectively.

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Debt

6 Months Ended

Jun. 30, 2019

Debt Disclosure [Abstract]

Debt

Debt

During the second quarter of 2019, we issued $200 million of 3.80% senior notes due 2028, $400 million of 4.10% senior notes due 2049, and $200 million of 5.10% senior notes due 2118.

In May 2019, we renewed and amended our accounts receivable securitization program, increasing borrowing capacity from $400 million to $450 million with a term expiring in May 2020. We had no amounts outstanding at June 30, 2019, and December 31, 2018.

The “Cash, cash equivalents, and restricted cash” line item in the Consolidated Statements of Cash Flows includes restricted cash of $86 million and $88 million at June 30, 2019 and December 31, 2018, respectively, reflecting deposits held by a third-party bond agent as collateral for certain debt obligations maturing in 2019. The restricted cash balance is included as part of “Other current assets” on the Consolidated Balance Sheets in both periods.

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Leases

6 Months Ended

Jun. 30, 2019

Leases [Abstract]

Leases

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 right-of-use (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. There were no adjustments to “Retained income” on adoption.

The new 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 Accounting Standards Codification (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.

The new 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 are committed under long-term lease agreements for equipment, lines of road, and other property. Some of these agreements contain variable 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. These variable lease agreements include usage-based payments for equipment under service contracts, lines of road, and other property. Our long-term lease agreements do not contain any material restrictive covenants.

Our equipment leases have remaining terms of less than 1 year to 9 years and our lines of road and land leases have remaining terms of less than 1 year to 138 years. Some of these leases may include options to extend the leases for up to 99 years, and some may 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. We do not separate lease and non-lease components.

Operating lease amounts included in the Consolidated Balance Sheet are as follows:

		June 30, 2019
Assets	Classification	($ in millions)
ROU assets	Other assets	$	586
Liabilities
Current lease liabilities	Other current liabilities	$	98
Non-current lease liabilities	Other liabilities	488
Total lease liabilities		$	586

The components of total lease expense, primarily included in “Purchased services and rents,” were as follows:

	Second Quarter		First Six Months
	2019		2019
	($ in millions)
Operating lease expense	$	29	$	56
Variable lease expense	16		28
Short-term lease expense	1		3
Total lease expense	$	46	$	87

At June 30, 2019, we do not have any material finance lease assets or liabilities, nor do we have any material subleases.

During 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 2021. The initial term of the lease is five years, 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 was as follows:

	June 30, 2019
Weighted-average remaining lease term (years) on operating leases	8.43
Weighted-average discount rates on operating leases	3.51	%

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 of leases.

During the first six months of 2019, right-of-use assets obtained in exchange for new operating lease liabilities were $46 million. During the first six months of 2019, cash paid for amounts included in the measurement of lease liabilities was $56 million in operating cash flows from operating leases. During the first quarter, 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 were as follows:

	June 30, 2019
	($ in millions)
2019 - 6 months	$	58
2020	110
2021	104
2022	79
2023	70
2024 and subsequent years	266
Total lease payments	687
Less: Interest	101
Present value of lease liabilities	$	586

Undiscounted future minimum lease payments under non-cancellable operating leases accounted for under ASC 840 “Leases” were as follows:

	December 31, 2018
	($ in millions)
2019	$	101
2020	95
2021	88
2022	75
2023	69
2024 and subsequent years	267
Total	$	695

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Pensions and Other Postretirement Benefits

6 Months Ended

Jun. 30, 2019

Defined Contribution Plan [Abstract]

Pensions and Other Postretirement Benefits

Pensions and Other Postretirement Benefits

We have both funded and unfunded defined benefit pension plans covering principally salaried employees. We also provide specified health care and life insurance 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, a defined percentage of health care expenses is covered for retired employees and their dependents, reduced by any deductibles, coinsurance, and, in some cases, coverage provided under other group insurance policies.  Those participants who are Medicare-eligible are not covered under the self-insured retiree health care plan, but instead are provided with an employer-funded health reimbursement account which can be used for reimbursement of health insurance premiums or eligible out-of-pocket medical expenses.

