Document/ExhibitDescriptionPagesSize 1: 10-Q Quarterly Report HTML 1.10M
2: EX-31.A Certification -- §302 - SOA'02 HTML 22K
3: EX-31.B Certification -- §302 - SOA'02 HTML 22K
4: EX-32 Certification -- §906 - SOA'02 HTML 20K
10: R1 Cover Page HTML 69K
11: R2 Consolidated Statements of Income (Unaudited) HTML 82K
12: R3 Consolidated Statements of Comprehensive Income HTML 55K
(Unaudited)
13: R4 Consolidated Balance Sheets (Unaudited) HTML 107K
14: R5 Consolidated Balance Sheets (Unaudited) HTML 26K
(Parenthetical)
15: R6 Consolidated Statements of Cash Flows (Unaudited) HTML 95K
16: R7 Consolidated Statements of Changes in HTML 71K
Stockholders? Equity (Unaudited)
17: R8 Consolidated Statements of Changes in HTML 20K
Stockholders? Equity (Unaudited) (Parenthetical)
18: R9 Railway Operating Revenues HTML 48K
19: R10 Stock-Based Compensation HTML 60K
20: R11 Earnings Per Share HTML 55K
21: R12 Accumulated Other Comprehensive Loss HTML 39K
22: R13 Stock Repurchase Program HTML 19K
23: R14 Investments HTML 24K
24: R15 Debt HTML 24K
25: R16 Pensions and Other Postretirement Benefits HTML 54K
26: R17 Fair Values of Financial Instruments HTML 26K
27: R18 Commitments and Contingencies HTML 36K
28: R19 New Accounting Pronouncements HTML 30K
29: R20 Subsequent Events HTML 20K
30: R21 New Accounting Pronouncements (Policies) HTML 20K
31: R22 Railway Operating Revenues (Tables) HTML 45K
32: R23 Stock-Based Compensation (Tables) HTML 69K
33: R24 Earnings Per Share (Tables) HTML 54K
34: R25 Accumulated Other Comprehensive Loss (Tables) HTML 39K
35: R26 Pensions and Other Postretirement Benefits HTML 49K
(Tables)
36: R27 Fair Values of Financial Instruments (Tables) HTML 25K
37: R28 Railway Operating Revenues - Disaggregation of HTML 40K
Revenues (Details)
38: R29 Railway Operating Revenues - Narrative (Details) HTML 34K
39: R30 Railway Operating Revenues - Schedule of Account HTML 25K
Receivables (Details)
40: R31 Stock-Based Compensation - Schedule of Stock-Based HTML 22K
Compensation Expense and Related Tax Benefits
(Details)
41: R32 Stock-Based Compensation - Schedule of Grants and HTML 36K
Weighted-Average Grant-Date Fair Values (Details)
42: R33 Stock-Based Compensation - Schedule of Options HTML 26K
Exercised, Cash Received, and Related Tax Benefits
(Details)
43: R34 Stock-Based Compensation - Narrative (Details) HTML 25K
44: R35 Stock-Based Compensation - Schedule of RSU HTML 26K
Activity (Details)
45: R36 Stock-Based Compensation - Schedule of PSU HTML 30K
Activity (Details)
46: R37 Earnings Per Share - Calculation of Basic and HTML 66K
Diluted Earnings Per Share (Details)
47: R38 Earnings Per Share - Antidilutive Securities HTML 20K
Excluded From Computation Of Earnings Per Share
(Details)
48: R39 Accumulated Other Comprehensive Loss (Details) HTML 36K
49: R40 Stock Repurchase Program (Details) HTML 26K
50: R41 Investments (Details) HTML 46K
51: R42 Debt (Details) HTML 37K
52: R43 Pensions and Other Postretirement Benefits HTML 43K
(Details)
53: R44 Fair Values of Financial Instruments - Schedule of HTML 25K
Carrying Amounts and Estimated Fair Values
(Details)
54: R45 Commitments and Contingencies (Details) HTML 46K
55: R46 Subsequent Events (Details) HTML 22K
58: XML IDEA XML File -- Filing Summary XML 104K
56: XML XBRL Instance -- nsc-20220630_htm XML 1.11M
57: EXCEL IDEA Workbook of Financial Reports XLSX 82K
6: EX-101.CAL XBRL Calculations -- nsc-20220630_cal XML 119K
7: EX-101.DEF XBRL Definitions -- nsc-20220630_def XML 253K
8: EX-101.LAB XBRL Labels -- nsc-20220630_lab XML 914K
9: EX-101.PRE XBRL Presentations -- nsc-20220630_pre XML 519K
5: EX-101.SCH XBRL Schema -- nsc-20220630 XSD 103K
59: JSON XBRL Instance as JSON Data -- MetaLinks 293± 414K
60: ZIP XBRL Zipped Folder -- 0000702165-22-000028-xbrl Zip 270K
