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, 2020

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

For the transition period from ___________ to___________

Commission File Number: 1-8339

NORFOLK SOUTHERN CORPORATION

(Exact name of registrant as specified in its charter) 

Virginia		52-1188014
(State or other jurisdiction of incorporation or organization)		(I.R.S. 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, 2020
Common Stock ($1.00 par value per share)	253,985,338	(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 2020 and 2019	3
		Consolidated Statements of Comprehensive Income Third Quarter and First Nine Months of 2020 and 2019	4
		Consolidated Balance Sheets At September 30, 2020 and December 31, 2019	5
		Consolidated Statements of Cash Flows First Nine Months of 2020 and 2019	6
		Consolidated Statements of Changes in Stockholders’ Equity Third Quarter and First Nine Months of 2020 and 2019	7
		Notes to Consolidated Financial Statements	9
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	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	31
	Item 6.	Exhibits	32
		Signatures	33

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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
	2020		2019		2020		2019
	($ in millions, except per share amounts)
Railway operating revenues	$	2,506	$	2,841	$	7,216	$	8,606
Railway operating expenses:
Compensation and benefits	578		682		1,786		2,121
Purchased services and rents	486		423		1,261		1,265
Fuel	126		226		399		730
Depreciation	293		286		867		853
Materials and other	183		228		500		610
Loss on asset disposal	—		—		385		—
Total railway operating expenses	1,666		1,845		5,198		5,579
Income from railway operations	840		996		2,018		3,027
Other income – net	39		22		110		88
Interest expense on debt	155		150		465		452
Income before income taxes	724		868		1,663		2,663
Income taxes	155		211		321		607
Net income	$	569	$	657	$	1,342	$	2,056
Earnings per share:
Basic	$	2.23	$	2.50	$	5.24	$	7.76
Diluted	2.22		2.49		5.21		7.70

 See accompanying notes to consolidated financial statements.

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Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income

(Unaudited)

	Third Quarter				First Nine Months
	2020		2019		2020		2019
	($ in millions)
Net income	$	569	$	657	$	1,342	$	2,056
Other comprehensive income, before tax:
Pension and other postretirement benefits	7		5		20		15
Other comprehensive income (loss) of equity investees	—		—		6		(1)
Other comprehensive income, before tax	7		5		26		14
Income tax expense related to items of
other comprehensive income	(3)		(1)		(6)		(4)
Other comprehensive income, net of tax	4		4		20		10
Total comprehensive income	$	573	$	661	$	1,362	$	2,066

 See accompanying notes to consolidated financial statements.

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Norfolk Southern Corporation and Subsidiaries

Consolidated Balance Sheets

(Unaudited)

	September 30, 2020		December 31, 2019
	($ in millions)
Assets
Current assets:
Cash and cash equivalents	$	1,359	$	580
Accounts receivable – net	883		920
Materials and supplies	247		244
Other current assets	90		337
Total current assets	2,579		2,081
Investments	3,566		3,428
Properties less accumulated depreciation of $11,873
and $11,982, respectively	31,239		31,614
Other assets	795		800
Total assets	$	38,179	$	37,923
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	1,273	$	1,428
Income and other taxes	257		229
Other current liabilities	386		327
Current maturities of long-term debt	89		316
Total current liabilities	2,005		2,300
Long-term debt	12,634		11,880
Other liabilities	1,701		1,744
Deferred income taxes	6,898		6,815
Total liabilities	23,238		22,739
Stockholders’ equity:
Common stock $1.00 per share par value, 1,350,000,000 shares
authorized; outstanding 253,985,338 and 257,904,956 shares,
respectively, net of treasury shares	255		259
Additional paid-in capital	2,246		2,209
Accumulated other comprehensive loss	(471)		(491)
Retained income	12,911		13,207
Total stockholders’ equity	14,941		15,184
Total liabilities and stockholders’ equity	$	38,179	$	37,923

 See accompanying notes to consolidated financial statements.

5

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

		First Nine Months
		2020		2019
		($ in millions)
Cash flows from operating activities:
	Net income	$	1,342	$	2,056
	Reconciliation of net income to net cash provided by operating activities:
	Depreciation	867		854
	Deferred income taxes	78		225
	Gains and losses on properties	(14)		(4)
	Loss on asset disposal	385		—
	Impairment of investment	99		—
	Changes in assets and liabilities affecting operations:
	Accounts receivable	36		34
	Materials and supplies	(3)		(59)
	Other current assets	55		40
	Current liabilities other than debt	104		(72)
	Other – net	(182)		(77)
	Net cash provided by operating activities	2,767		2,997
Cash flows from investing activities:
	Property additions	(1,053)		(1,494)
	Property sales and other transactions	291		282
	Investment purchases	(6)		(12)
	Investment sales and other transactions	(50)		(99)
	Net cash used in investing activities	(818)		(1,323)
Cash flows from financing activities:
	Dividends	(722)		(705)
	Common stock transactions	53		21
	Purchase and retirement of common stock	(960)		(1,550)
	Proceeds from borrowings – net of issuance costs	784		1,404
	Debt repayments	(325)		(750)
	Net cash used in financing activities	(1,170)		(1,580)
	Net increase in cash, cash equivalents, and restricted cash	779		94
Cash, cash equivalents, and restricted cash:
	At beginning of year	580		446
	At end of period	$	1,359	$	540
Supplemental disclosures of cash flow information:
	Cash paid during the period for:
	Interest (net of amounts capitalized)	$	395	$	392
	Income taxes (net of refunds)	118		404

 See accompanying notes to consolidated financial statements.

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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, 2019	$	259	$	2,209	$	(491)	$	13,207	$	15,184
Comprehensive income:
Net income							381		381
Other comprehensive income					10				10
Total comprehensive income									391
Dividends on common stock,
$0.94 per share							(242)		(242)
Share repurchases	(2)		(21)				(443)		(466)
Stock-based compensation	1		17				(1)		17
Balance at March 31, 2020	258		2,205		(481)		12,902		14,884
Comprehensive income:
Net income							392		392
Other comprehensive income					6				6
Total comprehensive income									398
Dividends on common stock,
$0.94 per share							(240)		(240)
Share repurchases	(2)		(10)				(191)		(203)
Stock-based compensation			22						22
Balance at June 30, 2020	256		2,217		(475)		12,863		14,861
Comprehensive income:
Net income							569		569
Other comprehensive income					4				4
Total comprehensive income									573
Dividends on common stock,
$0.94 per share							(240)		(240)
Share repurchases	(1)		(11)				(279)		(291)
Stock-based compensation			40				(2)		38
Balance at September 30, 2020	$	255	$	2,246	$	(471)	$	12,911	$	14,941

 See accompanying notes to consolidated financial statements.

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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.

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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, 2020, and December 31, 2019, our results of operations, comprehensive income and changes in stockholders’ equity for the third quarters and first nine months of 2020 and 2019, and our cash flows for the first nine months of 2020 and 2019 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
	2020		2019		2020		2019
	($ in millions)
Merchandise:
Agriculture, forest and consumer products	$	521	$	572	$	1,570	$	1,707
Chemicals	428		535		1,371		1,586
Metals and construction	337		377		997		1,131
Automotive	270		247		597		749
Merchandise	1,556		1,731		4,535		5,173
Intermodal	700		707		1,924		2,127
Coal	250		403		757		1,306
Total	$	2,506	$	2,841	$	7,216	$	8,606

At the beginning of 2020, we combined the agriculture products and forest and consumer commodity groups. In addition, we also made changes in the categorization of certain other commodity groups within Merchandise. Specifically, certain commodities were shifted between agriculture, forest, and consumer products; chemicals; and, metals and construction. These changes were made as a result of organizational initiatives to better align with how we manage these commodities. Prior period railway operating revenues have been reclassified to conform to the current presentation.

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. We had no material remaining performance obligations as of September 30, 2020 or December 31, 2019.

Revenue related to interline transportation services that involve another railroad is reported on a net basis. Therefore, the portion of the amount that relates to another party is not reflected in revenue.

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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, 2020		December 31, 2019
	($ in millions)
Customer	$	664	$	682
Non-customer	219		238
Accounts receivable – net	$	883	$	920

Non-customer receivables include non-revenue-related amounts due from other railroads, governmental entities, and others. “Other assets” on the Consolidated Balance Sheets includes non-current customer receivables of $23 million at both September 30, 2020 and December 31, 2019. We do not have any material contract assets or liabilities at September 30, 2020 or December 31, 2019.

We may provide customers ancillary services, such as switching, demurrage and other incidental services, under their transportation contracts. These are distinct performance obligations that are recognized at a point in time when the services are performed or as contractual obligations are met. 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 quarters and first nine months of 2020 and 2019.

2.  Stock-Based Compensation

	Third Quarter				First Nine Months
	2020		2019		2020		2019
	($ in millions)
Stock-based compensation expense	$	13	$	10	$	25	$	46
Total tax benefit	10		3		39		34

During 2020, a committee of nonemployee members of our Board of Directors (and the Chief Executive Officer when 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	—	$	—	43,770	$	52.05
RSUs	10,230	211.90		177,770	210.13
PSUs	—	—		78,720	212.67

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Stock Options

	Third Quarter				First Nine Months
	2020		2019		2020		2019
	($ in millions)
Stock options exercised	313,358		55,155		998,996		677,072
Cash received upon exercise	$	27	$	3	$	82	$	47
Related tax benefit realized	8		1		24		16

Restricted Stock Units

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). 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
	2020		2019		2020		2019
	($ in millions)
RSUs vested	1,635		142		203,934		166,197
Common Stock issued net of tax withholding	1,630		102		145,342		119,346
Related tax benefit realized	$	—	$	—	$	4	$	2

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 2020 or 2019.

	First Nine Months
	2020		2019
	($ in millions)
PSUs earned	235,935		331,099
Common Stock issued net of tax withholding	156,450		221,241
Related tax benefit realized	$	7	$	9

3. Loss on Asset Disposal

In the first quarter of 2020, in connection with our initiatives to increase operational fluidity and asset utilization and improve labor and fuel efficiency, we committed to a plan to dispose of certain locomotives deemed excess and no longer needed for railroad operations. When depreciable operating road and equipment assets are sold or retired in the ordinary course of business, the cost of the assets, net of sale proceeds or salvage, is charged to accumulated depreciation, and no gain or loss is recognized in earnings. A retirement is considered abnormal if it does not occur in the ordinary course of business, if it relates to disposition of a large segment of an asset class and if the retirement varies significantly from the retirement profile identified through our depreciation studies, which inherently consider the impact of normal retirements on expected service lives and depreciation rates. We evaluated the

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planned locomotive retirements and concluded they were abnormal. Accordingly, a $385 million loss was recorded to adjust their carrying amount to their estimated fair value, which resulted in a $97 million tax benefit. During the first nine months, we sold 574 of 703 locomotives under the plan. The carrying amount of the remaining assets held for sale of $20 million is classified as “Other current assets” in the Consolidated Balance Sheet at September 30, 2020.

