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 SEPTEMBER 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 September 30, 2019
Common Stock ($1.00 par value per share)	260,746,663	(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 Third Quarter and First Nine Months of 2019 and 2018	3
		Consolidated Statements of Comprehensive Income Third Quarter and First Nine Months of 2019 and 2018	4
		Consolidated Balance Sheets At September 30, 2019 and December 31, 2018	5
		Consolidated Statements of Cash Flows First Nine Months of 2019 and 2018	6
		Consolidated Statements of Changes in Stockholders’ Equity Third Quarter and First Nine 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	22
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
	Item 4.	Controls and Procedures	29
Part II.	Other Information:
	Item 1.	Legal Proceedings	30
	Item 1A.	Risk Factors	30
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
	Item 6.	Exhibits	31
		Signatures	32

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Income

(Unaudited)

	Third Quarter				First Nine Months
	2019		2018		2019		2018
	($ in millions, except per share amounts)
Railway operating revenues	$	2,841	$	2,947	$	8,606	$	8,562
Railway operating expenses:
Compensation and benefits	682		725		2,121		2,168
Purchased services and rents	423		450		1,265		1,281
Fuel	226		274		730		812
Depreciation	286		276		853		821
Materials and other	228		202		610		599
Total railway operating expenses	1,845		1,927		5,579		5,681
Income from railway operations	996		1,020		3,027		2,881
Other income – net	22		30		88		67
Interest expense on debt	150		142		452		409
Income before income taxes	868		908		2,663		2,539
Income taxes	211		206		607		575
Net income	$	657	$	702	$	2,056	$	1,964
Earnings per share:
Basic	$	2.50	$	2.54	$	7.76	$	7.00
Diluted	2.49		2.52		7.70		6.95

 See accompanying notes to consolidated financial statements.

3

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income

(Unaudited)

	Third Quarter						First Nine Months
	2019			2018			2019			2018
	($ in millions)
Net income	$	657		$	702		$	2,056		$	1,964
Other comprehensive income, before tax:
Pension and other postretirement benefits	5			8			15			9
Other comprehensive income (loss) of equity investees	—			—			(1		)	2
Other comprehensive income, before tax	5			8			14			11
Income tax expense related to items of
other comprehensive income	(1		)	(2		)	(4		)	(2		)
Other comprehensive income, net of tax	4			6			10			9
Total comprehensive income	$	661		$	708		$	2,066		$	1,973

 See accompanying notes to consolidated financial statements.

4

Norfolk Southern Corporation and Subsidiaries

Consolidated Balance Sheets

(Unaudited)

	September 30, 2019			December 31, 2018
	($ in millions)
Assets
Current assets:
Cash and cash equivalents	$	452		$	358
Accounts receivable – net	973			1,009
Materials and supplies	266			207
Other current assets	325			288
Total current assets	2,016			1,862
Investments	3,376			3,109
Properties less accumulated depreciation of $12,381
and $12,374, respectively	31,394			31,091
Other assets	714			177
Total assets	$	37,500		$	36,239
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	1,407		$	1,505
Short-term debt	350			—
Income and other taxes	202			255
Other current liabilities	401			246
Current maturities of long-term debt	401			585
Total current liabilities	2,761			2,591
Long-term debt	11,085			10,560
Other liabilities	1,727			1,266
Deferred income taxes	6,689			6,460
Total liabilities	22,262			20,877
Stockholders’ equity:
Common stock $1.00 per share par value, 1,350,000,000 shares
authorized; outstanding 260,746,663 and 268,098,472 shares,
respectively, net of treasury shares	262			269
Additional paid-in capital	2,219			2,216
Accumulated other comprehensive loss	(553		)	(563		)
Retained income	13,310			13,440
Total stockholders’ equity	15,238			15,362
Total liabilities and stockholders’ equity	$	37,500		$	36,239

 See accompanying notes to consolidated financial statements.

5

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

		First Nine Months
		2019			2018
		($ in millions)
Cash flows from operating activities:
	Net income	$	2,056		$	1,964
	Reconciliation of net income to net cash provided by operating activities:
	Depreciation	854			822
	Deferred income taxes	225			138
	Gains and losses on properties	(4		)	(26		)
	Changes in assets and liabilities affecting operations:
	Accounts receivable	34			(102		)
	Materials and supplies	(59		)	(45		)
	Other current assets	40			45
	Current liabilities other than debt	(72		)	173
	Other – net	(77		)	(85		)
	Net cash provided by operating activities	2,997			2,884
Cash flows from investing activities:
	Property additions	(1,494		)	(1,326		)
	Property sales and other transactions	282			93
	Investment purchases	(12		)	(4		)
	Investment sales and other transactions	(99		)	96
	Net cash used in investing activities	(1,323		)	(1,141		)
Cash flows from financing activities:
	Dividends	(705		)	(627		)
	Common stock transactions	21			38
	Purchase and retirement of common stock	(1,550		)	(2,300		)
	Proceeds from borrowings – net of issuance costs	1,404			2,023
	Debt repayments	(750		)	(750		)
	Net cash used in financing activities	(1,580		)	(1,616		)
	Net increase in cash, cash equivalents,
	and restricted cash	94			127
Cash, cash equivalents, and restricted cash:
	At beginning of year	446			690
	At end of period	$	540		$	817
Supplemental disclosures of cash flow information:
	Cash paid during the period for:
	Interest (net of amounts capitalized)	$	392		$	327
	Income taxes (net of refunds)	404			314

 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
Comprehensive income:
Net income										657			657
Other comprehensive income							4						4
Total comprehensive income													661
Dividends on common stock,
$0.94 per share										(247		)	(247		)
Share repurchases	(3		)	(21		)				(476		)	(500		)
Stock-based compensation				14						(1		)	13
Balance at September 30, 2019	$	262		$	2,219		$	(553	)	$	13,310		$	15,238

 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
Comprehensive income:
Net income										702			702
Other comprehensive income							6						6
Total comprehensive income													708
Dividends on common stock,
$0.80 per share										(219		)	(219		)
Share repurchases	(8		)	(300		)				(1,292		)	(1,600		)
Stock-based compensation	1			33						(2		)	32
Balance at September 30, 2018	$	274		$	1,996		$	(435	)	$	13,645		$	15,480

 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 September 30, 2019, and December 31, 2018, our results of operations, comprehensive income and changes in stockholders’ equity for the third quarters and first nine months of 2019 and 2018, and our cash flows for the first nine 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:

	Third Quarter				First Nine Months
	2019		2018		2019		2018
Merchandise:	($ in millions)
Chemicals	$	481	$	481	$	1,406	$	1,400
Agriculture products	394		388		1,185		1,124
Metals and construction	391		401		1,192		1,170
Automotive	247		245		749		741
Forest and consumer	218		222		641		625
Merchandise	1,731		1,737		5,173		5,060
Intermodal	707		746		2,127		2,138
Coal	403		464		1,306		1,364
Total	$	2,841	$	2,947	$	8,606	$	8,562

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 September 30, 2019 or December 31, 2018.

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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:

	September 30, 2019		December 31, 2018
	($ in millions)
Customer	$	720	$	740
Non-customer	253		269
Accounts receivable – net	$	973	$	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 $23 million and $55 million at September 30, 2019 and December 31, 2018, respectively.  During the third quarter of 2019, we wrote off a $32 million non-current customer receivable resulting from a legal dispute and this expense is included in “Materials and other” on the Consolidated Statements of Income.   We do not have any material contract assets or liabilities.

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 5% of total “Railway operating revenues” on the Consolidated Statements of Income for the third quarter and first nine months of 2019 and 4% for the third quarter and first nine months of 2018.

2.  Stock-Based Compensation

	Third Quarter				First Nine Months
	2019		2018		2019		2018
	($ in millions)
Stock-based compensation expense	$	10	$	12	$	46	$	41
Total tax benefit	3		9		34		29

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:

	Third Quarter			First Nine Months
	Granted	Weighted-Average Grant-Date Fair Value		Granted	Weighted-Average Grant-Date Fair Value
Stock options	1,190	$	40.98	45,110	$	45.80
RSUs	5,610	176.40		216,800	164.20
PSUs	2,090	168.73		98,860	160.42

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Stock Options

	Third Quarter				First Nine Months
	2019		2018		2019		2018
	($ in millions)
Stock options exercised	55,155		327,275		677,072		797,389
Cash received upon exercise	$	3	$	23	$	47	$	56
Related tax benefit realized	1		7		16		14

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. 

	Third Quarter				First Nine Months
	2019		2018		2019		2018
	($ in millions)
RSUs vested	142		—		166,197		160,200
Common Stock issued net of tax withholding	102		—		119,346		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 third quarters of 2019 or 2018.

	First Nine 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
	Third Quarter
	2019			2018			2019		2018
	($ in millions, except per share amounts, shares in millions)
Net income	$	657		$	702		$	657	$	702
Dividend equivalent payments	(1		)	(2		)	—		—
Income available to common stockholders	$	656		$	700		$	657	$	702
Weighted-average shares outstanding	262.1			275.5			262.1		275.5
Dilutive effect of outstanding options
and share-settled awards							2.2		2.7
Adjusted weighted-average shares outstanding							264.3		278.2
Earnings per share	$	2.50		$	2.54		$	2.49	$	2.52
	Basic						Diluted
	First Nine Months
	2019			2018			2019		2018
	($ in millions, except per share amounts, shares in millions)
Net income	$	2,056		$	1,964		$	2,056	$	1,964
Dividend equivalent payments	(4		)	(4		)	—		(1		)
Income available to common stockholders	$	2,052		$	1,960		$	2,056	$	1,963
Weighted-average shares outstanding	264.6			280.1			264.6		280.1
Dilutive effect of outstanding options
and share-settled awards							2.3		2.5
Adjusted weighted-average shares outstanding							266.9		282.6
Earnings per share	$	7.76		$	7.00		$	7.70	$	6.95

During the third quarters and first nine 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

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to common stockholders. There are no awards outstanding that were antidilutive for both the third quarters and first nine months ended September 30, 2019 and 2018.