(Exact name of registrant as specified in its charter)
iVirginia
i52-1188014
(State
or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
i650 West Peachtree Street NW
i30308-1925
iAtlanta,
iGeorgia
(Address
of principal executive offices)
(Zip Code)
i(855)
i667-3655
(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
iNorfolk
Southern Corporation Common Stock (Par Value $1.00)
iNSC
iNew 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. iYes☒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). iYes☒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.
iLarge accelerated filer☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company i☐Emerging
growth company i☐
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 i☐No☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
In the opinion of management, the accompanying unaudited interim consolidated financial statements contain all adjustments (consisting of normal
recurring accruals) necessary to present fairly Norfolk Southern Corporation (Norfolk Southern) and subsidiaries’ (collectively, NS, we, us, and our) financial position at June 30, 2022 and December 31, 2021, our results of operations, comprehensive income and changes in stockholders’ equity for the second quarters and first six months of 2022 and 2021, and our cash flows for the first six months of 2022 and 2021 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.
iRailway Operating Revenues
i
The following table disaggregates our revenues by major commodity group:
Second
Quarter
First Six Months
2022
2021
2022
2021
($ in millions)
Merchandise:
Agriculture, forest and consumer products
$
i624
$
i578
$
i1,197
$
i1,117
Chemicals
i552
i494
i1,050
i953
Metals
and construction
i420
i402
i795
i772
Automotive
i257
i206
i483
i446
Merchandise
i1,853
i1,680
i3,525
i3,288
Intermodal
i972
i801
i1,826
i1,520
Coal
i425
i318
i814
i630
Total
$
i3,250
$
i2,799
$
i6,165
$
i5,438
/
We
recognize the amount of revenues to which we expect to be entitled for the transfer of promised goods or services to customers. A performance obligation is created when a customer under a transportation contract or public tariff submits a bill of lading to us for the transport of goods. These performance obligations are satisfied as the shipments move from origin to destination. As such, transportation revenues are recognized proportionally as a shipment moves, and related expenses are recognized as incurred. These performance obligations are generally short-term in nature with transit days averaging approximately one week or less for each commodity group. The customer has an unconditional obligation to pay for the service once the service has been completed. Estimated revenues associated with in-process shipments at period-end are recorded based on the estimated percentage
of service completed. We had no material remaining performance obligations at June 30, 2022 and December 31, 2021.
We may provide customers ancillary services, such as switching, demurrage and other incidental activities, under their transportation contracts. These are distinct performance obligations that are recognized at a point in time when the services are performed or as contractual obligations are met. These revenues are included within each of the commodity groups and represent approximately iii6//%
of total “Railway operating revenues” on the Consolidated Statements of Income for the second quarters of 2022 and 2021 and first six months of 2021 and i7% for the first six months of 2022.
9
Revenues related to interline transportation services that involve another railroad are reported
on a net basis. Therefore, the portion of the amount that relates to another party is not reflected in revenues.