4.  Earnings Per Share

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

	Basic				Diluted
	Third Quarter
	2020		2019		2020		2019
	($ in millions, except per share amounts, shares in millions)
Net income	$	569	$	657	$	569	$	657
Dividend equivalent payments	(2)		(1)		(1)		—
Income available to common stockholders	$	567	$	656	$	568	$	657
Weighted-average shares outstanding	254.6		262.1		254.6		262.1
Dilutive effect of outstanding options and share-settled awards					1.5		2.2
Adjusted weighted-average shares outstanding					256.1		264.3
Earnings per share	$	2.23	$	2.50	$	2.22	$	2.49
	Basic				Diluted
	First Nine Months
	2020		2019		2020		2019
	($ in millions, except per share amounts, shares in millions)
Net income	$	1,342	$	2,056	$	1,342	$	2,056
Dividend equivalent payments	(3)		(4)		(2)		—
Income available to common stockholders	$	1,339	$	2,052	$	1,340	$	2,056
Weighted-average shares outstanding	255.7		264.6		255.7		264.6
Dilutive effect of outstanding options and share-settled awards					1.5		2.3
Adjusted weighted-average shares outstanding					257.2		266.9
Earnings per share	$	5.24	$	7.76	$	5.21	$	7.70

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During the third quarters and first nine months of 2020 and 2019, we made dividend equivalent payments 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 the third quarters and first nine months ended September 30, 2020 and 2019.

5. Accumulated Other Comprehensive Loss

The changes in the cumulative balances of “Accumulated other comprehensive loss” reported in the Consolidated Balance Sheets consisted of the following:

	Balance at Beginning of Year		Net Income (Loss)		Reclassification Adjustments		Balance at End of Period
	($ in millions)
Nine Months Ended September 30, 2020
Pensions and other postretirement liabilities	$	(421)	$	—	$	14	$	(407)
Other comprehensive income (loss) of equity
investees	(70)		6		—		(64)
Accumulated other comprehensive loss	$	(491)	$	6	$	14	$	(471)
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)

6.  Stock Repurchase Program

We repurchased and retired 5.3 million and 8.4 million shares of Common Stock under our stock repurchase program during the first nine months of 2020 and 2019, respectively, at a cost of $960 million and $1.6 billion, respectively.

7.  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 Conrail, and CSX has the remainder of the economic and voting interests. Our investment in Conrail was $1.4 billion at both September 30, 2020 and December 31, 2019.

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 $32 million and $37 million for the third quarters of 2020 and 2019,

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respectively, and $97 million and $112 million for the first nine months of 2020 and 2019, respectively. Our equity in the earnings of Conrail, net of amortization, included in “Purchased services and rents,” which offsets the costs of operating the Shared Assets Areas, was $17 million and $13 million for the third quarters of 2020 and 2019, respectively, and $39 million and $36 million for the first nine months of 2020 and 2019, respectively.

“Other liabilities” includes $280 million at both September 30, 2020 and December 31, 2019, 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 $67 million and $61 million of expense for the third quarters of 2020 and 2019, respectively, and $185 million and $183 million for the first nine months of 2020 and 2019, respectively. Our equity in the earnings of TTX, which offsets the costs and are also included in “Purchased services and rents,” totaled $21 million and $19 million for the third quarters of 2020 and 2019, respectively, and $35 million and $44 million for the first nine months of 2020 and 2019, respectively.

Impairment of Investment

During the third quarter of 2020, we recorded an other-than-temporary impairment of $99 million related to the carrying value of an equity method investment. This non-cash impairment charge is recorded in “Purchased services and rents” on the 2020 Consolidated Statements of Income and had a $74 million impact on net income for the third quarter and first nine months of 2020.

8.  Debt

In May 2020, we issued $800 million of 3.05% senior notes due 2050, resulting in $790 million in net proceeds.

In May 2020, we also issued $800 million of 3.155% senior notes due 2055 in exchange for $554 million of previously issued notes ($450 million at 5.1% due 2118, $42 million at 6% due 2111, $29 million at 7.9% due 2097, $26 million at 6% due 2105, and $7 million at 7.05% due 2037). As part of the debt exchange, a $4 million loss on extinguishment was recognized in “Other income – net.”

In May 2020, we renewed and amended our accounts receivable securitization program with maximum borrowing capacity of $400 million and a term expiring in May 2021. We had no amounts outstanding at both September 30, 2020, and December 31, 2019, and our available borrowing capacity was $400 million and $429 million, respectively.

In March 2020, we renewed and amended our five-year credit agreement. We increased the program’s borrowing authority from $750 million to $800 million. The amended agreement expires in 2025 and provides for borrowing at prevailing rates and includes covenants. We had no amounts outstanding under this facility at both September 30, 2020, and December 31, 2019.

The “Cash, cash equivalents, and restricted cash” line item on the Consolidated Statements of Cash Flows includes restricted cash of $88 million in 2019, reflecting deposits held by a third-party bond agent as collateral for certain debt obligations, which matured on October 1, 2019.

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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, certain health care expenses are covered for retired employees and their dependents, reduced by any deductibles, coinsurance, and, in some cases, coverage provided under other group insurance policies.  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 quarter and first nine months were as follows:

					Other Postretirement
	Pension Benefits				Benefits
	Third Quarter
	2020		2019		2020		2019
	($ in millions)
Service cost	$	10	$	9	$	2	$	2
Interest cost	19		24		3		4
Expected return on plan assets	(48)		(45)		(4)		(4)
Amortization of net losses	13		11		—		—
Amortization of prior service benefit	—		—		(6)		(6)
Net benefit	$	(6)	$	(1)	$	(5)	$	(4)

					Other Postretirement
	Pension Benefits				Benefits
	First Nine Months
	2020		2019		2020		2019
	($ in millions)
Service cost	$	30	$	26	$	5	$	5
Interest cost	56		70		9		13
Expected return on plan assets	(143)		(134)		(10)		(11)
Amortization of net losses	39		33		—		—
Amortization of prior service benefit	—		—		(19)		(18)
Net benefit	$	(18)	$	(5)	$	(15)	$	(11)

The service cost components 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,” and “Accounts payable,” approximate carrying values because of the short maturity of these financial instruments. The carrying value of corporate-owned life insurance is recorded at cash surrender value and, accordingly, approximates fair value. There are no other assets or liabilities measured at fair value on a recurring basis at September 30, 2020 or December 31, 2019. The carrying amounts and estimated fair values, based on Level 1 inputs, of long-term debt consisted of the following:

	September 30, 2020				December 31, 2019
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	($ in millions)
Long-term debt, including current maturities	$	(12,723)	$	(16,582)	$	(12,196)	$	(14,806)

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 and also consolidated in the District of Columbia. We believe the allegations in the complaints are without merit and intend to vigorously defend the cases. We do not believe the outcome of these proceedings will have a material effect on our financial position, results of operations, or liquidity.

In 2018, a lawsuit was filed against one of our subsidiaries by the minority owner in a jointly-owned terminal railroad company in which our subsidiary has the majority ownership. The lawsuit alleged violations of various state laws and federal antitrust laws. It is reasonably possible that we could incur a loss in the case; however, we intend to vigorously defend the case and believe that we will prevail. The potential range of loss cannot be estimated at this time.

Casualty Claims

Casualty claims include employee personal injury and occupational claims as well as third-party claims, all exclusive of legal costs.  To aid in valuing our personal injury liability and determining the amount to accrue with respect to such claims during the year, we utilize studies prepared by an independent consulting actuarial firm.  Job-related personal injury and occupational claims are subject to 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

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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 future claim payments and is supported by the most recent actuarial study.  In all cases, we record a liability when the expected loss for the claim is both probable and reasonably estimable.

Employee personal injury claims – The largest component of claims expense is employee personal injury costs.  The independent actuarial firm we engage provides quarterly studies to aid in valuing our employee personal injury liability and estimating personal injury expense.  The actuarial firm studies our historical patterns of reserving for claims and subsequent settlements, taking into account relevant outside influences.  The actuarial firm uses the results of these analyses to estimate the ultimate amount of liability. We adjust the liability quarterly based upon our assessment and the results of the study. Our estimate of the liability is subject to inherent limitation given the difficulty of predicting future events such as jury decisions, court interpretations, or legislative changes. As a result, actual claim settlements may vary from the estimated liability recorded.

Occupational claims – Occupational claims include injuries and illnesses alleged to be caused by exposures which occur over time as opposed to injuries or illnesses caused by a specific accident or event. Types of occupational claims commonly seen allege exposure to asbestos and other claimed toxic substances resulting in respiratory diseases or cancer. Many such claims are being asserted by former or retired employees, some of whom have not been employed in the rail industry for decades.  The independent actuarial firm provides an estimate of the occupational claims liability based upon our history of claim filings, severity, payments, and other pertinent facts.  The liability is dependent upon judgments we make as to the specific case reserves as well as judgments of the actuarial firm in the quarterly studies.  The actuarial firm’s estimate of ultimate loss includes a provision for those claims that have been incurred but not reported.  This provision is derived by analyzing industry data and projecting our experience. We adjust the liability quarterly based upon our assessment and the results of the study.  However, it is possible that the recorded liability may not be adequate to cover future claim payments.  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 determining any necessary adjustments to liability estimates.  

Our Consolidated Balance Sheets include liabilities for environmental exposures of $55 million and $56 million at September 30, 2020 and December 31, 2019, respectively, of which $15 million is classified as a current liability at both dates. At September 30, 2020, the liability represents our estimates of the probable cleanup, investigation, and remediation costs based on available information at 105 known locations and projects compared with 110 locations and projects at December 31, 2019. At September 30, 2020, seventeen sites accounted for $41 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

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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 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 purchase insurance covering legal liabilities for bodily injury and property damage to third parties. This insurance provides coverage above $75 million and below $1.1 billion ($1.5 billion for specific perils) per occurrence and/or policy year. In addition, we purchase insurance covering damage to property owned by us or in our care, custody, or control. This insurance covers approximately 85% of damage above $75 million and below $275 million per occurrence and/or policy year.

12. New Accounting Pronouncements

On January 1, 2020, we adopted the Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) 2016-13, “Credit Losses - Measurement of Credit Losses on Financial Instruments,” which replaced the current incurred loss impairment method with a method that reflects expected credit losses. Historically, losses associated from the inability to collect on accounts receivable have been insignificant, with little divergence in collection trends through varying economic cycles. Short-term and long-term financial assets, as defined by the standard, are impacted by immediate recognition of estimated credit losses in the financial statements, reflecting the net amount expected to be collected. There was no material impact to the financial statements upon adoption.

In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes,” which adds new guidance to simplify the accounting for income taxes, changes the accounting for certain income tax transactions, and makes other minor changes. The new standard is effective as of January 1, 2021, and early adoption is permitted for any interim period for which financial statements have not been issued. 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.  We are a major transporter of industrial products, including chemicals, agriculture, and metals and construction materials. In addition, we operate the most extensive intermodal network in the East and are a principal carrier of coal, automobiles, and automotive parts.