4. Accumulated Other Comprehensive Loss

The changes in the cumulative balances of “Accumulated other comprehensive loss” reported on 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)
Nine Months Ended September 30, 2019
Pensions and other
postretirement liabilities	$	(497	)	$	—		$	—		$	11	$	(486	)
Other comprehensive loss
of equity investees	(66		)	(1		)	—			—		(67		)
Accumulated other
comprehensive loss	$	(563	)	$	(1	)	$	—		$	11	$	(553	)
Nine Months Ended September 30, 2018
Pensions and other
postretirement liabilities	$	(300	)	$	(11	)	$	(86	)	$	18	$	(379	)
Other comprehensive income
(loss) of equity investees	(56		)	2			(2		)	—		(56		)
Accumulated other
comprehensive loss	$	(356	)	$	(9	)	$	(88	)	$	18	$	(435	)

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 8.4 million shares of Common Stock under our stock repurchase program during the first nine months of 2019, at a cost of $1.6 billion. During the first nine months of 2018, we repurchased and retired 12.8 million shares (5.7 million under an accelerated share repurchase program and 7.1 million shares under our ongoing program) at a cost of $2.1 billion.

Since the beginning of 2006, we have repurchased and retired 194.0 million shares at a total cost of $15.7 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 September 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 $37 million and $38 million for the third quarters of 2019 and 2018, respectively, and $112 million for both the first nine months of 2019 and 2018. Our equity in the earnings of Conrail, net of amortization, included in “Purchased services and rents” was $13 million and $12 million for the third quarters of 2019 and 2018, respectively, and $36 million and $46 million for the first nine months of 2019 and 2018, respectively.

“Other liabilities” includes $280 million at both September 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 $61 million and $64 million of expense for the third quarters of 2019 and 2018, respectively, and $183 million and $197 million for the first nine months of 2019 and 2018, respectively. Our equity in the earnings of TTX, also included in “Purchased services and rents,” totaled $19 million and $16 million for the third quarters of 2019 and 2018, respectively, and $44 million and $49 million for the first nine months of 2019 and 2018, respectively.

7.  Debt

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.

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 $350 million outstanding at September 30, 2019 reflected as “Short-term debt” on the Consolidated Balance Sheets, and no amounts outstanding at December 31, 2018.

The “Cash, cash equivalents, and restricted cash” line item on the Consolidated Statements of Cash Flows includes restricted cash of $88 million at both September 30, 2019 and December 31, 2018, reflecting deposits held by a third-party bond agent as collateral for certain debt obligations maturing in October 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. Upon adoption of the standard, we recognized ROU assets and corresponding lease liabilities of $586 million on the Consolidated Balance Sheets as of 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 include options to extend the leases for up to 99 years, and some include options to terminate the leases within 30 days. Because we are not reasonably certain to exercise these renewal options, the options are not considered in determining the lease term, and associated payments are excluded from future minimum lease payments.

Leases with an initial term of twelve months or less are not recorded on the balance sheet. We recognize lease expense for these leases on a straight-line basis over the lease term. We do not separate lease and non-lease components.

Operating lease amounts included on the Consolidated Balance Sheet were as follows:

		September 30, 2019
Assets	Classification	($ in millions)
ROU assets	Other assets	$	561
Liabilities
Current lease liabilities	Other current liabilities	$	97
Non-current lease liabilities	Other liabilities	464
Total lease liabilities		$	561

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

	Third Quarter		First Nine Months
	2019		2019
	($ in millions)
Operating lease expense	$	29	$	85
Variable lease expense	15		43
Short-term lease expense	1		4
Total lease expense	$	45	$	132

At September 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:

	September 30, 2019
Weighted-average remaining lease term (years) on operating leases	8.32
Weighted-average discount rates on operating leases	3.52	%

As the rates implicit in most of our leases are not readily determinable, we use a collateralized incremental borrowing rate based on the information available at the lease commencement date in determining the present value of future payments. We use the portfolio approach and group leases into short, medium, and long-term categories, applying the corresponding incremental borrowing rates to these categories of leases.

During the first nine months of 2019, right-of-use assets obtained in exchange for new operating lease liabilities were $47 million. During the first nine months of 2019, cash paid for amounts included in the measurement of lease liabilities was $85 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:

	September 30, 2019
	($ in millions)
2019 - 3 months	$	30
2020	110
2021	103
2022	79
2023	69
2024 and subsequent years	266
Total lease payments	657
Less: Interest	96
Present value of lease liabilities	$	561

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.

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Pension and postretirement benefit cost components for the third quarters and first nine months were as follows:

							Other Postretirement
	Pension Benefits						Benefits
	Third Quarter
	2019			2018			2019			2018
	($ in millions)
Service cost	$	9		$	9		$	2		$	2
Interest cost	24			21			4			4
Expected return on plan assets	(45		)	(44		)	(4		)	(4		)
Amortization of net losses	11			14			—			—
Amortization of prior service benefit	—			—			(6		)	(6		)
Net benefit	$	(1	)	$	—		$	(4	)	$	(4	)

							Other Postretirement
	Pension Benefits						Benefits
	First Nine Months
	2019			2018			2019			2018
	($ in millions)
Service cost	$	26		$	29		$	5		$	6
Interest cost	70			63			13			12
Expected return on plan assets	(134		)	(133		)	(11		)	(12		)
Amortization of net losses	33			42			—			—
Amortization of prior service benefit	—			—			(18		)	(18		)
Net expense (benefit)	$	(5	)	$	1		$	(11	)	$	(12	)

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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10.  Fair Values of Financial Instruments

The fair values of “Cash and cash equivalents,” “Accounts receivable – net,” “Accounts payable,” and “Short-term debt” 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 September 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:

	September 30, 2019						December 31, 2018
	Carrying Amount			Fair Value			Carrying Amount			Fair Value
	($ in millions)
Long-term debt, including current maturities	$	(11,486	)	$	(14,131	)	$	(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 decision was upheld by the Court of Appeals on August 16, 2019. Since that decision, various individual cases have been filed in multiple jurisdictions. 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.

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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 $60 million and $55 million at September 30, 2019 and December 31, 2018, respectively, of which $15 million is classified as a current liability at both dates. At September 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 September 30, 2019, sixteen sites accounted for $42 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.

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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.

12. New Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, “Credit Losses - Measurement of Credit Losses on Financial Instruments,” which will replace 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 third quarter 2019 results reflect the commitment to the implementation of our new strategic plan that we unveiled in February. We achieved a record low third-quarter operating ratio (a measure of the amount of operating revenues consumed by operating expenses) of 64.9%. The new operating plan drove improvements in the velocity and fluidity of the network allowing for reduced operating expenses.

SUMMARIZED RESULTS OF OPERATIONS

($ in millions, except per share amounts)

	Third Quarter					First Nine Months
	2019		2018		% change	2019		2018		% change
Income from railway operations	$	996	$	1,020	(2%)	$	3,027	$	2,881	5%
Net income	$	657	$	702	(6%)	$	2,056	$	1,964	5%
Diluted earnings per share	$	2.49	$	2.52	(1%)	$	7.70	$	6.95	11%
Railway operating ratio (percent)	64.9		65.4		(1%)	64.8		66.4		(2%)

Income from railway operations decreased in the third quarter, but increased for the first nine months.  The decrease in the third quarter was primarily the result of lower operating revenues partially offset by decreased compensation expense, lower equipment rents, and declines in fuel prices.  Additionally, we wrote off a $32 million receivable as a result of a legal dispute.  Railway operating revenues decreased in the third quarter, driven by lower volumes, partially offset by higher average revenue per unit due to increased pricing.  Diluted earnings per share was down 1% in the third quarter as the 6% decline in net income was partially offset by a lower share count due to our ongoing share repurchase program. 

For the first nine months, the increase in income from railway operations was primarily a result of increased pricing and decreased operating expenses. Railway operating revenues increased for the first nine months, driven by higher average revenue per unit, reflecting pricing gains, which more than offset volume declines.  Decreased operating expenses were driven by declines in fuel prices, lower equipment rents, and decreased compensation expense that were partially offset by an increase in depreciation and the aforementioned write-off. 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).

	Third Quarter					First Nine Months
Revenues	2019		2018		% change	2019		2018		% change
Merchandise:
Chemicals	$	481	$	481	—%	$	1,406	$	1,400	—%
Agriculture products	394		388		2%	1,185		1,124		5%
Metals and construction	391		401		(2%)	1,192		1,170		2%
Automotive	247		245		1%	749		741		1%
Forest and consumer	218		222		(2%)	641		625		3%
Merchandise	1,731		1,737		—%	5,173		5,060		2%
Intermodal	707		746		(5%)	2,127		2,138		(1%)
Coal	403		464		(13%)	1,306		1,364		(4%)
Total	$	2,841	$	2,947	(4%)	$	8,606	$	8,562	1%

Units
Merchandise:
Chemicals	130.1	134.7	(3%)	385.8	394.3	(2%)
Agriculture products	132.1	136.8	(3%)	404.3	404.1	—%
Metals and construction	191.0	199.9	(4%)	561.6	582.6	(4%)
Automotive	99.5	98.4	1%	299.4	305.9	(2%)
Forest and consumer	69.2	76.0	(9%)	207.2	220.5	(6%)
Merchandise	621.9	645.8	(4%)	1,858.3	1,907.4	(3%)
Intermodal	1,059.9	1,116.2	(5%)	3,179.4	3,257.2	(2%)
Coal	218.7	255.8	(15%)	713.3	778.5	(8%)
Total	1,900.5	2,017.8	(6%)	5,751.0	5,943.1	(3%)

Revenue per Unit
Merchandise:
Chemicals	$	3,699	$	3,573	4%	$	3,645	$	3,551	3%
Agriculture products	2,986		2,837		5%	2,932		2,781		5%
Metals and construction	2,045		2,006		2%	2,122		2,008		6%
Automotive	2,480		2,486		—%	2,502		2,422		3%
Forest and consumer	3,145		2,929		7%	3,091		2,838		9%
Merchandise	2,783		2,690		3%	2,784		2,653		5%
Intermodal	668		669		—%	669		656		2%
Coal	1,842		1,812		2%	1,831		1,752		5%
Total	1,495		1,461		2%	1,496		1,441		4%

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Railway operating revenues decreased $106 million in the third quarter but increased $44 million for the first nine months compared with the same periods last year. The table below reflects the components of the revenue change by major commodity group ($ in millions).