Under the typical terms of our freight contracts, payment for services is due within ififteen days of billing the customer, thus there are no significant financing components. i“Accounts
receivable – net” on the Consolidated Balance Sheets includes both customer and non-customer receivables as follows:
Non-customer
receivables include non-revenue related amounts due from other railroads, governmental entities, and others. There were ino non-current customer receivables at June 30, 2022, while “Other assets” on the Consolidated Balance Sheets included $i23 million
at December 31, 2021. We do iiiino///t
have any material contract assets or liabilities at June 30, 2022 and December 31, 2021.
2. iStock-Based Compensation
i
Second
Quarter
First Six Months
2022
2021
2022
2021
($ in millions)
Stock-based
compensation expense
$
i13
$
i16
$
i36
$
i32
Total
tax benefit
i4
i8
i17
i25
/
i
During
2022, we granted stock options, restricted stock units (RSUs) and performance share units (PSUs) pursuant to the Long-Term Incentive Plan (LTIP), as follows:
Second Quarter
First Six Months
Granted
Weighted-Average
Grant-Date Fair Value
Granted
Weighted-Average Grant-Date Fair Value
Stock options
i1,640
$
i84.01
i133,810
$
i60.69
RSUs
i9,090
i265.31
i163,991
i268.31
PSUs
i2,430
i271.83
i51,455
i274.70
/
10
Stock
Optionsi
Second
Quarter
First Six Months
2022
2021
2022
2021
($ in millions)
Options exercised
i39,546
i128,934
i158,889
i341,480
Cash
received upon exercise
$
i4
$
i12
$
i14
$
i31
Related
tax benefits realized
i1
i5
i6
i12
/
Restricted
Stock Units
RSUs granted primarily have a ifour-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. i
Second
Quarter
First Six Months
2022
2021
2022
2021
($ in millions)
RSUs vested
i3,652
i1,730
i246,953
i259,127
Common
Stock issued net of tax withholding
i2,612
i1,222
i174,976
i183,511
Related
tax benefits realized
$
i—
$
i—
$
i5
$
i7
/
Performance
Share Units
PSUs provide for awards based on the achievement of certain predetermined corporate performance goals at the end of a ithree-year cycle and are settled through the issuance of shares of Common Stock. All PSUs will earn out based on the achievement of performance conditions and some will also earn out based on a market condition. The market condition fair value
was measured on the date of grant using a Monte Carlo simulation model. No PSUs were
earned or paid out during the second quarters of 2022 or 2021.
i
First
Six Months
2022
2021
($ in millions)
PSUs earned
i86,420
i78,727
Common
Stock issued net of tax withholding
i54,651
i49,967
Related
tax benefits realized
$
i1
$
i1
/
11
3.
iEarnings Per Share
i
The following table sets forth the calculation of basic and diluted earnings per share:
Basic
Diluted
Second
Quarter
2022
2021
2022
2021
($ in millions, except per share amounts, shares in millions)
Net income
$
i819
$
i819
$
i819
$
i819
Dividend
equivalent payments
(i1)
i—
(i1)
i—
Income
available to common stockholders
$
i818
$
i819
$
i818
$
i819
Weighted-average
shares outstanding
i236.7
i248.9
i236.7
i248.9
Dilutive
effect of outstanding options and share-settled awards
i0.8
i1.1
Adjusted
weighted-average shares outstanding
i237.5
i250.0
Earnings
per share
$
i3.46
$
i3.29
$
i3.45
$
i3.28
Basic
Diluted
First
Six Months
2022
2021
2022
2021
($ in millions, except per share amounts, shares in millions)
Net income
$
i1,522
$
i1,492
$
i1,522
$
i1,492
Dividend
equivalent payments
(i1)
(i1)
(i1)
i—
Income
available to common stockholders
$
i1,521
$
i1,491
$
i1,521
$
i1,492
Weighted-average
shares outstanding
i238.0
i250.1
i238.0
i250.1
Dilutive
effect of outstanding options and share-settled awards
i0.9
i1.2
Adjusted
weighted-average shares outstanding
i238.9
i251.3
Earnings
per share
$
i6.39
$
i5.96
$
i6.37
$
i5.94
/
During
the second quarters and first six months of 2022 and 2021, dividend equivalent payments were made to certain holders of stock options and RSUs. For purposes of computing basic earnings per share, dividend equivalent payments made to holders of stock options and RSUs were deducted from net income to determine income available to common stockholders. For purposes of computing diluted earnings per share, we evaluate on a grant-by-grant basis those stock options and RSUs receiving dividend equivalent payments under the two-class and treasury stock methods to determine which method is more dilutive for each grant. For those grants for which the two-class method was more dilutive, net income was reduced by dividend equivalent payments to determine income available to common stockholders. The dilution calculations exclude options having exercise prices exceeding the average market price of Common Stock as follows: ii0.1/
million in the second quarter and first six months ended June 30, 2022 and iinone/
in the second quarter and first six months ended June 30, 2021.