The ongoing COVID-19 pandemic has caused significant economic disruption and continues to influence the demand for our services, as evidenced by the volume declines compared to prior year experienced across most of our major commodity groups in the third quarter. However, we have seen improvement in underlying demand. Overall volumes in the third quarter were down 7% compared to last year, marking a significant improvement relative to the 26% year-over-year decline experienced in the second quarter. While substantial uncertainty remains with respect to customer demand as a result of the pandemic, we continue to execute on operational initiatives to improve efficiencies and lower our cost structure.

COVID-19 is generating significant uncertainty in the economy and our outlook as we conclude 2020. We continue to monitor the impact of the pandemic on our employees’ availability, which has not been adversely affected in a significant manner this year. We remain committed to protecting our employees and providing excellent transportation service products for our customers.

SUMMARIZED RESULTS OF OPERATIONS

($ in millions, except per share amounts)

	Third Quarter					First Nine Months
	2020		2019		% change	2020		2019		% change
Income from railway operations	$	840	$	996	(16%)	$	2,018	$	3,027	(33%)
Net income	$	569	$	657	(13%)	$	1,342	$	2,056	(35%)
Diluted earnings per share	$	2.22	$	2.49	(11%)	$	5.21	$	7.70	(32%)
Railway operating ratio (percent)	66.5		64.9		2%	72.0		64.8		11%

Decreases in railway operating revenues exceeded operating expense declines, resulting in reduced income from railway operations and increased operating ratios. Railway operating revenues declined in both periods as lower customer demand resulted in volume declines. Additionally, negative mix led to lower revenue per unit. Notwithstanding the charges noted below, railway operating expenses decreased due to declines in fuel price and consumption, reduced employment levels, lower volumes and operational efficiency improvements.

Third-quarter 2020 results were adversely impacted by a $99 million impairment charge related to an equity method investment. Additionally, our results for the first nine months of 2020 were adversely impacted by a loss on asset disposal of $385 million related to locomotives sold or designated as held-for-sale. For more information on the impact of these charges, see Notes 7 and 3.

The following tables adjust our 2020 GAAP financial results for the third quarter and first nine months to exclude the effects of these charges. We use these non-GAAP financial measures internally and believe this information

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provides useful supplemental information to investors to facilitate making period-to-period comparisons by excluding the 2020 charges. While we believe that these non-GAAP financial measures are useful in evaluating our business, this information should be considered as supplemental in nature and is not meant to be considered in isolation, or as a substitute for, the related financial information prepared in accordance with GAAP. In addition, these non-GAAP financial measures may not be the same as similar measures presented by other companies.

	Non-GAAP Reconciliation for the Third Quarter
	Reported 2020 (GAAP)		2020 Investment Impairment		Adjusted 2020 (non-GAAP)
	($ in millions, except per share amounts)
Railway operating expenses	$	1,666	$	(99)	$	1,567
Income from railway operations	$	840	$	99	$	939
Net income	$	569	$	74	$	643
Diluted earnings per share	$	2.22	$	0.29	$	2.51
Railway operating ratio (percent)	66.5		(4.0)		62.5

In the table below, references to the third quarter of 2020 results and related comparisons use the adjusted, non-GAAP results from the reconciliation in the table above.

	Third Quarter
	Adjusted 2020 (non-GAAP)		2019		Adjusted 2020 (non-GAAP) vs. 2019
	($ in millions, except per share amounts)				% change
Railway operating expenses	$	1,567	$	1,845	(15%)
Income from railway operations	$	939	$	996	(6%)
Net income	$	643	$	657	(2%)
Diluted earnings per share	$	2.51	$	2.49	1%
Railway operating ratio (percent)	62.5		64.9		(4%)

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	Non-GAAP Reconciliation for First Nine Months
	Reported 2020 (GAAP)		First Quarter Loss on Asset Disposal		Third Quarter Investment Impairment		Adjusted 2020 (non-GAAP)
	($ in millions, except per share amounts)
Railway operating expenses	$	5,198	$	(385)	$	(99)	$	4,714
Income from railway operations	$	2,018	$	385	$	99	$	2,502
Net income	$	1,342	$	288	$	74	$	1,704
Diluted earnings per share	$	5.21	$	1.12	$	0.29	$	6.62
Railway operating ratio (percent)	72.0		(5.3)		(1.4)		65.3

In the table below, references to the first nine months of 2020 results and related comparisons use the adjusted, non-GAAP results from the reconciliation in the table above.

	First Nine Months
	Adjusted 2020 (non-GAAP)		2019		Adjusted 2020 (non-GAAP) vs. 2019
	($ in millions, except per share amounts)				% change
Railway operating expenses	$	4,714	$	5,579	(16%)
Income from railway operations	$	2,502	$	3,027	(17%)
Net income	$	1,704	$	2,056	(17%)
Diluted earnings per share	$	6.62	$	7.70	(14%)
Railway operating ratio (percent)	65.3		64.8		1%

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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.

	Third Quarter					First Nine Months
Revenues	2020		2019		% change	2020		2019		% change
Merchandise:
Agriculture, forest and consumer products	$	521	$	572	(9%)	$	1,570	$	1,707	(8%)
Chemicals	428		535		(20%)	1,371		1,586		(14%)
Metals and construction	337		377		(11%)	997		1,131		(12%)
Automotive	270		247		9%	597		749		(20%)
Merchandise	1,556		1,731		(10%)	4,535		5,173		(12%)
Intermodal	700		707		(1%)	1,924		2,127		(10%)
Coal	250		403		(38%)	757		1,306		(42%)
Total	$	2,506	$	2,841	(12%)	$	7,216	$	8,606	(16%)

Units
Merchandise:
Agriculture, forest and consumer products	176.4	191.7	(8%)	523.7	583.0	(10%)
Chemicals	111.9	148.2	(24%)	366.3	446.9	(18%)
Metals and construction	157.2	182.5	(14%)	448.2	529.0	(15%)
Automotive	105.7	99.5	6%	233.2	299.4	(22%)
Merchandise	551.2	621.9	(11%)	1,571.4	1,858.3	(15%)
Intermodal	1,068.8	1,059.9	1%	2,908.3	3,179.4	(9%)
Coal	147.7	218.7	(32%)	422.8	713.3	(41%)
Total	1,767.7	1,900.5	(7%)	4,902.5	5,751.0	(15%)

Revenue per Unit
Merchandise:
Agriculture, forest and consumer products	$	2,953	$	2,984	(1%)	$	2,998	$	2,928	2%
Chemicals	3,827		3,609		6%	3,742		3,549		5%
Metals and construction	2,145		2,066		4%	2,226		2,138		4%
Automotive	2,548		2,480		3%	2,558		2,502		2%
Merchandise	2,822		2,783		1%	2,886		2,784		4%
Intermodal	655		668		(2%)	662		669		(1%)
Coal	1,698		1,842		(8%)	1,791		1,831		(2%)
Total	1,418		1,495		(5%)	1,472		1,496		(2%)

At the beginning of 2020, we combined the agriculture products and forest and consumer commodity groups. In addition, we also made changes in the categorization of certain other commodity groups within Merchandise.

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Specifically, certain commodities were shifted between: agriculture, forest, and consumer products; chemicals; and, metals and construction. These changes were made as a result of organizational initiatives to better align with how we manage these commodities. Prior period railway operating revenues, units, and revenue per unit have been reclassified to conform to the current presentation.

Railway operating revenues decreased $335 million in the third quarter and $1.4 billion for the first nine months compared with the same periods last year. The table below reflects the components of the revenue change by major commodity group ($ in millions).

	Third Quarter						First Nine Months
	Increase (Decrease)						Increase (Decrease)
	Merchandise		Intermodal		Coal		Merchandise		Intermodal		Coal
Volume	$	(197)	$	6	$	(131)	$	(799)	$	(181)	$	(532)
Fuel surcharge revenue	(34)		(35)		(2)		(64)		(93)		(11)
Rate, mix and other	56		22		(20)		225		71		(6)
Total	$	(175)	$	(7)	$	(153)	$	(638)	$	(203)	$	(549)

Approximately 90% of our revenue base is covered by contracts that include negotiated fuel surcharges. Revenues associated with these surcharges totaled $75 million and $146 million in the third quarters of 2020 and 2019, respectively, and $275 million and $443 million for the first nine months of 2020 and 2019, respectively. The decreases in fuel surcharge revenues for the third quarter and first nine months are driven by lower fuel commodity prices and volume declines.

Merchandise

Merchandise revenue decreased in both periods as lower volumes were partially offset by higher average revenue per unit driven by pricing gains. Volumes fell in most merchandise commodity groups due to the impact of the COVID-19 pandemic. The pandemic has continued to cause many industries to suspend production which persists in negatively impacting customers’ needs for materials and shipping of finished and semi-finished goods.

Agriculture, forest and consumer products volume decreased in both periods due to the continued impact of COVID-19 on ethanol demand, food service, and building, industrial and commercial activities.

Chemicals volume decreased in both periods due to the continued impact from COVID-19 and ongoing disruptions in the energy market. Oil and petroleum shipments continued to be negatively impacted due to reductions in gasoline/jet fuel demand and consumer travel. The pandemic created an overabundance of products in the market as companies reduced stockpiles before requiring more products.

Metals and construction volume fell in both periods, largely the result of weakened demand due to reductions in metal and domestic vehicle production. Low coal power generation in the third quarter weakened scrubber stone demand, which negatively affected aggregates volumes. The pandemic caused industries to suspend production which heavily impacted customers’ needs for materials and shipping of finished and semi-finished goods.

Automotive volume increased in the third quarter, but decreased for the first nine months. The third-quarter volume strength was driven by increased demand which partially offset the first-half 2020 unplanned automotive plant shutdowns, primarily due to the COVID-19 pandemic.

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Merchandise revenues for the remainder of the year are expected to decline as decreased volumes will be partially offset by increased revenue per unit driven by pricing gains.

Intermodal

Intermodal revenue declined in both periods. The third-quarter decline is a result of lower revenue per unit driven by decreased fuel surcharge revenue partially offset by positive mix and increased volumes. The decline for the first nine months resulted from decreased volumes and lower revenue per unit, a result of lower fuel surcharge revenue partially offset by improved price and mix.

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

	Third Quarter			First Nine Months
	2020	2019	% change	2020	2019	% change
Domestic	699.9	643.2	9%	1,864.8	1,935.3	(4%)
International	368.9	416.7	(11%)	1,043.5	1,244.1	(16%)
Total	1,068.8	1,059.9	1%	2,908.3	3,179.4	(9%)

Domestic volumes increased in the third quarter but decreased in the first nine months, driven by a strong third-quarter recovery from supply chain disruptions related to COVID-19. International volumes fell in both periods, the result of supply chain disruptions from COVID-19.

Intermodal revenues for the remainder of the year are expected to increase primarily due to volume gains partially offset by lower revenue per unit due to decreased fuel surcharge revenue.

Coal

Coal revenues decreased in both periods, primarily driven by significant volume declines.