	Third Quarter									First Nine Months
	Increase (Decrease)									Increase (Decrease)
	Merchandise			Intermodal			Coal			Merchandise			Intermodal			Coal
Volume	$	(64	)	$	(38	)	$	(67	)	$	(130	)	$	(51	)	$	(114	)
Fuel surcharge revenue	(10		)	(12		)	(14		)	4			(8		)	(23		)
Rate, mix and other	68			11			20			239			48			79
Total	$	(6	)	$	(39	)	$	(61	)	$	113		$	(11	)	$	(58	)

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 about 80% tied to OHD. In the third quarter and first nine months of 2019, contracts tied to OHD accounted for over 95% of our fuel surcharge revenue. Revenues associated with these surcharges totaled $146 million and $182 million in the third quarters of 2019 and 2018, respectively, and $443 million and $470 million for the first nine months of 2019 and 2018, respectively.

Merchandise

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

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

Agriculture products volume declined in the third quarter largely driven by declines in ethanol and corn which more than offset an increase in soybeans. The first nine months remained flat with increases in corn and feed shipments offset by decreased ethanol shipments.

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

Automotive volume rose in the third quarter due to capacity from improved network fluidity, increased railcar availability, and increased truck and SUV production. Volume declined in the first nine months driven 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, lumber, kaolin, pulp, and graphic paper traffic.

Merchandise revenues for the remainder of the year are expected to decline, reflecting lower volume partially offset by higher average revenue per unit, driven by pricing gains.

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Intermodal

Intermodal revenue decreased in both periods, primarily driven by volume decreases. The third quarter average revenue per unit remained flat, with pricing gains offset by declines in fuel surcharge revenue and negative mix associated with increased International volume. Revenue per unit for the first nine months increased driven by pricing gains partially offset by negative mix associated with increased International volume and declines in fuel surcharge revenue.

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

	Third Quarter			First Nine Months
	2019	2018	% change	2019	2018	% change
Domestic	643.2	704.0	(9%)	1,935.3	2,082.2	(7%)
International	416.7	412.2	1%	1,244.1	1,175.0	6%
Total	1,059.9	1,116.2	(5%)	3,179.4	3,257.2	(2%)

Domestic volumes fell in both periods, the result of stronger over-the-road competition and weaker customer demand. The first nine months were also impacted by severe weather in the Midwest earlier in the year. 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 decrease, driven by volume declines partially offset by higher average revenue per unit due to pricing gains.

Coal

Coal revenues decreased in both periods, as volume declines were partially offset by higher average revenue per unit, the result of pricing gains.

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

	Third Quarter			First Nine Months
	2019	2018	% change	2019	2018	% change
Utility	14,124	16,213	(13%)	47,008	48,773	(4%)
Export	5,403	6,621	(18%)	18,417	21,775	(15%)
Domestic metallurgical	3,649	4,226	(14%)	10,431	11,624	(10%)
Industrial	1,125	1,352	(17%)	3,528	4,069	(13%)
Total	24,301	28,412	(14%)	79,384	86,241	(8%)

Utility coal tonnage declined in both periods due to low natural gas prices and additional renewable energy generating capacity. Export coal tonnage dropped in both periods as a result of weak thermal seaborne pricing and coal supply disruptions at select mines. Domestic metallurgical coal and coke 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 negatively impacted by lower natural gas prices and increased renewable energy generating capacity.  Export will be impacted by a lower average revenue per unit, as a result of softening seaborne metallurgical prices, and reduced volume due to weak thermal seaborne pricing. 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):

	Third Quarter					First Nine Months
	2019		2018		% change	2019		2018		% change
Compensation and benefits	$	682	$	725	(6%)	$	2,121	$	2,168	(2%)
Purchased services and rents	423		450		(6%)	1,265		1,281		(1%)
Fuel	226		274		(18%)	730		812		(10%)
Depreciation	286		276		4%	853		821		4%
Materials and other	228		202		13%	610		599		2%
Total	$	1,845	$	1,927	(4%)	$	5,579	$	5,681	(2%)

Compensation and benefits expense decreased in both periods as follows:

• employment levels (down $34 million for the quarter and $58 million for the first nine months),

• overtime and recrews (down $13 million for the quarter and $30 million for the first nine months),

• incentive and stock-based compensation (down $4 million for the quarter and $26 million for the first nine months),

• higher capitalized labor ($3 million for the quarter and $14 million for the first nine months),

• increased pay rates (up $17 million for the quarter and $59 million for the first nine months),

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

• other (down $6 million for the quarter and $9 million for the first nine months).

Average rail headcount for the quarter was down by about 2,400 compared with the third quarter 2018 and down by about 1,000 sequentially. We expect headcount at the end of the year to approximate 23,300.

Purchased services and rents declined in both periods as follows ($ in millions):

	Third Quarter					First Nine Months
	2019		2018		% change	2019		2018		% change
Purchased services	$	355	$	347	2%	$	1,048	$	1,007	4%
Equipment rents	68		103		(34%)	217		274		(21%)
Total	$	423	$	450	(6%)	$	1,265	$	1,281	(1%)

The rise in purchased services in both periods was largely the result of increased technology-related expenses, headquarter relocation expenses, and intermodal-related costs, while the first nine months were also impacted by lower earnings in equity affiliates. These increases in both periods were partially offset by decreased transportation expenses. Equipment rents fell in both periods, primarily the result of increased network velocity and the absence of short-term locomotive resource costs incurred in the prior year.

Fuel expense, which includes the cost of locomotive fuel as well as other fuel used in railway operations, decreased in both periods primarily due to lower locomotive fuel prices (down 13% in the third quarter and 8% in the first nine months), as well as decreased consumption (down 5% in the third quarter and 2% in the first nine months).

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Materials and other expenses increased in both periods as follows ($ in millions):  

	Third Quarter					First Nine Months
	2019		2018		% change	2019		2018		% change
Materials	$	85	$	95	(11%)	$	254	$	277	(8%)
Casualties and other claims	48		46		4%	147		131		12%
Other	95		61		56%	209		191		9%
Total	$	228	$	202	13%	$	610	$	599	2%

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 slightly in the third quarter driven by higher personal injury costs partially offset by lower derailment costs. For the first nine months, the increase is largely a result of higher costs related to environmental remediation matters. Other expense increased in both periods due to the write off of a $32 million receivable as a result of a legal dispute. Other expense for the first nine months benefited from higher gains associated with property sales.

Other Income – Net

Other income – net decreased $8 million in the third quarter but increased $21 million for the first nine months. The decrease in the third quarter is primarily driven by lower gains on sales of non-operating property. The increase for the first nine months was driven by higher investment returns on corporate-owned life insurance, which more than offset a $28 million impairment loss recognized in the second quarter related to our natural resource assets that we are actively marketing to sell. 

Income Taxes

The third-quarter effective tax rates were 24.3% and 22.7% for 2019 and 2018, respectively. The current quarter reflects decreased tax benefits on stock-based compensation. The year-to-date effective tax rates were 22.8% and 22.6% for the first nine 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 $3.0 billion for the first nine months of 2019, compared with $2.9 billion for the same period of 2018, primarily due to improved operating results. We had working capital deficits of $745 million at September 30, 2019 and $729 million at December 31, 2018. Cash and cash equivalents totaled $452 million at September 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 $1.3 billion for the first nine months of 2019, compared with $1.1 billion in the same period last year, reflecting higher property additions and increased corporate owned life insurance activity partially offset by higher proceeds from property sales and other transactions.

Cash used in financing activities was $1.6 billion for the first nine months of 2019 and 2018. For the first nine months of 2019, there were lower repurchases of Common Stock, offset by lower proceeds from borrowing. We repurchased Common Stock totaling $1.6 billion in the first nine months of 2019 compared to $2.3 billion in the

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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 43.7% at September 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 September 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 $350 million outstanding under this program at September 30, 2019, and no amounts outstanding at 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. The next round of bargaining will commence on November 1, 2019 with both management and the unions serving their formal proposals for changes to the collective bargaining 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, we have most of our capital invested in long-lived assets.  The replacement cost of these assets, as well as the related depreciation expense, would be substantially greater than the amounts reported on the basis of historical cost.

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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 September 30, 2019.  Based on such evaluation, our officers have concluded that, at September 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 third 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. 

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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 decision was upheld by the Court of Appeals on August 16, 2019. Since that decision, various individual cases have been filed in multiple jurisdictions. 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)
July 1-31, 2019	930,199	$	197.38	928,847	32,760,742
August 1-31, 2019	965,416	175.97		965,088	31,795,654
September 1-30, 2019	819,752	179.23		819,203	30,976,451
Total	2,715,367			2,713,138

⁽¹⁾  Of this amount, 2,229 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 September 30, 2019, 31.0 million shares remain authorized for repurchase.

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Item 6. Exhibits.

3(ii)	The Bylaws of Norfolk Southern Corporation, as amended September 24, 2019, are incorporated by reference to Exhibit 3(ii) to Norfolk Southern Corporation’s Form 8-K filed on September 24, 2019.
10.1*,**	The description of Norfolk Southern Corporation optional executive physical reimbursement program, as amended effective July 26, 2019.
10.2*,**	The Norfolk Southern Corporation Officers’ Deferred Compensation Plan, as amended effective July 26, 2019.
10.3*	Offer Letter for Mark R. George, dated August 26, 2019, is incorporated by reference to Exhibit 99.1 to Norfolk Southern Corporation’s Form 8-K filed on August 28, 2019.
10.4*	Norfolk Southern Corporation Long-Term Incentive Plan Inducement Award Agreement for Performance-Based Restricted Stock Units is incorporated by reference to Exhibit 99.2 to Norfolk Southern Corporation’s Form 8-K filed on August 28, 2019.
10.5*	Norfolk Southern Corporation Long-Term Incentive Plan Inducement Award Agreement for Restricted Stock Units is incorporated by reference to Exhibit 99.3 to Norfolk Southern Corporation’s Form 8-K filed on August 28, 2019.
10.6*	Norfolk Southern Corporation Long-Term Incentive Plan Inducement Award Agreement for Non-Qualified Stock Options is incorporated by reference to Exhibit 99.4 to Norfolk Southern Corporation’s Form 8-K filed on August 28, 2019.
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 third quarter of 2019, formatted in Inline Extensible Business Reporting Language (iXBRL) includes (i) the Consolidated Statements of Income for the third quarter and first nine months of 2019 and 2018; (ii) the Consolidated Statements of Comprehensive Income for the third quarter and first nine months of 2019 and 2018; (iii) the Consolidated Balance Sheets at September 30, 2019 and December 31, 2018; (iv) the Consolidated Statements of Cash Flows for the first nine months of 2019 and 2018; (v) the Consolidated Statements of Changes in Stockholders’ Equity for the third quarter and first nine months of 2019 and 2018; and (vi) the Notes to Consolidated Financial Statements.
104**	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
*   Management contract or compensatory arrangement.
**   Filed herewith.