12
4. iAccumulated Other Comprehensive Loss
iThe
changes in the cumulative balances of “Accumulated other comprehensive loss” reported in the Consolidated Balance Sheets consisted of the following:
We repurchased and retired ii5.7/
million shares of Common Stock under our stock repurchase program at a cost of $ii1.5/
billion during the first six months of both 2022 and 2021. On March 29, 2022, our Board of Directors authorized a new program for the repurchase of up to $i10.0 billion of Common Stock beginning April 1, 2022. Our previous share repurchase program terminated on March 31, 2022.
6.
iInvestments
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 i58%
economic and i50% voting interest in the jointly-owned entity, and CSX has the remainder of the economic and voting interests. Our investment in Conrail was $i1.6 billion and $i1.5
billion at June 30, 2022 and December 31, 2021, respectfully.
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 expenses payable to CRC for operation of the Shared Assets Areas totaling $i36
million and $i37 million for the second quarters of 2022 and 2021, respectively, and $i74
million and $i71 million for the first six months of 2022 and 2021, respectively. Our equity in Conrail’s earnings, net of amortization, was $i11
million and $i14 million for the second quarters of 2022 and 2021, respectively, and $i25 million and $i28
million for the first six months of 2022 and 2021, respectively. These amounts partially offset the costs of operating the Shared Assets Areas and are included in “Purchased services and rents.”
“Other liabilities” includes $ii534/
million at both June 30, 2022 and December 31, 2021 for long-term advances from Conrail, maturing in 2050 that bear interest at an average rate of ii1.31/%.
13
Investment
in TTX
We and ieight other North American railroads collectively own TTX Company (TTX), a railcar pooling company that provides its owner-railroads with standardized fleets of intermodal, automotive, and general use railcars at stated rates. We have a i19.65%
ownership interest in TTX.
Expenses incurred for use of TTX equipment are included in “Purchased services and rents.” These expenses amounted to $i66 million and $i61
million for the second quarters of 2022 and 2021, respectively, and $i130 million and $i124
million for the first six months of 2022 and 2021, respectively. Our equity in TTX’s earnings partially offsets these costs and totaled $i11 million and $i14
million for the second quarters of 2022 and 2021, respectively, and $i21 million and $i31 million for the first
six months of 2022 and 2021, respectively.
7. iDebt
In June 2022, we issued $i750
million of i4.55% senior notes due 2053.
In May 2022, we renewed our accounts receivable securitization program with a maximum borrowing capacity of $i400
million. The term expires in May 2023. We had ino amounts outstanding under this program and our available borrowing capacity was $ii400/
million at both June 30, 2022, and December 31, 2021.
In February 2022, we issued $i600 million of i3.00%
senior notes due 2032 and $i400 million of i3.70% senior notes due 2053.