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

	Third Quarter			First Nine Months
	2020	2019	% change	2020	2019	% change
Utility	9,867	14,124	(30%)	24,465	47,008	(48%)
Export	3,585	5,403	(34%)	13,323	18,417	(28%)
Domestic metallurgical	2,379	3,649	(35%)	6,993	10,431	(33%)
Industrial	864	1,125	(23%)	2,592	3,528	(27%)
Total	16,695	24,301	(31%)	47,373	79,384	(40%)

In both periods, low natural gas prices and reduced demand in global and domestic manufacturing due to COVID-19 negatively impacted each market. Utility coal tonnage was challenged in both periods by low natural gas prices, high stockpiles, and diminished industrial and commercial electricity demand. Export coal tonnage declined in both periods as a result of continued COVID-19 related global disruptions, weak seaborne pricing, and import restrictions. Domestic metallurgical coal and coke tonnage fell in both periods due to continued reduced domestic steel demand which led to idled customer facilities and lower production. Industrial coal tonnage

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decreased in both periods as a result of customer sourcing changes and continued pressure from natural gas conversions.

Coal revenues are expected to decline in each market for the remainder of the year, being negatively impacted by decreased volumes resulting from COVID-19.

Railway Operating Expenses

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

	Third Quarter					First Nine Months
	2020		2019		% change	2020		2019		% change
Compensation and benefits	$	578	$	682	(15%)	$	1,786	$	2,121	(16%)
Purchased services and rents	486		423		15%	1,261		1,265		—%
Fuel	126		226		(44%)	399		730		(45%)
Depreciation	293		286		2%	867		853		2%
Materials and other	183		228		(20%)	500		610		(18%)
Loss on asset disposal	—		—			385		—
Total	$	1,666	$	1,845	(10%)	$	5,198	$	5,579	(7%)

Compensation and benefits expense decreased in both periods as follows:

•employment levels (down $76 million for the quarter and $250 million for the first nine months),

•health and welfare benefits for agreement employees (down $22 million for the quarter and $61 million for the first nine months),

•stock-based and incentive compensation (down $15 million for the quarter and $48 million for the first nine months),

•overtime and recrews (down $11 million for the quarter and $48 million for the first nine months),

•increased pay rates (up $10 million for the quarter and $40 million for the first nine months),

•lower capitalized labor (additional expense of $18 million for the quarter and $41 million for the first nine months), and

•other (down $8 million for the quarter and $9 million for the first nine months).

Average rail headcount for the quarter was down by approximately 4,400 compared with the third quarter of 2019.

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Purchased services and rents increased in the third quarter but decreased slightly for the first nine months as follows ($ in millions):

	Third Quarter					First Nine Months
	2020		2019		% change	2020		2019		% change
Purchased services	$	419	$	355	18%	$	1,042	$	1,048	(1%)
Equipment rents	67		68		(1%)	219		217		1%
Total	$	486	$	423	15%	$	1,261	$	1,265	—%

The increase in purchased services for the third quarter was due to a $99 million impairment related to an equity method investment. Both periods reflect volume-related decreases.

Fuel expense, which includes the cost of locomotive fuel as well as other fuel used in railway operations, decreased due to lower locomotive fuel prices (down 34% in the third quarter and 32% in the first nine months), and reduced consumption (down 17% in the third quarter and 21% in the first nine months).

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

	Third Quarter					First Nine Months
	2020		2019		% change	2020		2019		% change
Materials	$	72	$	85	(15%)	$	206	$	254	(19%)
Claims	59		48		23%	141		147		(4%)
Other	52		95		(45%)	153		209		(27%)
Total	$	183	$	228	(20%)	$	500	$	610	(18%)

Materials costs decreased in both periods, due primarily to lower maintenance requirements as a result of fewer locomotives and freight cars in service. Claims expenses increased in the third quarter as a result of derailments. Claims expense declined in the first nine months, driven by lower costs related to environmental remediation matters partially offset by increased derailment costs. Other expense decreased in both periods, primarily due to a prior year write off of a $32 million receivable as a result of a legal dispute as well as reduced travel. Gains from operating property sales, included in Other, totaled $15 million and $21 million in the first nine months of 2020 and 2019, respectively.

Other income – net

Other income – net increased $17 million in the third quarter and $22 million for the first nine months. Both periods experienced higher returns on corporate-owned life insurance and lower pension and postretirement benefit expenses. The first nine months reflect the impact of a prior year impairment loss on our natural resource assets and lower 2020 non-operating property sales. Coal royalties were lower in both periods due to the sale of our natural resource assets in the first quarter of 2020. Full-year 2019 coal royalties totaled $24 million.

26

Income taxes

The third-quarter effective tax rate was 21.4% compared with 24.3% for the same period last year. Both periods were aided by tax benefits on stock-based compensation while the current quarter reflects increased tax benefits from higher returns on corporate-owned life insurance. The effective tax rates were 19.3% and 22.8% for the first nine months of 2020 and 2019, respectively. Both periods reflect tax benefits on stock-based compensation, while the effective rate for the first nine months includes a $19 million reduction of taxes upon the resolution of our 2012 amended federal return.

FINANCIAL CONDITION AND LIQUIDITY

Cash provided by operating activities, our principal source of liquidity, was $2.8 billion for the first nine months of 2020, compared with $3.0 billion for the same period of 2019. We had working capital of $574 million at September 30, 2020, and negative working capital of $219 million at December 31, 2019. Cash and cash equivalents totaled $1.4 billion at September 30, 2020.

Cash used in investing activities was $818 million for the first nine months of 2020, compared with $1.3 billion for the same period last year. The decrease was primarily driven by lower property additions in 2020.

Cash used in financing activities was $1.2 billion for the first nine months of 2020, compared with $1.6 billion in the same period last year, reflecting lower repurchases of Common Stock and debt repayments, partially offset by reduced borrowing proceeds. We repurchased $960 million of Common Stock in the first nine months of 2020 compared to $1.6 billion in the same period last year.  The timing and volume of future share repurchases will be guided by our assessment of market conditions, cash flow 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 46.0% at September 30, 2020, and 44.5% at December 31, 2019.

In May 2020, we issued $800 million of 3.05% senior notes due 2050, resulting in $790 million in net proceeds.

In May 2020, we also issued $800 million of 3.155% senior notes due 2055 in exchange for $554 million of our previously-issued notes ($450 million at 5.1% due 2118, $42 million at 6% due 2111, $29 million at 7.9% due 2097, $26 million at 6% due 2105, and $7 million at 7.05% due 2037). As part of the debt exchange, a $4 million loss on extinguishment was recognized in “Other income – net.”

In May 2020, we renewed and amended our accounts receivable securitization program with maximum borrowing capacity of $400 million and a term expiring in May 2021. We had no amounts outstanding at September 30, 2020, or December 31, 2019, and our available borrowing capacity was $400 million and $429 million, respectively. In addition, we have investments in general purpose corporate-owned life insurance policies and had the ability to borrow up to $750 million against these policies at September 30, 2020.

In March 2020, we renewed and amended our five-year credit agreement. We increased the program’s borrowing authority from $750 million to $800 million. The amended agreement expires in 2025 and provides for borrowings at prevailing rates and includes covenants. We had no amounts outstanding under this facility at September 30, 2020, or December 31, 2019, and we are in compliance with all of its covenants.

We expect cash on hand combined with cash provided by operating activities will be sufficient to meet our ongoing obligations. In addition, we believe our currently-available borrowing capacity, access to additional financing, and ability to reduce expenditures on property additions and shareholder distributions, including share repurchases, provide additional flexibility to meet our ongoing obligations. Nonetheless, we are monitoring the ongoing impacts of the COVID-19 pandemic, which could lead to a further decline of cash inflows from operations. There have been no material changes to the information on future contractual obligations contained in our Form 10-K for the

27

year ended December 31, 2019, with the exception of additional senior notes (see Note 8) and $150 million of unconditional purchase obligations, which extend through 2021.

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 contained in our Form 10-K at December 31, 2019. 

OTHER MATTERS

Labor Agreements

Approximately 80% of our railroad employees are covered by collective bargaining agreements with various labor unions.  Pursuant to the Railway Labor Act, these agreements remain in effect until new agreements are reached, or until the bargaining procedures mandated by the Railway Labor Act are completed.  We largely bargain nationally in concert with other major railroads, represented by the National Carriers Conference Committee.  Moratorium provisions in the labor agreements govern when the railroads and unions may propose changes to the agreements. The current round of bargaining commenced on November 1, 2019, with both management and the unions serving their formal proposals for changes to the collective bargaining agreements.

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.

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 the risks and uncertainties related to the COVID-19 pandemic and 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

28

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, 2020.  Based on such evaluation, our officers have concluded that, at September 30, 2020, 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 2020, 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. 

29

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 and also consolidated in the District of Columbia. We believe the allegations in the complaints are without merit and intend to vigorously defend the cases. We do not believe the outcome of these proceedings will have a material effect on our financial position, results of operations, or liquidity.

Item 1A. Risk Factors.

The risks set forth in “Risk Factors” included in our 2019 Form 10-K could have a material adverse effect on our financial position, results of operations, or liquidity in a particular year or quarter, and could cause those results to differ materially from those expressed or implied in our forward-looking statements. Those risks remain unchanged and are incorporated herein by reference and are updated to include the following risk.

The COVID-19 pandemic could impact us, our customers, our supply chain and our operations. The pandemic has negatively impacted the economy and continues to generate significant economic uncertainty. It has had a significant adverse impact on our results of operations, and may have material adverse impacts on our financial position, results of operations, or liquidity. The magnitude and duration of the pandemic, and its impact on our customers and general economic conditions will influence the demand for our services and affect our revenues. In addition, COVID-19 could affect our operations and business continuity if a significant number of our essential employees, overall or in a key location, are quarantined from contraction of or exposure to the disease or if governmental orders prevent our operating employees or critical suppliers from working. To the extent COVID-19 adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in the risk factors included in our 2019 Form 10-K.

30

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, 2020	370,977	$	181.20	370,532	23,814,662
August 1-31, 2020	463,900	207.56		459,832	23,354,830
September 1-30, 2020	602,751	214.44		601,940	22,752,890
Total	1,437,628			1,432,304

(1)Of this amount, 5,324 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, 2020, 22.8 million shares remain authorized for repurchase.

31

Item 6. Exhibits.

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 2020, formatted in Inline Extensible Business Reporting Language (iXBRL) includes (i) the Consolidated Statements of Income for the third quarter and first nine months of 2020 and 2019; (ii) the Consolidated Statements of Comprehensive Income for the third quarter and first nine months of 2020 and 2019; (iii) the Consolidated Balance Sheets at September 30, 2020 and December 31, 2019; (iv) the Consolidated Statements of Cash Flows for the first nine months of 2020 and 2019; (v) the Consolidated Statements of Changes in Stockholders’ Equity for the third quarter and first nine months of 2020 and 2019; and (vi) the Notes to Consolidated Financial Statements.
104*	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
*  Filed herewith.