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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:	October 23, 2019	/s/ Jason A. Zampi
		Jason A. Zampi Vice President and Controller (Principal Accounting Officer) (Signature)
Date:	October 23, 2019	/s/ Denise W. Hutson
		Denise W. Hutson Corporate Secretary (Signature)

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EX-10.1

Exhibit 10.1

Norfolk Southern Corporation

Optional Executive Physical Examination Program

Effective July 26, 2019, the Board of Directors of Norfolk Southern Corporation revised the existing optional executive physical examination program to include executives employed at the level of senior vice president and above. The physical examinations may be performed by a physician and/or facility selected at the executive’s sole discretion, and executives will continue to be reimbursed for up to $10,000 per year for such examinations.

EX-10.2

Exhibit 10.2

NORFOLK SOUTHERN CORPORATION

OFFICERS' DEFERRED COMPENSATION PLAN

ARTICLE I. NAME AND PURPOSE OF THE PLAN

The name of the plan is the Norfolk Southern Corporation Officers' Deferred Compensation Plan (the "Plan"). The purpose of the Plan is to provide retirement and death benefits to those officers of Norfolk Southern Corporation (the "Corporation") or a Participating Subsidiary who elect to participate in the Plan.

ARTICLE II. DEFINITIONS

Account. The total of the amount of Deferrals by a Participant together with Interest as provided in Article V.

Agreement. The "Deferral Agreement" between each Participant and the Corporation.

Beneficiary. The person or persons designated as Beneficiary pursuant to Article XII.

Board of Directors. The Board of Directors of the Corporation.

Committee. The Compensation Committee of the Board of Directors.

Compensation. The fixed salary payable in the form of cash (including vacation pay) of the Participant before any reduction for contributions to the Thrift and Investment Plan of Norfolk Southern Corporation and Participating Subsidiary Companies, as amended from time to time, and before any deferrals under this Plan.

Deferral. A Deferred Bonus and/or a Monthly Deferred Amount.

Deferred Bonus. That amount set forth in the Agreement which shall be deferred from a Participant's MIP incentive award (and any other annual cash incentive award payable to participants in MIP) or EMIP incentive award (and any other annual cash incentive award approved by the Board of Directorsand payable to participants in EMIP), or the bonus program of a Participating Subsidiary, if the deferral of such incentive award or bonus under the Plan is authorized by the Corporation.

Disability. A disability that enables the Participant to be eligible for a disability benefit under the Long‑Term Disability Plan of Norfolk Southern Corporation and Participating Subsidiaries, as amended from time to time, or under any such similar plan of a Participating Subsidiary.

EMIP. Norfolk Southern Corporation Executive Management Incentive Plan.

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MIP. Norfolk Southern Corporation Management Incentive Plan.

Monthly Deferred Amount. That amount set forth in the Agreement which shall be deferred monthly from a Participant's salary pursuant to the Plan.

Participant. Any employee of the Corporation or a Participating Subsidiary eligible to participate under Article IV of the Plan.

Participating Subsidiary. Each subsidiary or affiliated company of the Corporation which adopts the Plan and is approved for participation in the Plan as provided in Article XVIII.

Plan Administrator. The Executive Vice President ‑ Administration of the Corporation or the successor officer who performs substantially similar duties.

Plan Year. Any calendar year during which deferrals under this Plan are made.

Retirement. Retirement from the Corporation or a Participating Subsidiary pursuant to the provisions of the retirement plan of the Corporation or of a Participating Subsidiary (whichever is applicable), as amended from time to time.

ARTICLE III. ADMINISTRATION

The Plan Administrator shall administer, construe, and interpret this Plan and, from time to time, adopt such rules and regulations and make such recommendations to the Committee concerning Plan changes as are deemed necessary to ensure effective implementation of this Plan. The administration, construction, and interpretation by the Plan Administrator may be appealed to the Committee, and the decision of the Committee shall be final and conclusive, except that any claim for benefits with respect to a Participant shall be subject to the claims procedure set forth in Section 503 of the Employee Retirement Income Security Act of 1974. The Plan Administrator may correct errors and, so far as practicable, may adjust any benefit or payment or credit accordingly. Neither the Plan Administrator nor any member of the Committee shall be liable for any act done or determination made in good faith.

ARTICLE IV. ELIGIBILITY AND PARTICIPATION

Any nonagreement employee residing in the United States or Canada with at least 830 salary administration points assigned to his position shall be eligible to participate in the Plan. However, only those Participants with annual Compensation in excess of ninety thousand dollars ($90,000) shall be eligible to defer Compensation under this Plan, and only 20% of monthly Compensation in excess of seven thousand five hundred dollars ($7,500) shall qualify for deferral hereunder. A nonagreement employee who elects to become a Participant in the Plan and defer a portion of his monthly Compensation thereby consents to the reduction in his monthly Compensation by the Monthly Deferred Amount as specified in the Agreement. An election to participate in the Plan must be made annually by December 22 of the year prior to each Plan Year. Benefits payable hereunder shall be in addition

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to any other compensation or benefits to which a Participant may be entitled from the Corporation or a Participating Subsidiary.

A Participant may elect to defer a portion of any incentive bonus which may be awarded to him pursuant to MIP or EMIP or the authorized bonus program of a Participating Subsidiary. A Participant who elects to defer any of his incentive bonus thereby consents to a reduction in his bonus by the Deferred Bonus as specified in the Agreement, commencing with the incentive bonus award earned after December 31, 1986. By December 22 of the year prior to each Plan Year, a Participant may elect to defer any incentive bonus which may be earned by him during that Plan Year, either in whole or in part, in increments of twenty‑five percent (25%).

Participants may not elect to defer Compensation under this Plan for the Plan Year beginning January 1, 2001, and for subsequent Plan Years.

ARTICLE V. INTEREST EQUIVALENT

Unless otherwise stated herein or determined by the Board of Directors, an amount equivalent to interest ("Interest") shall accrue and be compounded annually on all Deferrals. For purposes of calculating the appropriate Interest only, the Deferred Bonus is deemed to occur on the date on which the incentive bonus is paid. Interest shall accrue and be compounded annually at rates in accordance with the schedule below on the basis of the Participant's age attained during the Plan Year for which the Deferral is made:

Age	Rate
Up to 45	7%
45-54	10%
55-60	11%
Over 60	12%

Interest on each Deferral shall continue to accrue at the rate determined by the Participant's age attained during the Plan Year for which the Deferral is made until all benefits payable hereunder have been distributed to, or with respect to, the Participant.

ARTICLE VI. BENEFITS

(a) Retirement: When a Participant ceases active service due to his Retirement, he shall be paid a monthly annuity commencing in January of the first calendar year following such Retirement for a period of years in accordance with the schedule below:

Age at	Distribution
Time of Deferral	Period
Up to 50	5 Years
50 or Over	10 Years

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The amount of the monthly annuity payable under this Article VI(a), shall be an amount sufficient to amortize the Participant's Account together with Interest over the applicable period.

(b) Disability: When a Participant ceases active service due to Disability, he shall be paid a monthly annuity commencing in January of the first calendar year following such Disability for a period of fifteen (15) years in an amount sufficient to amortize the Participant's Account together with Interest over that period.

(c) Death: If a Participant dies while in active service, the Corporation shall pay the amount of the Participant's Account to the Participant's Beneficiary in a single payment as soon as practicable after the date of death. If a Participant dies after Retirement or Disability but prior to receiving all benefits payable thereunder, the monthly payments shall be paid to the Participant's Beneficiary for the scheduled annuity period.

(d) Termination of Employment: If a Participant ceases active service other than by reason of leave of absence granted under the Corporation’s leave of absence policy, Retirement, Disability or Death, he shall be paid the balance of his Account as of the date of his separation from service as soon as practicable after such separation from service.

(e) Lump Sum or Other Settlement: Notwithstanding the foregoing provisions of this Article VI, the Plan Administrator, in his sole discretion, may authorize and direct the Corporation to make payments after termination of employment of a Participant to such Participant or his Beneficiary in a lump sum or over a period other than that provided for in this Article VI, and to charge such payments against the Participant's Account. Such accelerated distribution may be made only (1) in the event of a financial emergency which is beyond the control of the Participant if disallowance of the accelerated distribution would result in severe financial hardship to the Participant or Beneficiary, and only in an amount necessary to satisfy the financial emergency, or (2) if in the written opinion of counsel, payment in accordance with this Article VI could create a conflict of interest for the Participant or Beneficiary; provided, that all amounts due to a Participant or Beneficiary under this Plan shall in all events be paid to the Participant or Beneficiary by the end of the appropriate period referred to in this Article VI. The Plan Administrator shall report to the Committee annually on any distributions made under this paragraph.

(f) Change in Mandatory Distribution Schedule: Notwithstanding the foregoing provisions of this Article VI, the Committee may, without the consent of any Participant or Beneficiary, direct that all benefits payable thereafter pursuant to paragraph (a), (b), or (c) above (including benefits that accrued prior to the issuance of the direction) shall be paid under a schedule that differs from that prescribed by paragraph (a), (b), or (c). Any such direction shall apply to all Participants, without differentiating among individual Participants, except to the extent otherwise provided by paragraph (e), above. No Participant or Beneficiary who is also a member of the Committee shall participate in any decision of the Committee to make a change in the distribution schedule.

ARTICLE VII. NATURE AND SOURCE OF PAYMENTS

The obligation to pay benefits under Article VI with respect to each Participant shall constitute a liability of the Corporation to the Participant and any death Beneficiaries in accordance with the

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terms of the Plan. The Corporation may establish one or more grantor trusts to which the Corporation may transfer such assets as the Corporation determines in its sole discretion to assist in meeting its obligations under the Plan. The provisions of the Plan and the Agreement shall govern the rights of a Participant to receive distributions pursuant to the Plan. The provisions of the trust shall govern the rights of the Corporation, Participants and the creditors of the Corporation to the assets transferred to the trust. The Corporation’s obligations under the Plan may be satisfied with trust assets distributed pursuant to the terms of the trust, and any such distribution shall reduce the Corporation’s obligations under this Plan.