8.
iPensions and Other Postretirement Benefits
We have both funded and unfunded defined benefit pension plans covering eligible employees. We also provide specified health care benefits to eligible retired employees; these plans can be amended or terminated at our option. Under our self-insured retiree health care plan, for those participants who are not Medicare-eligible, certain health care expenses are covered for retired employees and their dependents, reduced
by any deductibles, coinsurance, and, in some cases, coverage provided under other group insurance policies. Eligible retired participants and their spouses who are Medicare-eligible are not covered under the self-insured retiree health care plan, but instead are provided with an employer-funded health reimbursement account which can be used for reimbursement of health insurance premiums or eligible out-of-pocket medical expenses.
i
Pension and postretirement benefit cost components for the second quarter
and first six months were as follows:
Pension Benefits
Other
Postretirement Benefits
Second Quarter
2022
2021
2022
2021
($ in millions)
Service cost
$
i10
$
i11
$
i2
$
i1
Interest
cost
i17
i14
i2
i2
Expected
return on plan assets
(i54)
(i48)
(i3)
(i3)
Amortization
of net losses
i12
i16
i—
i1
Amortization
of prior service benefit
i—
i—
(i7)
(i7)
Net
benefit
$
(i15)
$
(i7)
$
(i6)
$
(i6)
/
14
Pension
Benefits
Other Postretirement Benefits
First Six Months
2022
2021
2022
2021
($ in millions)
Service cost
$
i20
$
i22
$
i3
$
i3
Interest
cost
i34
i27
i4
i4
Expected
return on plan assets
(i107)
(i96)
(i6)
(i6)
Amortization
of net losses
i24
i33
i—
i1
Amortization
of prior service benefit
i—
i—
(i13)
(i13)
Net
benefit
$
(i29)
$
(i14)
$
(i12)
$
(i11)
The
service cost component of defined benefit pension cost and postretirement benefit cost are reported within “Compensation and benefits” and all other components of net benefit cost are presented in “Other income (expense) – net” on the Consolidated Statements of Income.
9. iFair Values of Financial Instruments
The
fair values of “Cash and cash equivalents,”“Accounts receivable – net,” and “Accounts payable,” approximate carrying values because of the short maturity of these financial instruments. The carrying value of corporate-owned life insurance is recorded at cash surrender value and, accordingly, approximates fair value. There are no other assets or liabilities measured at fair value on a recurring basis at June 30, 2022 or December 31, 2021. iThe
carrying amounts and estimated fair values, based on Level 1 inputs, of long-term debt consist of the following:
We and/or certain subsidiaries are defendants in numerous lawsuits and other claims relating principally to railroad operations. When we conclude that it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated, it is accrued through a
charge to earnings and, if material, disclosed below. While the ultimate amount of liability incurred in any of these lawsuits and claims is dependent on future developments, in our opinion, the recorded liability is adequate to cover the future payment of such liability and claims. However, the final outcome of any of these lawsuits and claims cannot be predicted with certainty, and unfavorable or unexpected outcomes could result in additional accruals that could be significant to results of operations in a particular year or quarter. Any adjustments to the recorded liability will be reflected in earnings in the periods in which such adjustments become known. For lawsuits and other claims where a loss may be reasonably possible, but not probable, or is probable but not reasonably estimable, no accrual is established but the matter, if potentially material, is disclosed below. We routinely review relevant information with respect to our lawsuits and other claims
and update our accruals, disclosures and estimates of reasonably possible loss based on such reviews.
15
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. Summary judgment has been briefed but not decided, and trial
is likely to occur in the first quarter of 2023. We continue to vigorously defend the lawsuit and, although it is reasonably possible we could incur a loss in the case, we believe that we will prevail. However, given that litigation is inherently unpredictable and subject to uncertainties, there can be no assurances that the final outcome of the litigation or a litigation settlement will not be material. We cannot reasonably estimate the potential loss or range of loss associated with the litigation 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 actuarial
consulting firm. Job-related personal injury and occupational claims are subject to the Federal Employer’s Liability Act (FELA), which is applicable only to railroads. The variability inherent in FELA’s fault-based tort system could result in actual costs being different from the liability recorded. While the ultimate amount of claims incurred is dependent on future developments, in our opinion, the recorded liability is adequate to cover the future payments of claims and is supported by the most recent actuarial study. In all cases, we record a liability when the expected loss for the claim is both probable and reasonably estimable.