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

							Other Postretirement
	Pension Benefits						Benefits
	Second Quarter
	2019			2018			2019			2018
	($ in millions)
Service cost	$	8		$	10		$	1		$	2
Interest cost	23			22			5			4
Expected return on plan assets	(44		)	(45		)	(3		)	(4		)
Amortization of net losses	11			14			—			—
Amortization of prior service benefit	—			—			(6		)	(6		)
Net expense (benefit)	$	(2	)	$	1		$	(3	)	$	(4	)

							Other Postretirement
	Pension Benefits						Benefits
	First Six Months
	2019			2018			2019			2018
	($ in millions)
Service cost	$	17		$	20		$	3		$	4
Interest cost	46			42			9			8
Expected return on plan assets	(89		)	(89		)	(7		)	(8		)
Amortization of net losses	22			28			—			—
Amortization of prior service benefit	—			—			(12		)	(12		)
Net expense (benefit)	$	(4	)	$	1		$	(7	)	$	(8	)

The service cost component of defined benefit pension cost and postretirement benefit cost are reported within “Compensation and benefits” and all other components of net benefit cost are presented in “Other income – net” on the Consolidated Statements of Income.

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Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2019

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

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 corporate-owned life insurance is recorded at cash surrender value and, accordingly, approximates fair value. There are no other assets or liabilities measured at fair value on a recurring basis at June 30, 2019 or December 31, 2018. The carrying amounts and estimated fair values, based on Level 1 inputs, of long-term debt consisted of the following:

	June 30, 2019						December 31, 2018
	Carrying Amount			Fair Value			Carrying Amount			Fair Value
	($ in millions)
Long-term debt, including current maturities	$	(11,477	)	$	(13,638	)	$	(11,145	)	$	(12,203	)

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2019

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Lawsuits

We and/or certain subsidiaries are defendants in numerous lawsuits and other claims relating principally to railroad operations.  When we conclude that it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated, it is accrued through a charge to earnings.  While the ultimate amount of liability incurred in any of these lawsuits and claims is dependent on future developments, in our opinion, the recorded liability is adequate to cover the future payment of such liability and claims.  However, the final outcome of any of these lawsuits and claims cannot be predicted with certainty, and unfavorable or unexpected outcomes could result in additional accruals that could be significant to results of operations in a particular year or quarter.  Any adjustments to the recorded liability will be reflected in earnings in the periods in which such adjustments become known.

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 findings are subject to appeal. 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.

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 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 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 casualties and other claims expense is employee personal injury costs.  The independent actuarial firm engaged by us provides quarterly studies to aid in valuing our employee personal injury liability and estimating personal injury expense.  The actuarial firm studies our historical patterns of reserving for claims and subsequent settlements, taking into account relevant outside influences.  The actuarial firm uses the results of these analyses to estimate the ultimate amount of liability. We adjust the liability quarterly based upon our assessment and the results of the study. 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, exposure to repetitive motion resulting in various musculoskeletal disorders, and exposure to excessive noise resulting in hearing loss. 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.

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 $63 million and $55 million at June 30, 2019 and December 31, 2018, respectively, of which $15 million is classified as a current liability at both dates. At June 30, 2019, the liability represents our estimates of the probable cleanup, investigation, and remediation costs based on available information at 113 known locations and projects compared with 114 locations and projects at December 31, 2018. At June 30, 2019, sixteen sites accounted for $44 million of the liability, and no individual site was considered to be material. We anticipate that much of this liability will be paid out over five years; however, some costs will be paid out over a longer period.

At 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.

Insurance

We obtain on behalf of ourself and our subsidiaries insurance for potential losses for third-party liability and first-party property damages.  We are currently self-insured up to $50 million and above $1.1 billion ($1.5 billion for specific perils) per occurrence and/or policy year for bodily injury and property damage to third parties and up to $25 million and above $200 million per occurrence and/or policy year for property owned by us or in our care, custody, or control.