Participants and Beneficiaries shall stand in the position of unsecured creditors of the Corporation, and all rights hereunder are subject to the claims of creditors of the Corporation.

ARTICLE VIII. EXPENSES OF ADMINISTRATION

All expenses of administering the Plan shall be borne by the Corporation, and no part thereof

shall be charged against the benefit of any Participant.

ARTICLE IX. AMENDMENT TO AND TERMINATION OF PLAN

The Corporation reserves the right at any time by a resolution duly adopted by its Board of Directors to amend this Plan in any manner or to terminate it at any time, except that no such amendment or termination shall deprive a Participant or his Beneficiary of any rights hereunder theretofore legally accrued, and no such termination shall be effective for the year in which such resolution is adopted.

ARTICLE X. RECALCULATION EVENTS

The Corporation's commitment to accrue and pay Interest as provided in Article V is facilitated by the purchase of corporate‑owned life insurance purchased on the lives of eligible Participants. If the Board of Directors, in its sole discretion, determines that any change whatsoever in Federal, State or local law, or in its application or interpretation, has materially affected, or will materially affect, the ability of the Corporation to recover the cost of providing the benefits otherwise payable under the Plan, then, if the Board of Directors so elects, a Recalculation Event shall be deemed to have occurred. If a Recalculation Event occurs, then Interest shall be recalculated and restated using a lower rate of Interest determined by the Board of Directors, but which shall be not less than one‑half (1/2) the rate of Interest provided for in Article V.

ARTICLE XI. GOVERNING LAW

This Plan and the Agreements are subject to the laws of the Commonwealth of Virginia.

ARTICLE XII. DESIGNATION OF BENEFICIARY

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For the purpose of this Plan, a beneficiary shall be either (1) the named Beneficiary or Beneficiaries designated as hereinafter provided for by the Participant, or (2) in the absence of any such designation, his estate. A Participant may designate both primary and contingent Beneficiaries. A Participant may revoke or change any designation. To be effective, the designation of a named Beneficiary or Beneficiaries, or any change in or revocation of any designation, must be on a form provided by the Corporation, signed by the Participant and filed with the Office of the Plan Administrator prior to the death of such Participant. Any such designation, change or revocation shall not invalidate any cash payment made or other action taken by the Corporation pursuant to the Plan prior to its receipt by the Corporation. The determination by the Corporation of a Beneficiary or Beneficiaries, or the identity thereof, or evidence satisfactory to the Corporation shall be conclusive as to the liability of the Corporation and any payment made in accordance therewith shall discharge the Corporation of all its obligations under the Plan for such payment.

Notwithstanding anything to the contrary in Article XV, if an estate is entitled to receive payments from the Plan following the death of a Participant or Beneficiary, the executor of the estate may direct the Corporation to make payments under the Plan to the beneficiary or beneficiaries, as identified by the executor, of said estate.  The Plan Administrator may, in his discretion, limit the number of Beneficiaries designated by a Participant and the number of designees designated by an executor of an estate.

ARTICLE XIII. SUCCESSORS, MERGERS, CONSOLIDATIONS

The terms and conditions of this Plan and each Agreement shall inure to the benefit of and bind the Corporation, the Participants, their successors, assigns, and personal representatives. If substantially all the assets of the Corporation are acquired by another corporation or entity or if the Corporation is merged into, or consolidated with, another corporation or entity, then the obligations created hereunder and as a result of the Corporation's acceptance of Agreements shall be obligations of the successor corporation or entity.

ARTICLE XIV. WITHHOLDING FOR TAXES

The Participant agrees as a condition of participation hereunder that the Corporation may withhold applicable Federal, State, and local income taxes and Social Security or Railroad Retirement taxes from any distribution or benefit paid hereunder.

ARTICLE XV. NON‑ALIENATION OF BENEFITS

No benefit under the Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge, and any attempt at such shall be void; nor shall any such benefit be in any way subject to the debts, contracts, liabilities, engagements, or torts of the person who shall be entitled to such benefit; nor shall it be subject to attachment or legal process for or against such person.

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ARTICLE XVI. FACILITY OF PAYMENT

If the Plan Administrator shall find that any individual to whom any amount is payable under the Plan is unable to care for his affairs because of illness or accident, or is a minor or other person under legal disability, any payment due such individual (unless a prior claim therefore shall have been made by a duly appointed guardian, committee, or other legal representative) may be paid to the spouse, a child, a parent, or a brother or sister of such individual or to any other person deemed by the Plan Administrator to have incurred expenses of such individual, in such manner and proportions as the Plan Administrator may determine. Any such payment shall be a complete discharge of the liabilities of the Corporation with respect thereto under the Plan or the Agreement.

ARTICLE XVII. CONTINUED EMPLOYMENT

Nothing contained herein or in an Agreement shall be construed as conferring upon any Participant the right nor imposing upon him the obligation to continue in the employment of the Corporation or a Participating Subsidiary in any capacity.

ARTICLE XVIII. PARTICIPATION BY SUBSIDIARY COMPANIES

Conditional upon prior approval by the Corporation, any company which is a subsidiary of or affiliated with the Corporation may adopt and participate in this Plan as a Participating Subsidiary. Each Participating Subsidiary shall make, execute and deliver such instruments as the Corporation and/or the Plan Administrator shall deem necessary or desirable, and shall constitute the Corporation and/or the Plan Administrators as its agents to act for it in all transactions in which the Corporation and/or the Plan Administrators believe such agency will facilitate the administration of this Plan.

ARTICLE XIX. MISCELLANEOUS

Whenever used in the Plan, words in the masculine form shall be deemed to refer to females as well as to males, and words in the singular or plural shall be deemed to refer also to the plural or singular, respectively, as the context may require.

ARTICLE XX. EFFECTIVE DATE

The effective date of the Plan is January 1, 1987. The Board of Directors of the Corporation subsequently amended the Plan, including most recently: to cease eligibility for participants to make deferrals under the Plan for years beginning January 1, 2001; effective January 1, 2008, to permit an executor of an estate that is entitled to receive payments from the Plan following the death of a participant or beneficiary to identify the beneficiary or beneficiaries who should receive any such payments directly from the Plan; and effective July 26, 2019, to make the Plan Administrator responsible for approving any financial emergency distribution from the Plan.

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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: October 23, 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: October 23, 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

September 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: October 23, 2019

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

September 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: October 23, 2019

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New Accounting Pronouncements (Policies)

9 Months Ended

Sep. 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 will replace 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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Accumulated Other Comprehensive Loss (Tables)

9 Months Ended

Sep. 30, 2019

Equity [Abstract]

Accumulated Other Comprehensive Loss

The changes in the cumulative balances of “Accumulated other comprehensive loss” reported on 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)
Nine Months Ended September 30, 2019
Pensions and other
postretirement liabilities	$	(497	)	$	—		$	—		$	11	$	(486	)
Other comprehensive loss
of equity investees	(66		)	(1		)	—			—		(67		)
Accumulated other
comprehensive loss	$	(563	)	$	(1	)	$	—		$	11	$	(553	)
Nine Months Ended September 30, 2018
Pensions and other
postretirement liabilities	$	(300	)	$	(11	)	$	(86	)	$	18	$	(379	)
Other comprehensive income
(loss) of equity investees	(56		)	2			(2		)	—		(56		)
Accumulated other
comprehensive loss	$	(356	)	$	(9	)	$	(88	)	$	18	$	(435	)

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Railway Operating Revenues (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	$ 2,841	$ 2,947	$ 8,606	$ 8,562
Revenue, payment terms			15 days
Accessorial Services
Disaggregation of Revenue [Line Items]
Accessorial services percent of total railway operating revenues	5.00%	4.00%	5.00%	4.00%
Merchandise
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	$ 1,731	$ 1,737	$ 5,173	$ 5,060
Merchandise | Chemicals
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	481	481	1,406	1,400
Merchandise | Agriculture products
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	394	388	1,185	1,124
Merchandise | Metals and construction
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	391	401	1,192	1,170
Merchandise | Automotive
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	247	245	749	741
Merchandise | Forest and consumer
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	218	222	641	625
Intermodal
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	707	746	2,127	2,138
Coal
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	$ 403	$ 464	$ 1,306	$ 1,364

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Leases - Future Minimum Lease Payments (Details) $ in Millions	Sep. 30, 2019 USD ($)
Leases [Abstract]
2019 - 3 months	$ 30
2020	110
2021	103
2022	79
2023	69
2024 and subsequent years	266
Total lease payments	657
Less: Interest	96
Present value of lease liabilities	$ 561

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Leases - Narrative (Details) - USD ($) $ in Millions	1 Months Ended	3 Months Ended	9 Months Ended
	Mar. 31, 2019	Mar. 31, 2019	Sep. 30, 2019	Jan. 01, 2019
Lessee, Lease, Description [Line Items]
ROU assets			$ 561
Operating lease, liability			$ 561
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			$ 47
Operating cash flows from operating leases			$ 85
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
Accounting Standards Update 2016-02
Lessee, Lease, Description [Line Items]
ROU assets				$ 586
Operating lease, liability				$ 586

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Accumulated Other Comprehensive Loss - Narrative (Details) - USD ($) $ in Millions	3 Months Ended	9 Months Ended
	Mar. 31, 2018	Sep. 30, 2019	Sep. 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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Fair Value of Financial Instruments - Schedule of Carrying Amounts and Estimated Fair Values (Details) - Fair Value, Measurements, Recurring - USD ($) $ in Millions	Sep. 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	$ (11,486)	$ (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	$ (14,131)	$ (12,203)

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Consolidated Statements of Changes in Stockholders' Equity (Parenthetical) - $ / shares	3 Months Ended
	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018
Statement of Stockholders' Equity [Abstract]
Common stock, dividends, per share, declared (in dollars per share)	$ 0.94	$ 0.86	$ 0.86	$ 0.80	$ 0.72	$ 0.72