Employee personal injury claims – The largest component of claims expense is employee personal injury costs. The independent actuarial firm we engage provides quarterly studies to aid in valuing our employee personal injury liability and estimating
personal injury expense. The actuarial firm studies our historical patterns of reserving for claims and subsequent settlements, taking into account relevant outside influences. The actuarial firm uses the results of these analyses to estimate the ultimate amount of liability. We adjust the liability quarterly based upon our assessment and the results of the study. The accuracy of our estimate of the liability is subject to inherent limitation given the difficulty of predicting future events such as jury decisions, court interpretations, or legislative changes. As a result, actual claim settlements may vary from the estimated liability recorded.
Occupational claims – Occupational claims include injuries and illnesses alleged to be caused by exposures which occur over time as opposed to injuries or illnesses caused by a specific accident or event. Types of occupational claims
commonly seen allege exposure to asbestos and other claimed toxic substances resulting in respiratory diseases or cancer. Many such claims are being asserted by former or retired employees, some of whom have not been employed in the rail industry for decades. The independent actuarial firm provides an estimate of the occupational claims liability based upon our history of claim filings, severity, payments, and other pertinent facts. The liability is dependent upon judgments we make as to the specific case reserves as well as judgments of the actuarial firm in the quarterly studies. Our estimate of ultimate loss includes a provision for those claims that have been incurred but not reported. This provision is derived by analyzing industry data and projecting our experience. We adjust the liability quarterly based upon our assessment and the results of the study. However, it is possible that the recorded liability may not be adequate to cover the future payment of
claims. Adjustments to the recorded liability are reflected in operating expenses in the periods in which such adjustments become known.
16
Third-party claims – We record a liability for third-party claims including those for highway crossing accidents, trespasser and other injuries, property damage, and lading damage. The actuarial firm assists us with the calculation of potential liability for third-party claims, except lading damage, based upon our experience including the number and timing of incidents, amount of payments, settlement rates, number of open claims, and legal defenses. We adjust the liability quarterly based upon our assessment and the results of the study. Given the
inherent uncertainty in regard to the ultimate outcome of third-party claims, it is possible that the actual loss may differ from the estimated liability recorded.
Environmental Matters
We are subject to various jurisdictions’ environmental laws and regulations. We record a liability where such liability or loss is probable and reasonably estimable. Environmental specialists regularly participate in ongoing evaluations of all known sites and in determining any necessary adjustments to liability estimates.
Our Consolidated Balance Sheets include liabilities for environmental exposures of $i56
million at June 30, 2022 and $i49 million at December 31, 2021, of which $ii15/
million is classified as a current liability at the end of both periods. At June 30, 2022, the liability represents our estimates of the probable cleanup, investigation, and remediation costs based on available information at i91 known locations and projects compared with i88
locations and projects at December 31, 2021. At June 30, 2022, inineteen sites accounted for $i45
million of the liability, and no individual site was considered to be material. We anticipate that most of this liability will be paid out over ifive years; however, some costs will be paid out over a longer period.
At ieight
locations, one or more of our subsidiaries in conjunction with a number of other parties have been identified as potentially responsible parties under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 or comparable state statutes that impose joint and several liability for cleanup costs. We calculate our estimated liability for these sites based on facts and legal defenses applicable to each site and not solely on the basis of the potential for joint liability.
With respect to known environmental sites (whether identified by us or by the Environmental Protection Agency or comparable state authorities), estimates of our ultimate potential financial exposure for a given site or in the aggregate for all such sites can change over time because of the widely varying costs of currently available
cleanup techniques, unpredictable contaminant recovery and reduction rates associated with available cleanup technologies, the likely development of new cleanup technologies, the difficulty of determining in advance the nature and full extent of contamination and each potential participant’s share of any estimated loss (and that participant’s ability to bear it), and evolving statutory and regulatory standards governing liability.