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New Accounting Pronouncements

6 Months Ended

Jun. 30, 2019

New Accounting Pronouncements and Changes in Accounting Principles [Abstract]

New Accounting Pronouncements

New Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, “Credit Losses - Measurement of Credit Losses on Financial Instruments,” which replaces the current incurred loss impairment method with a method that reflects expected credit losses. The new standard is effective as of January 1, 2020, and early adoption is permitted as of January 1, 2019. Because credit losses associated from our accounts receivables have historically been insignificant, we do not expect this standard to have a material effect on our financial statements. We will not adopt the standard early.

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New Accounting Pronouncements (Policies)

6 Months Ended

Jun. 30, 2019

New Accounting Pronouncements and Changes in Accounting Principles [Abstract]

New Accounting Pronouncements

New Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, “Credit Losses - Measurement of Credit Losses on Financial Instruments,” which replaces the current incurred loss impairment method with a method that reflects expected credit losses. The new standard is effective as of January 1, 2020, and early adoption is permitted as of January 1, 2019. Because credit losses associated from our accounts receivables have historically been insignificant, we do not expect this standard to have a material effect on our financial statements. We will not adopt the standard early.

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Railway Operating Revenues (Tables)

6 Months Ended

Jun. 30, 2019

Revenue from Contract with Customer [Abstract]

Disaggregation of Revenue

The following table disaggregates our revenues by major commodity group:

	Second Quarter				First Six Months
	2019		2018		2019		2018
Merchandise:	($ in millions)
Chemicals	$	473	$	465	$	925	$	919
Agriculture products	406		379		791		736
Metals and construction	416		413		801		769
Automotive	251		253		502		496
Forest and consumer	210		208		423		403
Merchandise	1,756		1,718		3,442		3,323
Intermodal	701		714		1,420		1,392
Coal	468		466		903		900
Total	$	2,925	$	2,898	$	5,765	$	5,615

Schedule of Accounts Receivable

“Accounts receivable – net” on the Consolidated Balance Sheets includes both customer and non-customer receivables as follows:

	June 30, 2019		December 31, 2018
	($ in millions)
Customer	$	767	$	740
Non-customer	272		269
Accounts receivable – net	$	1,039	$	1,009

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Stock-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2019

Share-based Compensation Arrangement by Share-based Payment Award [Line Items]

Schedule of Compensation Cost for Share-based Payment Arrangements, Allocation of Share-based Compensation Costs by Plan

	Second Quarter				First Six Months
	2019		2018		2019		2018
	($ in millions)
Stock-based compensation expense	$	20	$	13	$	36	$	29
Total tax benefit	8		6		31		20

Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value

During 2019, a committee of nonemployee members of our Board of Directors (and the Chief Executive Officer under delegated authority by such committee) granted stock options, restricted stock units (RSUs) and performance share units (PSUs) pursuant to the Long-Term Incentive Plan (LTIP), as follows:

	Second Quarter			First Six Months
	Granted	Weighted-Average Grant-Date Fair Value		Granted	Weighted-Average Grant-Date Fair Value
Stock options	1,540	$	54.83	43,920	$	45.93
RSUs	2,870	203.25		211,190	163.87
PSUs	3,060	189.57		96,770	160.24

Schedule of Cash Proceeds Received from Share-based Payment Awards

	Second Quarter				First Six Months
	2019		2018		2019		2018
	($ in millions)
Stock options exercised	215,546		215,132		621,917		470,114
Cash received upon exercise	$	16	$	16	$	44	$	33
Related tax benefit realized	6		3		15		7

Restricted Stock Units (RSUs)

Share-based Compensation Arrangement by Share-based Payment Award [Line Items]

Schedule of Share-based Compensation, Activity

	Second Quarter				First Six Months
	2019		2018		2019		2018
	($ in millions)
RSUs vested	506		—		166,055		160,200
Common Stock issued net of tax withholding	363		—		119,244		99,968
Related tax benefit realized	$	—	$	—	$	2	$	3

Performance Share Units

Share-based Compensation Arrangement by Share-based Payment Award [Line Items]