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Consolidated Balance Sheets - USD ($) $ in Millions	Sep. 30, 2019	Dec. 31, 2018
Assets
Cash and cash equivalents	$ 452	$ 358
Accounts receivable – net	973	1,009
Materials and supplies	266	207
Other current assets	325	288
Total current assets	2,016	1,862
Investments	3,376	3,109
Properties less accumulated depreciation of $12,381 and $12,374, respectively	31,394	31,091
Other assets	714	177
Total assets	37,500	36,239
Current liabilities:
Accounts payable	1,407	1,505
Short-term debt	350	0
Income and other taxes	202	255
Other current liabilities	401	246
Current maturities of long-term debt	401	585
Total current liabilities	2,761	2,591
Long-term debt	11,085	10,560
Other liabilities	1,727	1,266
Deferred income taxes	6,689	6,460
Total liabilities	22,262	20,877
Stockholders’ equity:
Common stock $1.00 per share par value, 1,350,000,000 shares authorized; outstanding 260,746,663 and 268,098,472 shares, respectively, net of treasury shares	262	269
Additional paid-in capital	2,219	2,216
Accumulated other comprehensive loss	(553)	(563)
Retained income	13,310	13,440
Total stockholders’ equity	15,238	15,362
Total liabilities and stockholders’ equity	$ 37,500	$ 36,239

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Stock Repurchase Program

9 Months Ended

Sep. 30, 2019

Stock Repurchase Program [Abstract]

Stock Repurchase Program

Stock Repurchase Program

We repurchased and retired 8.4 million shares of Common Stock under our stock repurchase program during the first nine months of 2019, at a cost of $1.6 billion. During the first nine months of 2018, we repurchased and retired 12.8 million shares (5.7 million under an accelerated share repurchase program and 7.1 million shares under our ongoing program) at a cost of $2.1 billion.

Since the beginning of 2006, we have repurchased and retired 194.0 million shares at a total cost of $15.7 billion.

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Pensions and Other Postretirement Benefits

9 Months Ended

Sep. 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 third quarters and first nine months were as follows:

							Other Postretirement
	Pension Benefits						Benefits
	Third Quarter
	2019			2018			2019			2018
	($ in millions)
Service cost	$	9		$	9		$	2		$	2
Interest cost	24			21			4			4
Expected return on plan assets	(45		)	(44		)	(4		)	(4		)
Amortization of net losses	11			14			—			—
Amortization of prior service benefit	—			—			(6		)	(6		)
Net benefit	$	(1	)	$	—		$	(4	)	$	(4	)

							Other Postretirement
	Pension Benefits						Benefits
	First Nine Months
	2019			2018			2019			2018
	($ in millions)
Service cost	$	26		$	29		$	5		$	6
Interest cost	70			63			13			12
Expected return on plan assets	(134		)	(133		)	(11		)	(12		)
Amortization of net losses	33			42			—			—
Amortization of prior service benefit	—			—			(18		)	(18		)
Net expense (benefit)	$	(5	)	$	1		$	(11	)	$	(12	)

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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Earnings Per Share - Antidilutive Securities Excluded From Computation Of Earnings Per Share (Details) - shares shares in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Earnings Per Share [Abstract]
Antidilutive securities excluded from computation of earnings per share (in shares)	0	0	0	0

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Stock-Based Compensation - Schedule of Options Exercised, Cash Received, and Related Tax Benefits (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Share-based Payment Arrangement [Abstract]
Stock options exercised (in shares)	55,155	327,275	677,072	797,389
Cash received upon exercise	$ 3	$ 23	$ 47	$ 56
Related tax benefit realized	$ 1	$ 7	$ 16	$ 14

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Railway Operating Revenues - Schedule of Account Receivables (Details) - USD ($) $ in Millions	3 Months Ended
	Sep. 30, 2019	Dec. 31, 2018
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Accounts receivable – net	$ 973	$ 1,009
Bad debt expense	32
Trade Accounts Receivable
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Accounts receivable – net	720	740
Other Receivables
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Accounts receivable – net	253	269
Other Noncurrent Receivables
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Accounts receivable, net, noncurrent	$ 23	$ 55

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Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Millions	Sep. 30, 2019	Dec. 31, 2018
Statement of Financial Position [Abstract]
Properties, accumulated depreciation	$ 12,381	$ 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)	260,746,663	268,098,472

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Cover Page	9 Months Ended
	Sep. 30, 2019 shares
Cover page.
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 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	260,746,663
Entity Central Index Key	0000702165
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q3
Amendment Flag	false

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Railway Operating Revenues

9 Months Ended

Sep. 30, 2019

Revenue from Contract with Customer [Abstract]

Railway Operating Revenues

Railway Operating Revenues

The following table disaggregates our revenues by major commodity group:

	Third Quarter				First Nine Months
	2019		2018		2019		2018
Merchandise:	($ in millions)
Chemicals	$	481	$	481	$	1,406	$	1,400
Agriculture products	394		388		1,185		1,124
Metals and construction	391		401		1,192		1,170
Automotive	247		245		749		741
Forest and consumer	218		222		641		625
Merchandise	1,731		1,737		5,173		5,060
Intermodal	707		746		2,127		2,138
Coal	403		464		1,306		1,364
Total	$	2,841	$	2,947	$	8,606	$	8,562

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 September 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:

	September 30, 2019		December 31, 2018
	($ in millions)
Customer	$	720	$	740
Non-customer	253		269
Accounts receivable – net	$	973	$	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 $23 million and $55 million at September 30, 2019 and December 31, 2018, respectively.  During the third quarter of 2019, we wrote off a $32 million non-current customer receivable resulting from a legal dispute and this expense is included in “Materials and other” on the Consolidated Statements of Income.   We do not have any material contract assets or liabilities.

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 5% of total “Railway operating revenues” on the Consolidated Statements of Income for the third quarter and first nine months of 2019 and 4% for the third quarter and first nine months of 2018.

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Pensions and Other Postretirement Benefits (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Pension Benefits
Defined Benefit Plan Disclosure [Line Items]
Service cost	$ 9	$ 9	$ 26	$ 29
Interest cost	24	21	70	63
Expected return on plan assets	(45)	(44)	(134)	(133)
Amortization of net losses	11	14	33	42
Amortization of prior service benefit	0	0	0	0
Net expense (benefit)	(1)	0	(5)	1
Other Postretirement Benefits
Defined Benefit Plan Disclosure [Line Items]
Service cost	2	2	5	6
Interest cost	4	4	13	12
Expected return on plan assets	(4)	(4)	(11)	(12)
Amortization of net losses	0	0	0	0
Amortization of prior service benefit	(6)	(6)	(18)	(18)
Net expense (benefit)	$ (4)	$ (4)	$ (11)	$ (12)

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Accumulated Other Comprehensive Loss

9 Months Ended

Sep. 30, 2019

Equity [Abstract]

Accumulated Other Comprehensive Loss

Accumulated Other Comprehensive Loss

The changes in the cumulative balances of “Accumulated other comprehensive loss” reported on 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)
Nine Months Ended September 30, 2019
Pensions and other
postretirement liabilities	$	(497	)	$	—		$	—		$	11	$	(486	)
Other comprehensive loss
of equity investees	(66		)	(1		)	—			—		(67		)
Accumulated other
comprehensive loss	$	(563	)	$	(1	)	$	—		$	11	$	(553	)
Nine Months Ended September 30, 2018
Pensions and other
postretirement liabilities	$	(300	)	$	(11	)	$	(86	)	$	18	$	(379	)
Other comprehensive income
(loss) of equity investees	(56		)	2			(2		)	—		(56		)
Accumulated other
comprehensive loss	$	(356	)	$	(9	)	$	(88	)	$	18	$	(435	)

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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Leases

9 Months Ended

Sep. 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. Upon adoption of the standard, we recognized ROU assets and corresponding lease liabilities of $586 million on the Consolidated Balance Sheets as of 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 include options to extend the leases for up to 99 years, and some include options to terminate the leases within 30 days. Because we are not reasonably certain to exercise these renewal options, the options are not considered in determining the lease term, and associated payments are excluded from future minimum lease payments.

Leases with an initial term of twelve months or less are not recorded on the balance sheet. We recognize lease expense for these leases on a straight-line basis over the lease term. We do not separate lease and non-lease components.

Operating lease amounts included on the Consolidated Balance Sheet were as follows:

		September 30, 2019
Assets	Classification	($ in millions)
ROU assets	Other assets	$	561
Liabilities
Current lease liabilities	Other current liabilities	$	97
Non-current lease liabilities	Other liabilities	464
Total lease liabilities		$	561

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

	Third Quarter		First Nine Months
	2019		2019
	($ in millions)
Operating lease expense	$	29	$	85
Variable lease expense	15		43
Short-term lease expense	1		4
Total lease expense	$	45	$	132

At September 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:

	September 30, 2019
Weighted-average remaining lease term (years) on operating leases	8.32
Weighted-average discount rates on operating leases	3.52	%

As the rates implicit in most of our leases are not readily determinable, we use a collateralized incremental borrowing rate based on the information available at the lease commencement date in determining the present value of future payments. We use the portfolio approach and group leases into short, medium, and long-term categories, applying the corresponding incremental borrowing rates to these categories of leases.