The risk of incurring environmental liability for acts and omissions, past, present, and future, is inherent in the railroad business. Some of the commodities we transport, particularly those classified as hazardous materials, pose special risks that we work diligently to reduce. In addition, several of our subsidiaries own, or have owned, land used as operating property, or which is leased
and operated by others, or held for sale. Because environmental problems that are latent or undisclosed may exist on these properties, there can be no assurance that we will not incur environmental liabilities or costs with respect to one or more of them, the amount and materiality of which cannot be estimated reliably at this time. Moreover, lawsuits and claims involving these and potentially other unidentified environmental sites and matters are likely to arise from time to time. The resulting liabilities could have a significant effect on financial position, results of operations, or liquidity in a particular year or quarter.
Based on our assessment of the facts and circumstances now known, we believe we have recorded the probable and reasonably estimable costs for dealing with those environmental matters of which we are aware. Further, we believe that it is unlikely that any known matters,
either individually or in the aggregate, will have a material adverse effect on our financial position, results of operations, or liquidity.
17
Labor Agreements
Approximately i80% 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. Bargaining procedures, which began in November 2019, are ongoing, with the ultimate outcome unknown. The ultimate changes in our labor agreements resulting from this process could significantly increase our costs for health care, wages, and other benefits.
Insurance
We purchase insurance covering legal liabilities for bodily injury and property damage to third parties. This insurance provides coverage above $i75
million and below $i800 million ($i1.1
billion for specific perils) per occurrence and/or policy year. In addition, we purchase insurance covering damage to property owned by us or in our care, custody, or control. This insurance covers approximately i82% of potential losses above $i75
million and below $i275 million per occurrence and/or policy year.
11. iNew
Accounting Pronouncements
iIn November 2021, the Financial Accounting Standards Board issued Accounting Standards Update 2021-10, “Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance,” which requires annual disclosures when an entity has received government assistance. Entities are required to disclose the types of government assistance received, the accounting treatment for
that government assistance, and the effect of the government assistance on the financial statements. The new standard is effective for annual periods beginning after December 15, 2021, and early adoption is permitted. We do not expect this standard to have a material effect on our disclosures. We did not adopt the standard early.
12. iSubsequent Events
On
July 8, 2022, House Bill 1342 was signed into law in the Commonwealth of Pennsylvania, making significant changes to its corporate income tax rate. The bill reduces its corporate income tax rate from 9.99% to 4.99%, with reductions occurring in phases beginning each tax year from January 1, 2023 through January 1, 2031. GAAP requires companies to recognize the effect of tax law changes in the period of enactment. As a result, it is expected that there will be a decrease in “Deferred income taxes” on the Consolidated Balance Sheet and a corresponding decrease in “Income taxes” on the Income Statement in the third quarter of 2022. We currently estimate that the impact will be approximately $ii135/
million.
18
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
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, moving goods and materials that help drive the U.S. economy. We connect customers to markets and communities to economic opportunity with safe, reliable, and cost-effective shipping solutions. Our Norfolk Southern Railway Company subsidiary operates in 22 states and the District of Columbia. We are a major transporter of industrial products, including agriculture, forest and consumer products, chemicals, and metals and construction materials. In addition, in the East we serve every major container port and operate the most extensive intermodal network. We are also a principal carrier of coal, automobiles, and automotive parts.
Strong revenue growth drove operating income improvement in the second quarter.Although lower network velocity contributed to volume declines compared to prior year, higher
fuel surcharge revenues and pricing gains led to revenue per unit growth that more than offset the impact of lower volume.The increase in fuel commodity prices also led to higher fuel expense. The net impact of fuel prices on revenues and expenses, coupled with lower current-year gains on operating property sales, contributed to the degradation of the railway operating ratio (a measure of the amount of operating revenues consumed by operating expenses).While network fluidity remained challenged, we are taking the steps necessary for service restoration.These efforts include recruiting, training, and retaining our transportation crews as well as evolving our operating plan, with the goal of improving service for our customers.