Schedule of Share-based Compensation, Activity

	First Six Months
	2019		2018
	($ in millions)
PSUs earned	331,099		154,189
Common Stock issued net of tax withholding	221,241		94,399
Related tax benefit realized	$	9	$	3

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Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2019

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted

The following table sets forth the calculation of basic and diluted earnings per share:

	Basic						Diluted
	Second Quarter
	2019			2018			2019		2018
	($ in millions, except per share amounts, shares in millions)
Net income	$	722		$	710		$	722	$	710
Dividend equivalent payments	(2		)	(1		)	—		—
Income available to common stockholders	$	720		$	709		$	722	$	710
Weighted-average shares outstanding	264.8			281.3			264.8		281.3
Dilutive effect of outstanding options
and share-settled awards							2.3		2.4
Adjusted weighted-average shares outstanding							267.1		283.7
Earnings per share	$	2.72		$	2.52		$	2.70	$	2.50
	Basic						Diluted
	First Six Months
	2019			2018			2019		2018
	($ in millions, except per share amounts, shares in millions)
Net income	$	1,399		$	1,262		$	1,399	$	1,262
Dividend equivalent payments	(3		)	(2		)	—		(1		)
Income available to common stockholders	$	1,396		$	1,260		$	1,399	$	1,261
Weighted-average shares outstanding	265.9			282.4			265.9		282.4
Dilutive effect of outstanding options
and share-settled awards							2.4		2.4
Adjusted weighted-average shares outstanding							268.3		284.8
Earnings per share	$	5.25		$	4.46		$	5.21	$	4.43

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Accumulated Other Comprehensive Loss (Tables)

6 Months Ended

Jun. 30, 2019

Equity [Abstract]

Accumulated Other Comprehensive Loss

The 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 of Stranded Tax Effects			Reclassification Adjustments		Balance at End of Period
	($ in millions)
Six Months Ended June 30, 2019
Pensions and other
postretirement liabilities	$	(497	)	$	—		$	—		$	7	$	(490	)
Other comprehensive loss
of equity investees	(66		)	(1		)	—			—		(67		)
Accumulated other
comprehensive loss	$	(563	)	$	(1	)	$	—		$	7	$	(557	)
Six Months Ended June 30, 2018
Pensions and other
postretirement liabilities	$	(300	)	$	(11	)	$	(86	)	$	12	$	(385	)
Other comprehensive income
(loss) of equity investees	(56		)	2			(2		)	—		(56		)
Accumulated other
comprehensive loss	$	(356	)	$	(9	)	$	(88	)	$	12	$	(441	)

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Leases (Tables)

6 Months Ended

Jun. 30, 2019

Leases [Abstract]

Schedule of Lease Related Assets and Liabilities

Operating lease amounts included in the Consolidated Balance Sheet are as follows:

		June 30, 2019
Assets	Classification	($ in millions)
ROU assets	Other assets	$	586
Liabilities
Current lease liabilities	Other current liabilities	$	98
Non-current lease liabilities	Other liabilities	488
Total lease liabilities		$	586

Lease, Cost

Other information related to operating leases was as follows:

	June 30, 2019
Weighted-average remaining lease term (years) on operating leases	8.43
Weighted-average discount rates on operating leases	3.51	%

The components of total lease expense, primarily included in “Purchased services and rents,” were as follows:

	Second Quarter		First Six Months
	2019		2019
	($ in millions)
Operating lease expense	$	29	$	56
Variable lease expense	16		28
Short-term lease expense	1		3
Total lease expense	$	46	$	87

Lessee, Operating Lease, Liability, Maturity

Future minimum lease payments under non-cancellable operating leases were as follows:

	June 30, 2019
	($ in millions)
2019 - 6 months	$	58
2020	110
2021	104
2022	79
2023	70
2024 and subsequent years	266
Total lease payments	687
Less: Interest	101
Present value of lease liabilities	$	586

Schedule of Future Minimum Rental Payments for Operating Leases

Undiscounted future minimum lease payments under non-cancellable operating leases accounted for under ASC 840 “Leases” were as follows:

	December 31, 2018
	($ in millions)
2019	$	101
2020	95
2021	88
2022	75
2023	69
2024 and subsequent years	267
Total	$	695

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Pensions and Other Postretirement Benefits (Tables)

6 Months Ended

Jun. 30, 2019

Defined Contribution Plan [Abstract]

Pension and Other Postretirement Benefit Cost Components

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

							Other Postretirement
	Pension Benefits						Benefits
	Second Quarter
	2019			2018			2019			2018
	($ in millions)
Service cost	$	8		$	10		$	1		$	2
Interest cost	23			22			5			4
Expected return on plan assets	(44		)	(45		)	(3		)	(4		)
Amortization of net losses	11			14			—			—
Amortization of prior service benefit	—			—			(6		)	(6		)
Net expense (benefit)	$	(2	)	$	1		$	(3	)	$	(4	)

							Other Postretirement
	Pension Benefits						Benefits
	First Six Months
	2019			2018			2019			2018
	($ in millions)
Service cost	$	17		$	20		$	3		$	4
Interest cost	46			42			9			8
Expected return on plan assets	(89		)	(89		)	(7		)	(8		)
Amortization of net losses	22			28			—			—
Amortization of prior service benefit	—			—			(12		)	(12		)
Net expense (benefit)	$	(4	)	$	1		$	(7	)	$	(8	)

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Fair Value of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2019

Fair Value Disclosures [Abstract]

Schedule Of Carrying Amounts And Estimated Fair Values

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

	June 30, 2019						December 31, 2018
	Carrying Amount			Fair Value			Carrying Amount			Fair Value
	($ in millions)
Long-term debt, including current maturities	$	(11,477	)	$	(13,638	)	$	(11,145	)	$	(12,203	)

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Railway Operating Revenues (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	$ 2,925	$ 2,898	$ 5,765	$ 5,615
Revenue, payment terms			15 days
Accessorial Services
Disaggregation of Revenue [Line Items]
Accessorial services percent of total railway operating revenues			4.00%	4.00%
Merchandise
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	1,756	1,718	$ 3,442	$ 3,323
Merchandise | Chemicals
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	473	465	925	919
Merchandise | Agriculture products
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	406	379	791	736
Merchandise | Metals and construction
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	416	413	801	769
Merchandise | Automotive
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	251	253	502	496
Merchandise | Forest and consumer
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	210	208	423	403
Intermodal
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	701	714	1,420	1,392
Coal
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	$ 468	$ 466	$ 903	$ 900

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Railway Operating Revenues - Schedule of Account Receivables (Details) - USD ($) $ in Millions	Jun. 30, 2019	Dec. 31, 2018
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Accounts receivable – net	$ 1,039	$ 1,009
Trade Accounts Receivable
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Accounts receivable – net	767	740
Other Receivables
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Accounts receivable – net	272	269
Other Noncurrent Receivables
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Accounts receivable, net, noncurrent	$ 55	$ 55

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Stock-Based Compensation - Schedule of Stock-Based Compensation Expense and Related Tax Benefits (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Share-based Payment Arrangement [Abstract]
Stock-based compensation expense	$ 20	$ 13	$ 36	$ 29
Total tax benefit	$ 8	$ 6	$ 31	$ 20

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Stock-Based Compensation - Schedule of Grants and Weighted-Average Grant-Date Fair Values (Details) - $ / shares	3 Months Ended	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2019
Stock options
Granted
Stock options (in shares)	1,540	43,920
Weighted-Average Grant-Date Fair Value
Stock options (in dollars per shares)	$ 54.83	$ 45.93
RSUs
Granted
Other than stock options (in shares)	2,870	211,190
Weighted-Average Grant-Date Fair Value
Other than stock options (in dollars per share)	$ 203.25	$ 163.87
PSUs
Granted
Other than stock options (in shares)	3,060	96,770
Weighted-Average Grant-Date Fair Value
Other than stock options (in dollars per share)	$ 189.57	$ 160.24