During the first nine months of 2019, right-of-use assets obtained in exchange for new operating lease liabilities were $47 million. During the first nine months of 2019, cash paid for amounts included in the measurement of lease liabilities was $85 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:

	September 30, 2019
	($ in millions)
2019 - 3 months	$	30
2020	110
2021	103
2022	79
2023	69
2024 and subsequent years	266
Total lease payments	657
Less: Interest	96
Present value of lease liabilities	$	561

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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Stock-Based Compensation - Schedule of RSU Activity (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Related tax benefit realized	$ 1	$ 7	$ 16	$ 14
Restricted Stock Units (RSUs)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share units earned (in shares)	142	0	166,197	160,200
Shares issued net of withholding taxes (in shares)	102	0	119,346	99,968
Related tax benefit realized	$ 0	$ 0	$ 2	$ 3

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Stock-Based Compensation - Schedule of Stock-Based Compensation Expense and Related Tax Benefits (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Share-based Payment Arrangement [Abstract]
Stock-based compensation expense	$ 10	$ 12	$ 46	$ 41
Total tax benefit	$ 3	$ 9	$ 34	$ 29

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Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Millions	3 Months Ended	9 Months Ended
	Mar. 31, 2018	Sep. 30, 2019	Sep. 30, 2018
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
Beginning Balance	$ 16,359	$ 15,362	$ 16,359
Net Income (Loss)		(1)	(9)
Reclassification of Stranded Tax Effects		0	(88)
Reclassification Adjustments		11	18
Ending Balance	16,418	15,238	15,480
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)	(553)	(435)
Pensions And Other Postretirement Liabilities
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
Beginning Balance	(300)	(497)	(300)
Net Income (Loss)		0	(11)
Reclassification of Stranded Tax Effects		0	(86)
Reclassification Adjustments		11	18
Ending Balance		(486)	(379)
Accumulated Other Comprehensive Loss Equity Investees
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
Beginning Balance	$ (56)	(66)	(56)
Net Income (Loss)		(1)	2
Reclassification of Stranded Tax Effects		0	(2)
Reclassification Adjustments		0	0
Ending Balance		$ (67)	$ (56)

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Fair Value of Financial Instruments (Tables)

9 Months Ended

Sep. 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:

	September 30, 2019						December 31, 2018
	Carrying Amount			Fair Value			Carrying Amount			Fair Value
	($ in millions)
Long-term debt, including current maturities	$	(11,486	)	$	(14,131	)	$	(11,145	)	$	(12,203	)

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New Accounting Pronouncements

9 Months Ended

Sep. 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 will replace 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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Earnings Per Share (Tables)

9 Months Ended

Sep. 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
	Third Quarter
	2019			2018			2019		2018
	($ in millions, except per share amounts, shares in millions)
Net income	$	657		$	702		$	657	$	702
Dividend equivalent payments	(1		)	(2		)	—		—
Income available to common stockholders	$	656		$	700		$	657	$	702
Weighted-average shares outstanding	262.1			275.5			262.1		275.5
Dilutive effect of outstanding options
and share-settled awards							2.2		2.7
Adjusted weighted-average shares outstanding							264.3		278.2
Earnings per share	$	2.50		$	2.54		$	2.49	$	2.52
	Basic						Diluted
	First Nine Months
	2019			2018			2019		2018
	($ in millions, except per share amounts, shares in millions)
Net income	$	2,056		$	1,964		$	2,056	$	1,964
Dividend equivalent payments	(4		)	(4		)	—		(1		)
Income available to common stockholders	$	2,052		$	1,960		$	2,056	$	1,963
Weighted-average shares outstanding	264.6			280.1			264.6		280.1
Dilutive effect of outstanding options
and share-settled awards							2.3		2.5
Adjusted weighted-average shares outstanding							266.9		282.6
Earnings per share	$	7.76		$	7.00		$	7.70	$	6.95

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Leases - Operating Lease Included in Balance Sheet (Details) $ in Millions	Sep. 30, 2019 USD ($)
Assets
ROU assets	$ 561
Liabilities
Current lease liabilities	97
Non-current lease liabilities	464
Total lease liabilities	$ 561

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Stock Repurchase Program (Details) - USD ($) shares in Millions, $ in Millions	3 Months Ended						9 Months Ended
	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Sep. 30, 2019	Sep. 30, 2018
Equity, Class of Treasury Stock [Line Items]
Stock repurchased and retired during period (in shares)							8.4	12.8
Stock repurchased and retired during period, cost	$ 500	$ 550	$ 500	$ 1,600	$ 400	$ 300	$ 1,600	$ 2,100
Stock repurchased and retired since beginning of stock repurchase program in 2006 (in shares)							194.0
Stock repurchased and retired since beginning of stock repurchase program in 2006, cost							$ 15,700
Accelerated Stock Repurchase Program, ASR
Equity, Class of Treasury Stock [Line Items]
Stock repurchased and retired during period (in shares)								5.7
Ongoing Share Repurchase Program
Equity, Class of Treasury Stock [Line Items]
Stock repurchased and retired during period (in shares)								7.1

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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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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	(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	1,964
Other comprehensive income (loss)	9
Total comprehensive income	1,973
Share repurchases	(2,100)
Reclassification of stranded tax effects	(88)
Ending Balance at Sep. 30, 2018	15,480	274	1,996	(435)	13,645
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	(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
Comprehensive income:
Net income	702				702
Other comprehensive income (loss)	6			6
Total comprehensive income	708
Dividends on common stock	(219)				(219)
Share repurchases	(1,600)	(8)	(300)		(1,292)
Stock-based compensation	32	1	33		(2)
Ending Balance at Sep. 30, 2018	15,480	274	1,996	(435)	13,645
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	(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	2,056
Other comprehensive income (loss)	10
Total comprehensive income	2,066
Share repurchases	(1,600)
Reclassification of stranded tax effects	0
Ending Balance at Sep. 30, 2019	15,238	262	2,219	(553)	13,310
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	(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
Comprehensive income:
Net income	657				657
Other comprehensive income (loss)	4			4
Total comprehensive income	661
Dividends on common stock	(247)				(247)
Share repurchases	(500)	(3)	(21)		(476)
Stock-based compensation	13		14		(1)
Ending Balance at Sep. 30, 2019	$ 15,238	$ 262	$ 2,219	$ (553)	$ 13,310

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Consolidated Statements of Comprehensive Income - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Net income	$ 657	$ 702	$ 2,056	$ 1,964
Other comprehensive income, before tax:
Pension and other postretirement benefits	5	8	15	9
Other comprehensive income (loss) before tax	5	8	14	11
Income tax expense related to items of other comprehensive income	(1)	(2)	(4)	(2)
Other comprehensive income, net of tax	4	6	10	9
Total comprehensive income	661	708	2,066	1,973
Accumulated Other Comprehensive Loss Equity Investees
Other comprehensive income, before tax:
Other comprehensive income (loss) before tax	$ 0	$ 0	$ (1)	$ 2

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Commitments and Contingencies (Details)	9 Months Ended
	Sep. 30, 2019 USD ($) location	Dec. 31, 2018 USD ($) location
Commitments and Contingencies Disclosure [Abstract]
Environmental liability	$ 60,000,000	$ 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	$ 42,000,000
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

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Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions	3 Months Ended						9 Months Ended
	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Sep. 30, 2019	Sep. 30, 2018
Earnings Per Share [Abstract]
Net income	$ 657	$ 722	$ 677	$ 702	$ 710	$ 552	$ 2,056	$ 1,964
Dividend equivalent payments, basic	(1)			(2)			(4)	(4)
Dividend equivalent payments, diluted	0			0			0	(1)
Income available to common stockholders, basic	656			700			2,052	1,960
Income available to common stockholders, diluted	$ 657			$ 702			$ 2,056	$ 1,963
Weighted-average shares outstanding (in shares)	262.1			275.5			264.6	280.1
Dilutive effect of outstanding options and share-settled awards (in shares)	2.2			2.7			2.3	2.5
Adjusted weighted-average shares outstanding (in shares)	264.3			278.2			266.9	282.6
Basic (in dollars per share)	$ 2.50			$ 2.54			$ 7.76	$ 7.00
Diluted (in dollars per share)	$ 2.49			$ 2.52			$ 7.70	$ 6.95

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Stock-Based Compensation - Narrative (Details)	9 Months Ended	12 Months Ended	21 Months Ended
	Sep. 30, 2019	Dec. 31, 2017	Sep. 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

9 Months Ended

Sep. 30, 2019

Share-based Payment Arrangement [Abstract]

Stock-Based Compensation

Stock-Based Compensation

	Third Quarter				First Nine Months
	2019		2018		2019		2018
	($ in millions)
Stock-based compensation expense	$	10	$	12	$	46	$	41
Total tax benefit	3		9		34		29

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:

	Third Quarter			First Nine Months
	Granted	Weighted-Average Grant-Date Fair Value		Granted	Weighted-Average Grant-Date Fair Value
Stock options	1,190	$	40.98	45,110	$	45.80
RSUs	5,610	176.40		216,800	164.20
PSUs	2,090	168.73		98,860	160.42

Stock Options

	Third Quarter				First Nine Months
	2019		2018		2019		2018
	($ in millions)
Stock options exercised	55,155		327,275		677,072		797,389
Cash received upon exercise	$	3	$	23	$	47	$	56
Related tax benefit realized	1		7		16		14

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. 

	Third Quarter				First Nine Months
	2019		2018		2019		2018
	($ in millions)
RSUs vested	142		—		166,197		160,200
Common Stock issued net of tax withholding	102		—		119,346		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 third quarters of 2019 or 2018.

	First Nine 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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Investments

9 Months Ended

Sep. 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 September 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 $37 million and $38 million for the third quarters of 2019 and 2018, respectively, and $112 million for both the first nine months of 2019 and 2018. Our equity in the earnings of Conrail, net of amortization, included in “Purchased services and rents” was $13 million and $12 million for the third quarters of 2019 and 2018, respectively, and $36 million and $46 million for the first nine months of 2019 and 2018, respectively.

“Other liabilities” includes $280 million at both September 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 $61 million and $64 million of expense for the third quarters of 2019 and 2018, respectively, and $183 million and $197 million for the first nine months of 2019 and 2018, respectively. Our equity in the earnings of TTX, also included in “Purchased services and rents,” totaled $19 million and $16 million for the third quarters of 2019 and 2018, respectively, and $44 million and $49 million for the first nine months of 2019 and 2018, respectively.