32

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 28, 2020	/s/ Clyde H. Allison, Jr.
		Clyde H. Allison, Jr. Vice President and Controller (Principal Accounting Officer) (Signature)
Date:	October 28, 2020	/s/ Denise W. Hutson
		Denise W. Hutson Corporate Secretary (Signature)

33

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 28, 2020

/s/ James A. Squires

James A. Squires

Chairman, President and Chief Executive Officer

EX-31.B

Exhibit 31-B

CERTIFICATIONS

I, Mark R. George, 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 28, 2020

/s/ Mark R. George

Mark R. George

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, 2020, 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 28, 2020

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

September 30, 2020, 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/ Mark R. George
	Mark R. George
	Executive Vice President Finance and Chief Financial Officer
	Norfolk Southern Corporation

Dated: October 28, 2020

XML

Cover Page	9 Months Ended
	Sep. 30, 2020 shares
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2020
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	253,985,338
Entity Central Index Key	0000702165
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q3
Amendment Flag	false

XML

Consolidated Statements of Income (Unaudited) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Income Statement [Abstract]
Railway operating revenues	$ 2,506	$ 2,841	$ 7,216	$ 8,606
Railway operating expenses:
Compensation and benefits	578	682	1,786	2,121
Purchased services and rents	486	423	1,261	1,265
Fuel	126	226	399	730
Depreciation	293	286	867	853
Materials and other	183	228	500	610
Loss on asset disposal	0	0	(385)	0
Total railway operating expenses	1,666	1,845	5,198	5,579
Income from railway operations	840	996	2,018	3,027
Other income – net	39	22	110	88
Interest expense on debt	155	150	465	452
Income before income taxes	724	868	1,663	2,663
Income taxes	155	211	321	607
Net income	$ 569	$ 657	$ 1,342	$ 2,056
Earnings per share:
Basic (in dollars per share)	$ 2.23	$ 2.50	$ 5.24	$ 7.76
Diluted (in dollars per share)	$ 2.22	$ 2.49	$ 5.21	$ 7.70

XML

Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Net income	$ 569	$ 657	$ 1,342	$ 2,056
Other comprehensive income, before tax:
Pension and other postretirement benefits	7	5	20	15
Other comprehensive income, before tax	7	5	26	14
Income tax expense related to items of other comprehensive income	(3)	(1)	(6)	(4)
Other comprehensive income, net of tax	4	4	20	10
Total comprehensive income	573	661	1,362	2,066
Accumulated Other Comprehensive Loss Equity Investees
Other comprehensive income, before tax:
Other comprehensive income, before tax	$ 0	$ 0	$ 6	$ (1)

XML

Consolidated Balance Sheets (Unaudited) - USD ($) $ in Millions	Sep. 30, 2020	Dec. 31, 2019
Current assets:
Cash and cash equivalents	$ 1,359	$ 580
Accounts receivable – net	883	920
Materials and supplies	247	244
Other current assets	90	337
Total current assets	2,579	2,081
Investments	3,566	3,428
Properties less accumulated depreciation of $11,823 and $11,982, respectively	31,239	31,614
Other assets	795	800
Total assets	38,179	37,923
Current liabilities:
Accounts payable	1,273	1,428
Income and other taxes	257	229
Other current liabilities	386	327
Current maturities of long-term debt	89	316
Total current liabilities	2,005	2,300
Long-term debt	12,634	11,880
Other liabilities	1,701	1,744
Deferred income taxes	6,898	6,815
Total liabilities	23,238	22,739
Stockholders’ equity:
Common stock $1.00 per share par value, 1,350,000,000 shares authorized; outstanding 256,179,130 and 257,904,956 shares, respectively, net of treasury shares	255	259
Additional paid-in capital	2,246	2,209
Accumulated other comprehensive loss	(471)	(491)
Retained income	12,911	13,207
Total stockholders’ equity	14,941	15,184
Total liabilities and stockholders’ equity	$ 38,179	$ 37,923

XML

Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) $ in Millions	Sep. 30, 2020	Dec. 31, 2019
Statement of Financial Position [Abstract]
Properties, accumulated depreciation	$ 11,873	$ 11,982
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)	253,985,338	257,904,956

XML

Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Cash flows from operating activities:
Net income	$ 1,342	$ 2,056
Reconciliation of net income to net cash provided by operating activities:
Depreciation	867	854
Deferred income taxes	78	225
Gains and losses on properties	(14)	(4)
Loss on asset disposal	385	0
Impairment of investment	99	0
Changes in assets and liabilities affecting operations:
Accounts receivable	36	34
Materials and supplies	(3)	(59)
Other current assets	55	40
Current liabilities other than debt	104	(72)
Other – net	(182)	(77)
Net cash provided by operating activities	2,767	2,997
Cash flows from investing activities:
Property additions	(1,053)	(1,494)
Property sales and other transactions	291	282
Investment purchases	(6)	(12)
Investment sales and other transactions	(50)	(99)
Net cash used in investing activities	(818)	(1,323)
Cash flows from financing activities:
Dividends	(722)	(705)
Common stock transactions	53	21
Purchase and retirement of common stock	(960)	(1,550)
Proceeds from borrowings – net of issuance costs	784	1,404
Debt repayments	(325)	(750)
Net cash used in financing activities	(1,170)	(1,580)
Net increase in cash, cash equivalents, and restricted cash	779	94
Cash, cash equivalents, and restricted cash:
At beginning of year	580	446
At end of period	1,359	540
Supplemental disclosures of cash flow information:
Interest (net of amounts capitalized)	395	392
Income taxes (net of refunds)	$ 118	$ 404

XML

Consolidated Statements of Changes in Stockholders' Equity (Unaudited) - USD ($) $ in Millions	Total	Common Stock	Additional Paid-in Capital	Accum. Other Comprehensive Loss	Retained Income
Balance at Beginning of Year at Dec. 31, 2018	$ 15,362	$ 269	$ 2,216	$ (563)	$ 13,440
Comprehensive income:
Net income	677				677
Other comprehensive income	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)
Balance at End of Period at Mar. 31, 2019	$ 15,331	267	2,213	(560)	13,411
Comprehensive income:
Common stock, dividends, per share, declared (in dollars per share)	$ 0.86
Balance at Beginning of Year at Dec. 31, 2018	$ 15,362	269	2,216	(563)	13,440
Comprehensive income:
Net income	2,056
Other comprehensive income	10
Total comprehensive income	2,066
Share repurchases	(1,600)
Balance at End of Period at Sep. 30, 2019	15,238	262	2,219	(553)	13,310
Balance at Beginning of Year at Mar. 31, 2019	15,331	267	2,213	(560)	13,411
Comprehensive income:
Net income	722				722
Other comprehensive income	3			3
Total comprehensive income	725
Dividends on common stock,	(228)				(228)
Share repurchases	(550)	(2)	(22)		(526)
Stock-based compensation	33		35		(2)
Balance at End of Period at Jun. 30, 2019	$ 15,311	265	2,226	(557)	13,377
Comprehensive income:
Common stock, dividends, per share, declared (in dollars per share)	$ 0.94
Net income	$ 657				657
Other comprehensive income	4			4
Total comprehensive income	661
Dividends on common stock,	(247)				(247)
Share repurchases	(500)	(3)	(21)		(476)
Stock-based compensation	13		14		(1)
Balance at End of Period at Sep. 30, 2019	$ 15,238	262	2,219	(553)	13,310
Comprehensive income:
Common stock, dividends, per share, declared (in dollars per share)	$ 0.86
Balance at Beginning of Year at Dec. 31, 2019	$ 15,184	259	2,209	(491)	13,207
Comprehensive income:
Net income	381				381
Other comprehensive income	10			10
Total comprehensive income	391
Dividends on common stock,	(242)				(242)
Share repurchases	(466)	(2)	(21)		(443)
Stock-based compensation	17	1	17		(1)
Balance at End of Period at Mar. 31, 2020	$ 14,884	258	2,205	(481)	12,902
Comprehensive income:
Common stock, dividends, per share, declared (in dollars per share)	$ 0.94
Balance at Beginning of Year at Dec. 31, 2019	$ 15,184	259	2,209	(491)	13,207
Comprehensive income:
Net income	1,342
Other comprehensive income	20
Total comprehensive income	1,362
Share repurchases	(960)
Balance at End of Period at Sep. 30, 2020	14,941	255	2,246	(471)	12,911
Balance at Beginning of Year at Mar. 31, 2020	14,884	258	2,205	(481)	12,902
Comprehensive income:
Net income	392				392
Other comprehensive income	6			6
Total comprehensive income	398
Dividends on common stock,	(240)				(240)
Share repurchases	(203)	(2)	(10)		(191)
Stock-based compensation	22		22
Balance at End of Period at Jun. 30, 2020	$ 14,861	256	2,217	(475)	12,863
Comprehensive income:
Common stock, dividends, per share, declared (in dollars per share)	$ 0.94
Net income	$ 569				569
Other comprehensive income	4			4
Total comprehensive income	573
Dividends on common stock,	(240)				(240)
Share repurchases	(291)	(1)	(11)		(279)
Stock-based compensation	38		40		(2)
Balance at End of Period at Sep. 30, 2020	$ 14,941	$ 255	$ 2,246	$ (471)	$ 12,911
Comprehensive income:
Common stock, dividends, per share, declared (in dollars per share)	$ 0.94

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Consolidated Statements of Changes in Stockholders' Equity (Unaudited) (Parenthetical) - $ / shares	3 Months Ended
	Sep. 30, 2020	Jun. 30, 2020	Mar. 31, 2020	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019
Statement of Stockholders' Equity [Abstract]
Common stock, dividends, per share, declared (in dollars per share)	$ 0.94	$ 0.94	$ 0.94	$ 0.86	$ 0.94	$ 0.86

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Railway Operating Revenues

9 Months Ended

Sep. 30, 2020

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
	2020		2019		2020		2019
	($ in millions)
Merchandise:
Agriculture, forest and consumer products	$	521	$	572	$	1,570	$	1,707
Chemicals	428		535		1,371		1,586
Metals and construction	337		377		997		1,131
Automotive	270		247		597		749
Merchandise	1,556		1,731		4,535		5,173
Intermodal	700		707		1,924		2,127
Coal	250		403		757		1,306
Total	$	2,506	$	2,841	$	7,216	$	8,606

At the beginning of 2020, we combined the agriculture products and forest and consumer commodity groups. In addition, we also made changes in the categorization of certain other commodity groups within Merchandise. Specifically, certain commodities were shifted between agriculture, forest, and consumer products; chemicals; and, metals and construction. These changes were made as a result of organizational initiatives to better align with how we manage these commodities. Prior period railway operating revenues have been reclassified to conform to the current presentation.

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. We had no material remaining performance obligations as of September 30, 2020 or December 31, 2019.

Revenue related to interline transportation services that involve another railroad is reported on a net basis. Therefore, the portion of the amount that relates to another party is not reflected in revenue.