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Stock-Based Compensation - Narrative (Details)	6 Months Ended	12 Months Ended	18 Months Ended
	Jun. 30, 2019	Dec. 31, 2017	Jun. 30, 2019
RSUs
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award vesting period (in years)		5 years	4 years
PSUs
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
PSU Cycle	3 years

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Stock-Based Compensation - Schedule of Options Exercised, Cash Received, and Related Tax Benefits (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Share-based Payment Arrangement [Abstract]
Stock options exercised (in shares)	215,546	215,132	621,917	470,114
Cash received upon exercise	$ 16	$ 16	$ 44	$ 33
Related tax benefit realized	$ 6	$ 3	$ 15	$ 7

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Stock-Based Compensation - Schedule of RSU Activity (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Related tax benefit realized	$ 6	$ 3	$ 15	$ 7
Restricted Stock Units (RSUs)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share units earned (in shares)	506	0	166,055	160,200
Shares issued net of withholding taxes (in shares)	363	0	119,244	99,968
Related tax benefit realized	$ 0	$ 0	$ 2	$ 3

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Stock-Based Compensation - Schedule of PSU Activity (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Related tax benefit realized	$ 6	$ 3	$ 15	$ 7
PSUs
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share units earned (in shares)	0	0	331,099	154,189
Shares issued net of withholding taxes (in shares)			221,241	94,399
Related tax benefit realized			$ 9	$ 3

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Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions	3 Months Ended				6 Months Ended
	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2018	Mar. 31, 2018	Jun. 30, 2019	Jun. 30, 2018
Earnings Per Share [Abstract]
Net income	$ 722	$ 677	$ 710	$ 552	$ 1,399	$ 1,262
Dividend equivalent payments, basic	(2)		(1)		(3)	(2)
Dividend equivalent payments, diluted	0		0		0	(1)
Income available to common stockholders, basic	720		709		1,396	1,260
Income available to common stockholders, diluted	$ 722		$ 710		$ 1,399	$ 1,261
Weighted-average shares outstanding (in shares)	264.8		281.3		265.9	282.4
Dilutive effect of outstanding options and share-settled awards (in shares)	2.3		2.4		2.4	2.4
Adjusted weighted-average shares outstanding (in shares)	267.1		283.7		268.3	284.8
Basic (in dollars per share)	$ 2.72		$ 2.52		$ 5.25	$ 4.46
Diluted (in dollars per share)	$ 2.70		$ 2.50		$ 5.21	$ 4.43

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Earnings Per Share - Antidilutive Securities Excluded From Computation Of Earnings Per Share (Details) - shares	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Earnings Per Share [Abstract]
Antidilutive securities excluded from computation of earnings per share (in shares)	0	0

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Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Millions	3 Months Ended	6 Months Ended
	Mar. 31, 2018	Jun. 30, 2019	Jun. 30, 2018
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
Beginning Balance	$ 16,359	$ 15,362	$ 16,359
Other comprehensive income (loss), before reclassifications, net of tax		(1)	(9)
Reclassification of Stranded Tax Effects		0	(88)
Reclassification Adjustments		7	12
Ending Balance	16,418	15,311	16,559
Accumulated Other Comprehensive Loss
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
Beginning Balance	(356)	(563)	(356)
Reclassification of Stranded Tax Effects	(88)
Ending Balance	(448)	(557)	(441)
Pensions And Other Postretirement Liabilities
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
Beginning Balance	(300)	(497)	(300)
Other comprehensive income (loss), before reclassifications, net of tax		0	(11)
Reclassification of Stranded Tax Effects		0	(86)
Reclassification Adjustments		7	12
Ending Balance		(490)	(385)
Accumulated Other Comprehensive Loss Equity Investees
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
Beginning Balance	$ (56)	(66)	(56)
Other comprehensive income (loss), before reclassifications, net of tax		(1)	2
Reclassification of Stranded Tax Effects		0	(2)
Reclassification Adjustments		0	0
Ending Balance		$ (67)	$ (56)