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Fair Value of Financial Instruments

9 Months Ended

Sep. 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,” “Accounts payable,” and “Short-term debt” 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 September 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:

	September 30, 2019						December 31, 2018
	Carrying Amount			Fair Value			Carrying Amount			Fair Value
	($ in millions)
Long-term debt, including current maturities	$	(11,486	)	$	(14,131	)	$	(11,145	)	$	(12,203	)

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Railway Operating Revenues (Tables)

9 Months Ended

Sep. 30, 2019

Revenue from Contract with Customer [Abstract]

Disaggregation of Revenue

The following table disaggregates our revenues by major commodity group:

	Third Quarter				First Nine Months
	2019		2018		2019		2018
Merchandise:	($ in millions)
Chemicals	$	481	$	481	$	1,406	$	1,400
Agriculture products	394		388		1,185		1,124
Metals and construction	391		401		1,192		1,170
Automotive	247		245		749		741
Forest and consumer	218		222		641		625
Merchandise	1,731		1,737		5,173		5,060
Intermodal	707		746		2,127		2,138
Coal	403		464		1,306		1,364
Total	$	2,841	$	2,947	$	8,606	$	8,562

Schedule of Accounts Receivable

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

	September 30, 2019		December 31, 2018
	($ in millions)
Customer	$	720	$	740
Non-customer	253		269
Accounts receivable – net	$	973	$	1,009

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Leases (Tables)

9 Months Ended

Sep. 30, 2019

Leases [Abstract]

Schedule of Lease Related Assets and Liabilities

Operating lease amounts included on the Consolidated Balance Sheet were as follows:

		September 30, 2019
Assets	Classification	($ in millions)
ROU assets	Other assets	$	561
Liabilities
Current lease liabilities	Other current liabilities	$	97
Non-current lease liabilities	Other liabilities	464
Total lease liabilities		$	561

Lease, Cost

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

	Third Quarter		First Nine Months
	2019		2019
	($ in millions)
Operating lease expense	$	29	$	85
Variable lease expense	15		43
Short-term lease expense	1		4
Total lease expense	$	45	$	132

Other information related to operating leases was as follows:

	September 30, 2019
Weighted-average remaining lease term (years) on operating leases	8.32
Weighted-average discount rates on operating leases	3.52	%

Lessee, Operating Lease, Liability, Maturity

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

	September 30, 2019
	($ in millions)
2019 - 3 months	$	30
2020	110
2021	103
2022	79
2023	69
2024 and subsequent years	266
Total lease payments	657
Less: Interest	96
Present value of lease liabilities	$	561

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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Leases - Additional Information (Details)	Sep. 30, 2019
Leases [Abstract]
Weighted-average remaining lease term (years) on operating leases	8 years 3 months 25 days
Weighted-average discount rates on operating leases	3.52%

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Debt (Details) - USD ($)	Sep. 30, 2019	May 31, 2019	Apr. 30, 2019	Dec. 31, 2018
Debt Instrument [Line Items]
Restricted cash	$ 88,000,000			$ 88,000,000
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%
Securitization Borrowings
Debt Instrument [Line Items]
Current borrowing capacity		$ 450,000,000	$ 400,000,000
Accounts receivable securitization balance	$ 350,000,000			$ 0

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Stock-Based Compensation (Tables)

9 Months Ended

Sep. 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

	Third Quarter				First Nine Months
	2019		2018		2019		2018
	($ in millions)
Stock-based compensation expense	$	10	$	12	$	46	$	41
Total tax benefit	3		9		34		29

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:

	Third Quarter			First Nine Months
	Granted	Weighted-Average Grant-Date Fair Value		Granted	Weighted-Average Grant-Date Fair Value
Stock options	1,190	$	40.98	45,110	$	45.80
RSUs	5,610	176.40		216,800	164.20
PSUs	2,090	168.73		98,860	160.42

Schedule of Cash Proceeds Received from Share-based Payment Awards

	Third Quarter				First Nine Months
	2019		2018		2019		2018
	($ in millions)
Stock options exercised	55,155		327,275		677,072		797,389
Cash received upon exercise	$	3	$	23	$	47	$	56
Related tax benefit realized	1		7		16		14

Restricted Stock Units (RSUs)

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

Schedule of Share-based Compensation, Activity

	Third Quarter				First Nine Months
	2019		2018		2019		2018
	($ in millions)
RSUs vested	142		—		166,197		160,200
Common Stock issued net of tax withholding	102		—		119,346		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 Nine 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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Pensions and Other Postretirement Benefits (Tables)

9 Months Ended

Sep. 30, 2019

Defined Contribution Plan [Abstract]

Pension and Other Postretirement Benefit Cost Components

Pension and postretirement benefit cost components for the third quarters and first nine months were as follows:

							Other Postretirement
	Pension Benefits						Benefits
	Third Quarter
	2019			2018			2019			2018
	($ in millions)
Service cost	$	9		$	9		$	2		$	2
Interest cost	24			21			4			4
Expected return on plan assets	(45		)	(44		)	(4		)	(4		)
Amortization of net losses	11			14			—			—
Amortization of prior service benefit	—			—			(6		)	(6		)
Net benefit	$	(1	)	$	—		$	(4	)	$	(4	)

							Other Postretirement
	Pension Benefits						Benefits
	First Nine Months
	2019			2018			2019			2018
	($ in millions)
Service cost	$	26		$	29		$	5		$	6
Interest cost	70			63			13			12
Expected return on plan assets	(134		)	(133		)	(11		)	(12		)
Amortization of net losses	33			42			—			—
Amortization of prior service benefit	—			—			(18		)	(18		)
Net expense (benefit)	$	(5	)	$	1		$	(11	)	$	(12	)

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Leases - Lease Cost (Details) - USD ($) $ in Millions	3 Months Ended	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2019
Leases [Abstract]
Operating lease expense	$ 29	$ 85
Variable lease expense	15	43
Short-term lease expense	1	4
Total lease expense	$ 45	$ 132

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Investments (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 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	37	$ 38	112	$ 112
Equity in the earnings of investee	13	12	36	46
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	$ 61	64	$ 183	197
Equity in the earnings of investee	$ 19	$ 16	$ 44	$ 49

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Consolidated Statements of Cash Flows - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Cash flows from operating activities:
Net income	$ 2,056	$ 1,964
Reconciliation of net income to net cash provided by operating activities:
Depreciation	854	822
Deferred income taxes	225	138
Gains and losses on properties	(4)	(26)
Changes in assets and liabilities affecting operations:
Accounts receivable	34	(102)
Materials and supplies	(59)	(45)
Other current assets	40	45
Current liabilities other than debt	(72)	173
Other – net	(77)	(85)
Net cash provided by operating activities	2,997	2,884
Cash flows from investing activities:
Property additions	(1,494)	(1,326)
Property sales and other transactions	282	93
Investment purchases	(12)	(4)
Investment sales and other transactions	(99)	96
Net cash used in investing activities	(1,323)	(1,141)
Cash flows from financing activities:
Dividends	(705)	(627)
Common stock transactions	21	38
Purchase and retirement of common stock	(1,550)	(2,300)
Proceeds from borrowings – net of issuance costs	1,404	2,023
Debt repayments	(750)	(750)
Net cash used in financing activities	(1,580)	(1,616)
Net increase (decrease) in cash, cash equivalents, and restricted cash	94	127
Cash, cash equivalents, and restricted cash:
At beginning of year	446	690
At end of period	540	817
Supplemental disclosures of cash flow information:
Interest (net of amounts capitalized)	392	327
Income taxes (net of refunds)	$ 404	$ 314

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Consolidated Statements of Income - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Income Statement [Abstract]
Railway operating revenues	$ 2,841	$ 2,947	$ 8,606	$ 8,562
Railway operating expenses:
Compensation and benefits	682	725	2,121	2,168
Purchased services and rents	423	450	1,265	1,281
Fuel	226	274	730	812
Depreciation	286	276	853	821
Materials and other	228	202	610	599
Total railway operating expenses	1,845	1,927	5,579	5,681
Income from railway operations	996	1,020	3,027	2,881
Other income – net	22	30	88	67
Interest expense on debt	150	142	452	409
Income before income taxes	868	908	2,663	2,539
Income taxes	211	206	607	575
Net income	$ 657	$ 702	$ 2,056	$ 1,964
Earnings per share:
Basic (in dollars per share)	$ 2.50	$ 2.54	$ 7.76	$ 7.00
Diluted (in dollars per share)	$ 2.49	$ 2.52	$ 7.70	$ 6.95

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Stock-Based Compensation - Schedule of PSU Activity (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Related tax benefit realized	$ 1	$ 7	$ 16	$ 14
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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Stock-Based Compensation - Schedule of Grants and Weighted-Average Grant-Date Fair Values (Details) - $ / shares	3 Months Ended	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2019
Stock options
Granted
Stock options (in shares)	1,190	45,110
Weighted-Average Grant-Date Fair Value
Stock options (in dollars per shares)	$ 40.98	$ 45.80
RSUs
Granted
Other than stock options (in shares)	5,610	216,800
Weighted-Average Grant-Date Fair Value
Other than stock options (in dollars per share)	$ 176.40	$ 164.20
PSUs
Granted
Other than stock options (in shares)	2,090	98,860
Weighted-Average Grant-Date Fair Value
Other than stock options (in dollars per share)	$ 168.73	$ 160.42

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Commitments and Contingencies

9 Months Ended

Sep. 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 decision was upheld by the Court of Appeals on August 16, 2019. Since that decision, various individual cases have been filed in multiple jurisdictions. 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 $60 million and $55 million at September 30, 2019 and December 31, 2018, respectively, of which $15 million is classified as a current liability at both dates. At September 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 September 30, 2019, sixteen sites accounted for $42 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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Earnings Per Share

9 Months Ended

Sep. 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
	Third Quarter
	2019			2018			2019		2018
	($ in millions, except per share amounts, shares in millions)
Net income	$	657		$	702		$	657	$	702
Dividend equivalent payments	(1		)	(2		)	—		—
Income available to common stockholders	$	656		$	700		$	657	$	702
Weighted-average shares outstanding	262.1			275.5			262.1		275.5
Dilutive effect of outstanding options
and share-settled awards							2.2		2.7
Adjusted weighted-average shares outstanding							264.3		278.2
Earnings per share	$	2.50		$	2.54		$	2.49	$	2.52
	Basic						Diluted
	First Nine Months
	2019			2018			2019		2018
	($ in millions, except per share amounts, shares in millions)
Net income	$	2,056		$	1,964		$	2,056	$	1,964
Dividend equivalent payments	(4		)	(4		)	—		(1		)
Income available to common stockholders	$	2,052		$	1,960		$	2,056	$	1,963
Weighted-average shares outstanding	264.6			280.1			264.6		280.1
Dilutive effect of outstanding options
and share-settled awards							2.3		2.5
Adjusted weighted-average shares outstanding							266.9		282.6
Earnings per share	$	7.76		$	7.00		$	7.70	$	6.95

During the third quarters and first nine 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. There are no awards outstanding that were antidilutive for both the third quarters and first nine months ended September 30, 2019 and 2018.

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Debt

9 Months Ended

Sep. 30, 2019

Debt Disclosure [Abstract]

Debt

Debt

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.

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 $350 million outstanding at September 30, 2019 reflected as “Short-term debt” on the Consolidated Balance Sheets, and no amounts outstanding at December 31, 2018.

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