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, 2020		December 31, 2019
	($ in millions)
Customer	$	664	$	682
Non-customer	219		238
Accounts receivable – net	$	883	$	920

Non-customer receivables include non-revenue-related amounts due from other railroads, governmental entities, and others. “Other assets” on the Consolidated Balance Sheets includes non-current customer receivables of $23 million at both September 30, 2020 and December 31, 2019. We do not have any material contract assets or liabilities at September 30, 2020 or December 31, 2019.

We may provide customers ancillary services, such as switching, demurrage and other incidental services, under their transportation contracts. These are distinct performance obligations that are recognized at a point in time when the services are performed or as contractual obligations are met. 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 quarters and first nine months of 2020 and 2019.

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Stock-Based Compensation

9 Months Ended

Sep. 30, 2020

Share-based Payment Arrangement [Abstract]

Stock-Based Compensation

Stock-Based Compensation

	Third Quarter				First Nine Months
	2020		2019		2020		2019
	($ in millions)
Stock-based compensation expense	$	13	$	10	$	25	$	46
Total tax benefit	10		3		39		34

During 2020, a committee of nonemployee members of our Board of Directors (and the Chief Executive Officer when 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	—	$	—	43,770	$	52.05
RSUs	10,230	211.90		177,770	210.13
PSUs	—	—		78,720	212.67

Stock Options

	Third Quarter				First Nine Months
	2020		2019		2020		2019
	($ in millions)
Stock options exercised	313,358		55,155		998,996		677,072
Cash received upon exercise	$	27	$	3	$	82	$	47
Related tax benefit realized	8		1		24		16

Restricted Stock Units

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). 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
	2020		2019		2020		2019
	($ in millions)
RSUs vested	1,635		142		203,934		166,197
Common Stock issued net of tax withholding	1,630		102		145,342		119,346
Related tax benefit realized	$	—	$	—	$	4	$	2

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 2020 or 2019.

	First Nine Months
	2020		2019
	($ in millions)
PSUs earned	235,935		331,099
Common Stock issued net of tax withholding	156,450		221,241
Related tax benefit realized	$	7	$	9

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Loss on Asset Disposal	9 Months Ended
	Sep. 30, 2020
Property, Plant and Equipment [Abstract]
Loss on Asset Disposal	Loss on Asset DisposalIn the first quarter of 2020, in connection with our initiatives to increase operational fluidity and asset utilization and improve labor and fuel efficiency, we committed to a plan to dispose of certain locomotives deemed excess and no longer needed for railroad operations. When depreciable operating road and equipment assets are sold or retired in the ordinary course of business, the cost of the assets, net of sale proceeds or salvage, is charged to accumulated depreciation, and no gain or loss is recognized in earnings. A retirement is considered abnormal if it does not occur in the ordinary course of business, if it relates to disposition of a large segment of an asset class and if the retirement varies significantly from the retirement profile identified through our depreciation studies, which inherently consider the impact of normal retirements on expected service lives and depreciation rates. We evaluated the planned locomotive retirements and concluded they were abnormal. Accordingly, a $385 million loss was recorded to adjust their carrying amount to their estimated fair value, which resulted in a $97 million tax benefit. During the first nine months, we sold 574 of 703 locomotives under the plan. The carrying amount of the remaining assets held for sale of $20 million is classified as “Other current assets” in the Consolidated Balance Sheet at September 30, 2020.

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Earnings Per Share

9 Months Ended

Sep. 30, 2020

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
	2020		2019		2020		2019
	($ in millions, except per share amounts, shares in millions)
Net income	$	569	$	657	$	569	$	657
Dividend equivalent payments	(2)		(1)		(1)		—
Income available to common stockholders	$	567	$	656	$	568	$	657
Weighted-average shares outstanding	254.6		262.1		254.6		262.1
Dilutive effect of outstanding options and share-settled awards					1.5		2.2
Adjusted weighted-average shares outstanding					256.1		264.3
Earnings per share	$	2.23	$	2.50	$	2.22	$	2.49
	Basic				Diluted
	First Nine Months
	2020		2019		2020		2019
	($ in millions, except per share amounts, shares in millions)
Net income	$	1,342	$	2,056	$	1,342	$	2,056
Dividend equivalent payments	(3)		(4)		(2)		—
Income available to common stockholders	$	1,339	$	2,052	$	1,340	$	2,056
Weighted-average shares outstanding	255.7		264.6		255.7		264.6
Dilutive effect of outstanding options and share-settled awards					1.5		2.3
Adjusted weighted-average shares outstanding					257.2		266.9
Earnings per share	$	5.24	$	7.76	$	5.21	$	7.70

During the third quarters and first nine months of 2020 and 2019, we made dividend equivalent payments 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 the third quarters and first nine months ended September 30, 2020 and 2019.

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Accumulated Other Comprehensive Loss

9 Months Ended

Sep. 30, 2020

Equity [Abstract]

Accumulated Other Comprehensive Loss

Accumulated Other Comprehensive Loss

The changes in the cumulative balances of “Accumulated other comprehensive loss” reported in the Consolidated Balance Sheets consisted of the following:

	Balance at Beginning of Year		Net Income (Loss)		Reclassification Adjustments		Balance at End of Period
	($ in millions)
Nine Months Ended September 30, 2020
Pensions and other postretirement liabilities	$	(421)	$	—	$	14	$	(407)
Other comprehensive income (loss) of equity
investees	(70)		6		—		(64)
Accumulated other comprehensive loss	$	(491)	$	6	$	14	$	(471)
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)

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Stock Repurchase Program	9 Months Ended
	Sep. 30, 2020
Stock Repurchase Program [Abstract]
Stock Repurchase Program	Stock Repurchase Program We repurchased and retired 5.3 million and 8.4 million shares of Common Stock under our stock repurchase program during the first nine months of 2020 and 2019, respectively, at a cost of $960 million and $1.6 billion, respectively.

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Investments

9 Months Ended

Sep. 30, 2020

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 Conrail, and CSX has the remainder of the economic and voting interests. Our investment in Conrail was $1.4 billion at both September 30, 2020 and December 31, 2019.

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 $32 million and $37 million for the third quarters of 2020 and 2019,

respectively, and $97 million and $112 million for the first nine months of 2020 and 2019, respectively. Our equity in the earnings of Conrail, net of amortization, included in “Purchased services and rents,” which offsets the costs of operating the Shared Assets Areas, was $17 million and $13 million for the third quarters of 2020 and 2019, respectively, and $39 million and $36 million for the first nine months of 2020 and 2019, respectively.

“Other liabilities” includes $280 million at both September 30, 2020 and December 31, 2019, 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 $67 million and $61 million of expense for the third quarters of 2020 and 2019, respectively, and $185 million and $183 million for the first nine months of 2020 and 2019, respectively. Our equity in the earnings of TTX, which offsets the costs and are also included in “Purchased services and rents,” totaled $21 million and $19 million for the third quarters of 2020 and 2019, respectively, and $35 million and $44 million for the first nine months of 2020 and 2019, respectively.

Impairment of Investment

During the third quarter of 2020, we recorded an other-than-temporary impairment of $99 million related to the carrying value of an equity method investment. This non-cash impairment charge is recorded in “Purchased services and rents” on the 2020 Consolidated Statements of Income and had a $74 million impact on net income for the third quarter and first nine months of 2020.

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Debt

9 Months Ended

Sep. 30, 2020

Debt Disclosure [Abstract]

Debt

Debt

In May 2020, we issued $800 million of 3.05% senior notes due 2050, resulting in $790 million in net proceeds.

In May 2020, we also issued $800 million of 3.155% senior notes due 2055 in exchange for $554 million of previously issued notes ($450 million at 5.1% due 2118, $42 million at 6% due 2111, $29 million at 7.9% due 2097, $26 million at 6% due 2105, and $7 million at 7.05% due 2037). As part of the debt exchange, a $4 million loss on extinguishment was recognized in “Other income – net.”

In May 2020, we renewed and amended our accounts receivable securitization program with maximum borrowing capacity of $400 million and a term expiring in May 2021. We had no amounts outstanding at both September 30, 2020, and December 31, 2019, and our available borrowing capacity was $400 million and $429 million, respectively.

In March 2020, we renewed and amended our five-year credit agreement. We increased the program’s borrowing authority from $750 million to $800 million. The amended agreement expires in 2025 and provides for borrowing at prevailing rates and includes covenants. We had no amounts outstanding under this facility at both September 30, 2020, and December 31, 2019.

The “Cash, cash equivalents, and restricted cash” line item on the Consolidated Statements of Cash Flows includes restricted cash of $88 million in 2019, reflecting deposits held by a third-party bond agent as collateral for certain debt obligations, which matured on October 1, 2019.

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Pensions and Other Postretirement Benefits

9 Months Ended

Sep. 30, 2020

Defined Benefit Plans and Other Postretirement Benefit Plans Disclosures [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, certain health care expenses are covered for retired employees and their dependents, reduced by any deductibles, coinsurance, and, in some cases, coverage provided under other group insurance policies.  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 quarter and first nine months were as follows:

					Other Postretirement
	Pension Benefits				Benefits
	Third Quarter
	2020		2019		2020		2019
	($ in millions)
Service cost	$	10	$	9	$	2	$	2
Interest cost	19		24		3		4
Expected return on plan assets	(48)		(45)		(4)		(4)
Amortization of net losses	13		11		—		—
Amortization of prior service benefit	—		—		(6)		(6)
Net benefit	$	(6)	$	(1)	$	(5)	$	(4)

					Other Postretirement
	Pension Benefits				Benefits
	First Nine Months
	2020		2019		2020		2019
	($ in millions)
Service cost	$	30	$	26	$	5	$	5
Interest cost	56		70		9		13
Expected return on plan assets	(143)		(134)		(10)		(11)
Amortization of net losses	39		33		—		—
Amortization of prior service benefit	—		—		(19)		(18)
Net benefit	$	(18)	$	(5)	$	(15)	$	(11)

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

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Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2020

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

Fair Values of Financial Instruments

The fair values of “Cash and cash equivalents,” “Accounts receivable – net,” and “Accounts payable,” approximate carrying values because of the short maturity of these financial instruments. The carrying value of corporate-owned life insurance is recorded at cash surrender value and, accordingly, approximates fair value. There are no other assets or liabilities measured at fair value on a recurring basis at September 30, 2020 or December 31, 2019. The carrying amounts and estimated fair values, based on Level 1 inputs, of long-term debt consisted of the following:

	September 30, 2020				December 31, 2019
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	($ in millions)
Long-term debt, including current maturities	$	(12,723)	$	(16,582)	$	(12,196)	$	(14,806)

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2020

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 and also consolidated in the District of Columbia. We believe the allegations in the complaints are without merit and intend to vigorously defend the cases. We do not believe the outcome of these proceedings will have a material effect on our financial position, results of operations, or liquidity.

In 2018, a lawsuit was filed against one of our subsidiaries by the minority owner in a jointly-owned terminal railroad company in which our subsidiary has the majority ownership. The lawsuit alleged violations of various state laws and federal antitrust laws. It is reasonably possible that we could incur a loss in the case; however, we intend to vigorously defend the case and believe that we will prevail. The potential range of loss cannot be estimated at this time.