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Accumulated Other Comprehensive Loss - Narrative (Details) - USD ($) $ in Millions	3 Months Ended	6 Months Ended
	Mar. 31, 2018	Jun. 30, 2019	Jun. 30, 2018
Accumulated Other Comprehensive Income (Loss) [Line Items]
Reclassification of stranded tax effects		$ 0	$ (88)
Accumulated Other Comprehensive Loss
Accumulated Other Comprehensive Income (Loss) [Line Items]
Reclassification of stranded tax effects	$ (88)
Accumulated Other Comprehensive Loss | Accounting Standards Update 2018-02
Accumulated Other Comprehensive Income (Loss) [Line Items]
Reclassification of stranded tax effects	(88)
Retained Income
Accumulated Other Comprehensive Income (Loss) [Line Items]
Reclassification of stranded tax effects	88
Retained Income | Accounting Standards Update 2018-02
Accumulated Other Comprehensive Income (Loss) [Line Items]
Reclassification of stranded tax effects	$ 88

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Stock Repurchase Program (Details) - USD ($) shares in Millions, $ in Millions	3 Months Ended				6 Months Ended
	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2018	Mar. 31, 2018	Jun. 30, 2019	Jun. 30, 2018
Stock Repurchase Program [Abstract]
Stock repurchased and retired during period (in shares)					5.7	4.8
Stock repurchased and retired during period, cost	$ 550	$ 500	$ 400	$ 300	$ 1,100	$ 700
Stock repurchased and retired since beginning of stock repurchase program in 2006 (in shares)					191.3
Stock repurchased and retired since beginning of stock repurchase program in 2006, cost					$ 15,200

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Investments (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Equity Method Investee
Schedule of Investments [Line Items]
Equity method investment, ownership percentage	58.00%		58.00%
Conrail Voting
Schedule of Investments [Line Items]
Equity method investment, ownership percentage	50.00%		50.00%
Conrail Inc
Schedule of Investments [Line Items]
Equity method investments	$ 1,400		$ 1,400		$ 1,300
Expenses from transactions with related party	38	$ 36	75	$ 74
Equity in the earnings of investee	15	18	23	34
Due to affiliate, noncurrent	$ 280		$ 280		$ 280
Due to affiliate, average interest rate			2.90%		2.90%
TTX Company
Schedule of Investments [Line Items]
Equity method investment, ownership percentage	19.65%		19.65%
Expenses from transactions with related party	$ 60	67	$ 122	133
Equity in the earnings of investee	$ 12	$ 17	$ 25	$ 33

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Debt (Details) - USD ($)	Jun. 30, 2019	May 31, 2019	Apr. 30, 2019	Dec. 31, 2018
Debt Instrument [Line Items]
Restricted cash	$ 86,000,000			$ 88,000,000
Securitization Borrowings
Debt Instrument [Line Items]
Current borrowing capacity		$ 450,000,000	$ 400,000,000
Accounts receivable securitization balance	0			$ 0
3.80% Senior Notes Due 2028 | Senior Notes
Debt Instrument [Line Items]
Debt instrument, face amount	$ 200,000,000
Interest rate, stated percentage	3.80%
4.10% Senior Notes Due 2049 | Senior Notes
Debt Instrument [Line Items]
Debt instrument, face amount	$ 400,000,000
Interest rate, stated percentage	4.10%
5.10% Senior Notes Due 2118 | Senior Notes
Debt Instrument [Line Items]
Debt instrument, face amount	$ 200,000,000
Interest rate, stated percentage	5.10%

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Leases - Narrative (Details) - USD ($) $ in Millions	1 Months Ended	3 Months Ended	6 Months Ended
	Mar. 31, 2019	Mar. 31, 2019	Jun. 30, 2019
Lessee, Lease, Description [Line Items]
Renewal term			99 years
Termination period			30 days
Estimated construction cost, noncancellable lease	$ 550
Residual value guarantee, percentage	90.00%
Right-of-use assets obtained in exchange for new operating lease liabilities			$ 46
Operating cash flows from operating leases			$ 56
Proceeds from sale of leaseback transactions		$ 82
Sale and leaseback transaction, gain (loss)		$ 15
Equipment | Minimum
Lessee, Lease, Description [Line Items]
Remaining lease term			1 year
Equipment | Maximum
Lessee, Lease, Description [Line Items]
Remaining lease term			9 years
Line of Road and Property Lease | Minimum
Lessee, Lease, Description [Line Items]
Remaining lease term			1 year
Line of Road and Property Lease | Maximum
Lessee, Lease, Description [Line Items]
Remaining lease term			138 years
Building
Lessee, Lease, Description [Line Items]
Lease not yet commenced, term of contract			5 years

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Leases - Operating Lease Included in Balance Sheet (Details) $ in Millions	Jun. 30, 2019 USD ($)
Assets
ROU assets	$ 586
Liabilities
Current lease liabilities	98
Non-current lease liabilities	488
Total lease liabilities	$ 586

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Leases - Lease Cost (Details) - USD ($) $ in Millions	3 Months Ended	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2019
Leases [Abstract]
Operating lease expense	$ 29	$ 56
Variable lease expense	16	28
Short-term lease expense	1	3
Total lease expense	$ 46	$ 87

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Leases - Additional Information (Details)	Jun. 30, 2019
Leases [Abstract]
Weighted-average remaining lease term (years) on operating leases	8 years 5 months 4 days
Weighted-average discount rates on operating leases	3.51%

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Leases - Future Minimum Lease Payments (Details) $ in Millions	Jun. 30, 2019 USD ($)
Leases [Abstract]
2019 - 6 months	$ 58
2020	110
2021	104
2022	79
2023	70
2024 and subsequent years	266
Total lease payments	687
Less: Interest	101
Present value of lease liabilities	$ 586

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Leases - Prior Year Future Minimum Lease Payments (Details) $ in Millions	Dec. 31, 2018 USD ($)
Leases [Abstract]
2019	$ 101
2020	95
2021	88
2022	75
2023	69
2024 and subsequent years	267
Total	$ 695

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Pensions and Other Postretirement Benefits (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Pension Benefits
Defined Benefit Plan Disclosure [Line Items]
Service cost	$ 8	$ 10	$ 17	$ 20
Interest cost	23	22	46	42
Expected return on plan assets	(44)	(45)	(89)	(89)
Amortization of net losses	11	14	22	28
Amortization of prior service benefit	0	0	0	0
Net expense (benefit)	(2)	1	(4)	1
Other Postretirement Benefits
Defined Benefit Plan Disclosure [Line Items]
Service cost	1	2	3	4
Interest cost	5	4	9	8
Expected return on plan assets	(3)	(4)	(7)	(8)
Amortization of net losses	0	0	0	0
Amortization of prior service benefit	(6)	(6)	(12)	(12)
Net expense (benefit)	$ (3)	$ (4)	$ (7)	$ (8)

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Fair Value of Financial Instruments - Schedule of Carrying Amounts and Estimated Fair Values (Details) - Fair Value, Measurements, Recurring - USD ($) $ in Millions	Jun. 30, 2019	Dec. 31, 2018
Carrying Amount
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Long-term debt, including current maturities, fair value	$ (11,477)	$ (11,145)
Fair Value
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Long-term debt, including current maturities, fair value	$ (13,638)	$ (12,203)

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Commitments and Contingencies (Details)	6 Months Ended
	Jun. 30, 2019 USD ($) location	Dec. 31, 2018 USD ($) location
Commitments and Contingencies Disclosure [Abstract]
Environmental liability	$ 63,000,000	$ 55,000,000
Current environmental liability	$ 15,000,000	$ 15,000,000
Known cleanup and remediation locations and projects | location	113	114
Number of sites - representative sample | location	16
Liability associated with those sites	$ 44,000,000
Environmental locations representative sample liability payout period, in years	5 years
Responsible locations with another party | location	11
Self-insured injury/damage to third party - up to	$ 50,000,000
Self-insured injury/damage to third parties - and above, per occurrence	1,100,000,000
Self-insured injury/damage to third parties - and above, per occurrence for specific perils	1,500,000,000
Self-insured NS owned property - up to	25,000,000
Self-insured NS owned property - and above, per occurrence	$ 200,000,000