Casualty Claims

Casualty claims include employee personal injury and occupational claims as well as third-party claims, all exclusive of legal costs.  To aid in valuing our personal injury liability and determining the amount to accrue with respect to such claims during the year, we utilize studies prepared by an independent consulting actuarial firm.  Job-related personal injury and occupational claims are subject to 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 future claim payments and is supported by the most recent actuarial study.  In all cases, we record a liability when the expected loss for the claim is both probable and reasonably estimable.

Employee personal injury claims – The largest component of claims expense is employee personal injury costs.  The independent actuarial firm we engage provides quarterly studies to aid in valuing our employee personal injury liability and estimating personal injury expense.  The actuarial firm studies our historical patterns of reserving for claims and subsequent settlements, taking into account relevant outside influences.  The actuarial firm uses the results of these analyses to estimate the ultimate amount of liability. We adjust the liability quarterly based upon our assessment and the results of the study. Our estimate of the liability is subject to inherent limitation given the difficulty of predicting future events such as jury decisions, court interpretations, or legislative changes. As a result, actual claim settlements may vary from the estimated liability recorded.

Occupational claims – Occupational claims include injuries and illnesses alleged to be caused by exposures which occur over time as opposed to injuries or illnesses caused by a specific accident or event. Types of occupational claims commonly seen allege exposure to asbestos and other claimed toxic substances resulting in respiratory diseases or cancer. Many such claims are being asserted by former or retired employees, some of whom have not been employed in the rail industry for decades.  The independent actuarial firm provides an estimate of the occupational claims liability based upon our history of claim filings, severity, payments, and other pertinent facts.  The liability is dependent upon judgments we make as to the specific case reserves as well as judgments of the actuarial firm in the quarterly studies.  The actuarial firm’s estimate of ultimate loss includes a provision for those claims that have been incurred but not reported.  This provision is derived by analyzing industry data and projecting our experience. We adjust the liability quarterly based upon our assessment and the results of the study.  However, it is possible that the recorded liability may not be adequate to cover future claim payments.  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 determining any necessary adjustments to liability estimates.  

Our Consolidated Balance Sheets include liabilities for environmental exposures of $55 million and $56 million at September 30, 2020 and December 31, 2019, respectively, of which $15 million is classified as a current liability at both dates. At September 30, 2020, the liability represents our estimates of the probable cleanup, investigation, and remediation costs based on available information at 105 known locations and projects compared with 110 locations and projects at December 31, 2019. At September 30, 2020, seventeen sites accounted for $41 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 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 purchase insurance covering legal liabilities for bodily injury and property damage to third parties. This insurance provides coverage above $75 million and below $1.1 billion ($1.5 billion for specific perils) per occurrence and/or policy year. In addition, we purchase insurance covering damage to property owned by us or in our care, custody, or control. This insurance covers approximately 85% of damage above $75 million and below $275 million per occurrence and/or policy year.

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New Accounting Pronouncements	9 Months Ended
	Sep. 30, 2020
Accounting Standards Update and Change in Accounting Principle [Abstract]
New Accounting Pronouncements	New Accounting PronouncementsOn January 1, 2020, we adopted the Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) 2016-13, “Credit Losses - Measurement of Credit Losses on Financial Instruments,” which replaced the current incurred loss impairment method with a method that reflects expected credit losses. Historically, losses associated from the inability to collect on accounts receivable have been insignificant, with little divergence in collection trends through varying economic cycles. Short-term and long-term financial assets, as defined by the standard, are impacted by immediate recognition of estimated credit losses in the financial statements, reflecting the net amount expected to be collected. There was no material impact to the financial statements upon adoption. In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes,” which adds new guidance to simplify the accounting for income taxes, changes the accounting for certain income tax transactions, and makes other minor changes. The new standard is effective as of January 1, 2021, and early adoption is permitted for any interim period for which financial statements have not been issued. We do not expect this standard to have a material effect on our financial statements. We will not adopt the standard early.

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New Accounting Pronouncements (Policies)	9 Months Ended
	Sep. 30, 2020
Accounting Standards Update and Change in Accounting Principle [Abstract]
New Accounting Pronouncements	New Accounting PronouncementsOn January 1, 2020, we adopted the Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) 2016-13, “Credit Losses - Measurement of Credit Losses on Financial Instruments,” which replaced the current incurred loss impairment method with a method that reflects expected credit losses. Historically, losses associated from the inability to collect on accounts receivable have been insignificant, with little divergence in collection trends through varying economic cycles. Short-term and long-term financial assets, as defined by the standard, are impacted by immediate recognition of estimated credit losses in the financial statements, reflecting the net amount expected to be collected. There was no material impact to the financial statements upon adoption. In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes,” which adds new guidance to simplify the accounting for income taxes, changes the accounting for certain income tax transactions, and makes other minor changes. The new standard is effective as of January 1, 2021, and early adoption is permitted for any interim period for which financial statements have not been issued. We do not expect this standard to have a material effect on our financial statements. We will not adopt the standard early.

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Railway Operating Revenues (Tables)

9 Months Ended

Sep. 30, 2020

Revenue from Contract with Customer [Abstract]

Disaggregation of Revenue

The following table disaggregates our revenues by major commodity group:

	Third Quarter				First Nine Months
	2020		2019		2020		2019
	($ in millions)
Merchandise:
Agriculture, forest and consumer products	$	521	$	572	$	1,570	$	1,707
Chemicals	428		535		1,371		1,586
Metals and construction	337		377		997		1,131
Automotive	270		247		597		749
Merchandise	1,556		1,731		4,535		5,173
Intermodal	700		707		1,924		2,127
Coal	250		403		757		1,306
Total	$	2,506	$	2,841	$	7,216	$	8,606

Schedule of Accounts Receivable

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

	September 30, 2020		December 31, 2019
	($ in millions)
Customer	$	664	$	682
Non-customer	219		238
Accounts receivable – net	$	883	$	920

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Stock-Based Compensation (Tables)

9 Months Ended

Sep. 30, 2020

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
	2020		2019		2020		2019
	($ in millions)
Stock-based compensation expense	$	13	$	10	$	25	$	46
Total tax benefit	10		3		39		34

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

During 2020, a committee of nonemployee members of our Board of Directors (and the Chief Executive Officer when 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	—	$	—	43,770	$	52.05
RSUs	10,230	211.90		177,770	210.13
PSUs	—	—		78,720	212.67

Schedule of Cash Proceeds Received from Share-based Payment Awards

	Third Quarter				First Nine Months
	2020		2019		2020		2019
	($ in millions)
Stock options exercised	313,358		55,155		998,996		677,072
Cash received upon exercise	$	27	$	3	$	82	$	47
Related tax benefit realized	8		1		24		16

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
	2020		2019		2020		2019
	($ in millions)
RSUs vested	1,635		142		203,934		166,197
Common Stock issued net of tax withholding	1,630		102		145,342		119,346
Related tax benefit realized	$	—	$	—	$	4	$	2

Performance Share Units

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

Schedule of Share-based Compensation, Activity

	First Nine Months
	2020		2019
	($ in millions)
PSUs earned	235,935		331,099
Common Stock issued net of tax withholding	156,450		221,241
Related tax benefit realized	$	7	$	9

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Earnings Per Share (Tables)

9 Months Ended

Sep. 30, 2020

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
	2020		2019		2020		2019
	($ in millions, except per share amounts, shares in millions)
Net income	$	569	$	657	$	569	$	657
Dividend equivalent payments	(2)		(1)		(1)		—
Income available to common stockholders	$	567	$	656	$	568	$	657
Weighted-average shares outstanding	254.6		262.1		254.6		262.1
Dilutive effect of outstanding options and share-settled awards					1.5		2.2
Adjusted weighted-average shares outstanding					256.1		264.3
Earnings per share	$	2.23	$	2.50	$	2.22	$	2.49
	Basic				Diluted
	First Nine Months
	2020		2019		2020		2019
	($ in millions, except per share amounts, shares in millions)
Net income	$	1,342	$	2,056	$	1,342	$	2,056
Dividend equivalent payments	(3)		(4)		(2)		—
Income available to common stockholders	$	1,339	$	2,052	$	1,340	$	2,056
Weighted-average shares outstanding	255.7		264.6		255.7		264.6
Dilutive effect of outstanding options and share-settled awards					1.5		2.3
Adjusted weighted-average shares outstanding					257.2		266.9
Earnings per share	$	5.24	$	7.76	$	5.21	$	7.70

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Accumulated Other Comprehensive Loss (Tables)

9 Months Ended

Sep. 30, 2020

Equity [Abstract]

Accumulated Other Comprehensive Loss

The changes in the cumulative balances of “Accumulated other comprehensive loss” reported in the Consolidated Balance Sheets consisted of the following:

	Balance at Beginning of Year		Net Income (Loss)		Reclassification Adjustments		Balance at End of Period
	($ in millions)
Nine Months Ended September 30, 2020
Pensions and other postretirement liabilities	$	(421)	$	—	$	14	$	(407)
Other comprehensive income (loss) of equity
investees	(70)		6		—		(64)
Accumulated other comprehensive loss	$	(491)	$	6	$	14	$	(471)
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)

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Pensions and Other Postretirement Benefits (Tables)

9 Months Ended

Sep. 30, 2020

Defined Benefit Plans and Other Postretirement Benefit Plans Disclosures [Abstract]

Pension and Other Postretirement Benefit Cost Components

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

					Other Postretirement
	Pension Benefits				Benefits
	Third Quarter
	2020		2019		2020		2019
	($ in millions)
Service cost	$	10	$	9	$	2	$	2
Interest cost	19		24		3		4
Expected return on plan assets	(48)		(45)		(4)		(4)
Amortization of net losses	13		11		—		—
Amortization of prior service benefit	—		—		(6)		(6)
Net benefit	$	(6)	$	(1)	$	(5)	$	(4)

					Other Postretirement
	Pension Benefits				Benefits
	First Nine Months
	2020		2019		2020		2019
	($ in millions)
Service cost	$	30	$	26	$	5	$	5
Interest cost	56		70		9		13
Expected return on plan assets	(143)		(134)		(10)		(11)
Amortization of net losses	39		33		—		—
Amortization of prior service benefit	—		—		(19)		(18)
Net benefit	$	(18)	$	(5)	$	(15)	$	(11)

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Fair Value of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2020

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, 2020				December 31, 2019
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	($ in millions)
Long-term debt, including current maturities	$	(12,723)	$	(16,582)	$	(12,196)	$	(14,806)

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Railway Operating Revenues (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	$ 2,506,000,000	$ 2,841,000,000	$ 7,216,000,000	$ 8,606,000,000
Revenue, payment terms			15 days
Contract assets	0		$ 0		$ 0
Contract liabilities	$ 0		$ 0		$ 0
Accessorial Services
Disaggregation of Revenue [Line Items]
Accessorial services percent of total railway operating revenues	5.00%	5.00%	5.00%	5.00%
Merchandise
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	$ 1,556,000,000	$ 1,731,000,000	$ 4,535,000,000	$ 5,173,000,000
Merchandise | Agriculture, forest and consumer products
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	521,000,000	572,000,000	1,570,000,000	1,707,000,000
Merchandise | Chemicals
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	428,000,000	535,000,000	1,371,000,000	1,586,000,000
Merchandise | Metals and construction
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	337,000,000	377,000,000	997,000,000	1,131,000,000
Merchandise | Automotive
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	270,000,000	247,000,000	597,000,000	749,000,000
Intermodal
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	700,000,000	707,000,000	1,924,000,000	2,127,000,000
Coal
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	$ 250,000,000	$ 403,000,000	$ 757,000,000	$ 1,306,000,000

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Railway Operating Revenues - Schedule of Account Receivables (Details) - USD ($) $ in Millions	Sep. 30, 2020	Dec. 31, 2019
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Accounts receivable – net	$ 883	$ 920
Trade Accounts Receivable
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Accounts receivable – net	664	682
Other Receivables
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Accounts receivable – net	219	238
Other Noncurrent Receivables
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Accounts receivable, net, noncurrent	$ 23	$ 23

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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, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Share-based Payment Arrangement [Abstract]
Stock-based compensation expense	$ 13	$ 10	$ 25	$ 46
Total tax benefit	$ 10	$ 3	$ 39	$ 34

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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, 2020	Sep. 30, 2020
Stock options
Granted
Stock options (in shares)	0	43,770
Weighted-Average Grant-Date Fair Value
Stock options (in dollars per shares)	$ 0	$ 52.05
RSUs
Granted
Other than stock options (in shares)	10,230	177,770
Weighted-Average Grant-Date Fair Value
Other than stock options (in dollars per share)	$ 211.90	$ 210.13
PSUs
Granted
Other than stock options (in shares)	0	78,720
Weighted-Average Grant-Date Fair Value
Other than stock options (in dollars per share)	$ 0	$ 212.67

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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, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Share-based Payment Arrangement [Abstract]
Stock options exercised (in shares)	313,358	55,155	998,996	677,072
Cash received upon exercise	$ 27	$ 3	$ 82	$ 47
Related tax benefit realized	$ 8	$ 1	$ 24	$ 16

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Stock-Based Compensation - Narrative (Details)	9 Months Ended
	Sep. 30, 2020
RSUs
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award vesting period (in years)	4 years
PSUs
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
PSU Cycle	3 years

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Stock-Based Compensation - Schedule of RSU Activity (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Related tax benefit realized	$ 8	$ 1	$ 24	$ 16
Restricted Stock Units (RSUs)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share units earned (in shares)	1,635	142	203,934	166,197
Shares issued net of withholding taxes (in shares)	1,630	102	145,342	119,346
Related tax benefit realized	$ 0	$ 0	$ 4	$ 2

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Stock-Based Compensation - Schedule of PSU Activity (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Related tax benefit realized	$ 8	$ 1	$ 24	$ 16
PSUs
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share units earned (in shares)			235,935	331,099
Shares issued net of withholding taxes (in shares)			156,450	221,241
Related tax benefit realized			$ 7	$ 9

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Loss on Asset Disposal (Details) $ in Millions	3 Months Ended	9 Months Ended
	Mar. 31, 2020 USD ($)	Sep. 30, 2020 USD ($) locomotive	Sep. 30, 2019 USD ($)
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Loss on locomotives		$ 14	$ 4
Railroad Transportation Equipment
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Loss on locomotives	$ (385)
Tax benefit on loss from sale of locomotives	$ 97
Number of locomotives sold | locomotive		574
Number of locomotives classified as Held-for-Sale | locomotive		703
Assets Held-for-sale, Not Part of Disposal Group		$ 20

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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, 2020	Jun. 30, 2020	Mar. 31, 2020	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Sep. 30, 2020	Sep. 30, 2019
Earnings Per Share [Abstract]
Net income	$ 569	$ 392	$ 381	$ 657	$ 722	$ 677	$ 1,342	$ 2,056
Dividend equivalent payments, basic	(2)			(1)			(3)	(4)
Dividend equivalent payments, diluted	(1)			0			(2)	0
Income available to common stockholders, basic	567			656			1,339	2,052
Income available to common stockholders, diluted	$ 568			$ 657			$ 1,340	$ 2,056
Weighted-average shares outstanding (in shares)	254.6			262.1			255.7	264.6
Dilutive effect of outstanding options and share-settled awards (in shares)	1.5			2.2			1.5	2.3
Adjusted weighted-average shares outstanding (in shares)	256.1			264.3			257.2	266.9
Basic (in dollars per share)	$ 2.23			$ 2.50			$ 5.24	$ 7.76
Diluted (in dollars per share)	$ 2.22			$ 2.49			$ 5.21	$ 7.70

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Earnings Per Share - Antidilutive Securities Excluded From Computation Of Earnings Per Share (Details) - shares	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Earnings Per Share [Abstract]
Antidilutive securities excluded from computation of earnings per share (in shares)	0	0	0	0

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Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
Balance at Beginning of Year	$ 15,184	$ 15,362
Net Income (Loss)	6	(1)
Reclassification Adjustments	14	11
Balance at End of Period	14,941	15,238
Accum. Other Comprehensive Loss
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
Balance at Beginning of Year	(491)	(563)
Balance at End of Period	(471)	(553)
Pensions and other postretirment liabilities
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
Balance at Beginning of Year	(421)	(497)
Net Income (Loss)	0	0
Reclassification Adjustments	14	11
Balance at End of Period	(407)	(486)
Other comprehensive loss of equity investees
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
Balance at Beginning of Year	(70)	(66)
Net Income (Loss)	6	(1)
Reclassification Adjustments	0	0
Balance at End of Period	$ (64)	$ (67)

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Stock Repurchase Program (Details) - USD ($) shares in Millions, $ in Millions	3 Months Ended						9 Months Ended
	Sep. 30, 2020	Jun. 30, 2020	Mar. 31, 2020	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Sep. 30, 2020	Sep. 30, 2019
Stock Repurchase Program [Abstract]
Stock repurchased and retired during period (in shares)							5.3	8.4
Stock repurchased and retired during period, cost	$ 291	$ 203	$ 466	$ 500	$ 550	$ 500	$ 960	$ 1,600

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Investments (Details) $ in Millions	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2020 USD ($)	Sep. 30, 2019 USD ($)	Sep. 30, 2020 USD ($) railroad	Sep. 30, 2019 USD ($)	Dec. 31, 2019 USD ($)
Schedule of Investments [Line Items]
Number of North American railroads | railroad			8
Impairment of investment			$ 99	$ 0
Equity Method Investment, Nonconsolidated Investee, Other
Schedule of Investments [Line Items]
Impairment of investment	$ 99
Equity method invesment impact on net income (loss)	$ 74		$ 74
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		$ 1,400
Expenses from transactions with related party	32	$ 37	97	112
Equity in the earnings of investee	17	13	39	36
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	$ 67	61	$ 185	183
Equity in the earnings of investee	$ 21	$ 19	$ 35	$ 44

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Debt (Details) - USD ($)	1 Months Ended
	May 31, 2020	Mar. 31, 2020	Sep. 30, 2020	Apr. 30, 2020	Feb. 29, 2020	Dec. 31, 2019	Sep. 30, 2019
Debt Instrument [Line Items]
Restricted cash							$ 88,000,000
Revolving Credit Facility
Debt Instrument [Line Items]
Senior notes issued		$ 800,000,000			$ 750,000,000
Credit agreement term, years		5 years
Long-term line of credit			$ 0			$ 0
Senior Notes
Debt Instrument [Line Items]
Senior notes issued				$ 554,000,000
Loss on extinguishment of debt	$ 4,000,000
Senior Notes | Senior Notes Due 2050
Debt Instrument [Line Items]
Senior notes issued	$ 800,000,000
Stated rates	3.05%
Proceeds from issuance of senior notes	$ 790,000,000
Senior Notes | Senior Notes Due 2055
Debt Instrument [Line Items]
Senior notes issued	$ 800,000,000
Stated rates	3.155%
Senior Notes | Senior Notes Due 2118
Debt Instrument [Line Items]
Senior notes issued				$ 450,000,000
Stated rates				5.10%
Senior Notes | Senior Notes Due 2097
Debt Instrument [Line Items]
Senior notes issued				$ 29,000,000
Stated rates				7.90%
Senior Notes | Senior Notes Due 2111
Debt Instrument [Line Items]
Senior notes issued				$ 42,000,000
Stated rates				6.00%
Senior Notes | Senior Notes Due 2105
Debt Instrument [Line Items]
Senior notes issued				$ 26,000,000
Stated rates				6.00%
Senior Notes | Senior Notes Due 2037
Debt Instrument [Line Items]
Senior notes issued				$ 7,000,000
Stated rates				7.05%
Securitization Borrowings
Debt Instrument [Line Items]
Credit agreement	$ 400,000,000
Accounts receivable securitization balance			0			0
Available borrowing capacity			$ 400,000,000			$ 429,000,000

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Pensions and Other Postretirement Benefits (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Pension Benefits
Defined Benefit Plan Disclosure [Line Items]
Service cost	$ 10	$ 9	$ 30	$ 26
Interest cost	19	24	56	70
Expected return on plan assets	(48)	(45)	(143)	(134)
Amortization of net losses	13	11	39	33
Amortization of prior service benefit	0	0	0	0
Net benefit	(6)	(1)	(18)	(5)
Other Postretirement Benefits
Defined Benefit Plan Disclosure [Line Items]
Service cost	2	2	5	5
Interest cost	3	4	9	13
Expected return on plan assets	(4)	(4)	(10)	(11)
Amortization of net losses	0	0	0	0
Amortization of prior service benefit	(6)	(6)	(19)	(18)
Net benefit	$ (5)	$ (4)	$ (15)	$ (11)

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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, 2020	Dec. 31, 2019
Carrying Amount
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Long-term debt, including current maturities	$ (12,723)	$ (12,196)
Fair Value
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Long-term debt, including current maturities	$ (16,582)	$ (14,806)

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Commitments and Contingencies (Details)	9 Months Ended
	Sep. 30, 2020 USD ($) location	Dec. 31, 2019 USD ($) location
Commitments and Contingencies Disclosure [Abstract]
Environmental liability	$ 55,000,000	$ 56,000,000
Current environmental liability	$ 15,000,000	$ 15,000,000
Known cleanup and remediation locations and projects | location	105	110
Number of sites - representative sample | location	17
Liability associated with those sites	$ 41,000,000
Environmental locations representative sample liability payout period, in years	5 years
Responsible locations with another party | location	11
Self-insured injury/damage to third parties - and above, per occurrence	$ 75,000,000
Self-insured injury/damage to third party - up to	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 - and above, per occurrence	75,000,000
Self-insured NS owned property - up to	$ 275,000,000
Portion Of Potential Losses Within A Specified Range Covered By Third Party Insurer, As A Percentage	85.00%