The COVID-19 pandemic continues
to impact the U.S. and global economies and has resulted in ongoing supply chain challenges. We are monitoring and reacting to the evolving nature of the pandemic, governmental responses, and their impacts on our business, including employee availability. We remain committed to protecting our employees, operating safely, and providing excellent transportation service products for our customers.
SUMMARIZED RESULTS OF OPERATIONS
Second
Quarter
First Six Months
2022
2021
% change
2022
2021
% change
($ in millions, except per share amounts)
Income
from railway operations
$
1,271
$
1,167
9%
$
2,356
$
2,182
8%
Net income
$
819
$
819
—%
$
1,522
$
1,492
2%
Diluted
earnings per share
$
3.45
$
3.28
5%
$
6.37
$
5.94
7%
Railway operating ratio (percent)
60.9
58.3
4%
61.8
59.9
3%
Income
from railway operations increased in both periods due to higher railway operating revenues. Revenue growth was driven by higher fuel surcharge revenues and pricing gains, which exceeded the impact of a 3% and 4% volume decline in the second quarter and first six months, respectively. The rise in revenues was offset in part by increased railway operating expenses, driven by higher fuel prices, other inflationary pressures, service-related costs, lower gains on the sale of operating properties, and higher claims-related expenses. Offsetting the growth in income from railway operations were lower net returns on corporate-owned life insurance (COLI) and higher income taxes. Our share repurchase activity resulted in the percentage increase in diluted earnings per share that exceeded that of net income.
19
DETAILED
RESULTS OF OPERATIONS
Railway Operating Revenues
The following tables present a comparison of revenues ($ in millions), units (in thousands), and average revenue per unit ($ per unit) by commodity group.
Second
Quarter
First Six Months
Revenues
2022
2021
% change
2022
2021
% change
Merchandise:
Agriculture,
forest and consumer products
$
624
$
578
8%
$
1,197
$
1,117
7%
Chemicals
552
494
12%
1,050
953
10%
Metals
and construction
420
402
4%
795
772
3%
Automotive
257
206
25%
483
446
8%
Merchandise
1,853
1,680
10%
3,525
3,288
7%
Intermodal
972
801
21%
1,826
1,520
20%
Coal
425
318
34%
814
630
29%
Total
$
3,250
$
2,799
16%
$
6,165
$
5,438
13%
Units
Merchandise:
Agriculture, forest and consumer products
183.6
187.7
(2%)
361.2
366.0
(1%)
Chemicals
140.0
133.7
5%
269.4
260.7
3%
Metals
and construction
163.9
176.3
(7%)
311.9
331.3
(6%)
Automotive
85.7
82.3
4%
166.9
176.0
(5%)
Merchandise
573.2
580.0
(1%)
1,109.4
1,134.0
(2%)
Intermodal
1,016.5
1,062.6
(4%)
1,973.0
2,079.0
(5%)
Coal
166.1
173.2
(4%)
331.7
339.7
(2%)
Total
1,755.8
1,815.8
(3%)
3,414.1
3,552.7
(4%)
Revenue
per Unit
Merchandise:
Agriculture, forest and consumer products
$
3,398
$
3,076
10%
$
3,314
$
3,051
9%
Chemicals
3,941
3,691
7%
3,897
3,654
7%
Metals
and construction
2,560
2,285
12%
2,548
2,332
9%
Automotive
3,007
2,507
20%
2,894
2,534
14%
Merchandise
3,233
2,896
12%
3,177
2,899
10%
Intermodal
955
754
27%
925
731
27%
Coal
2,562
1,837
39%
2,455
1,854
32%
Total
1,851
1,542
20%
1,806
1,531
18%
20
Railway
operating revenues increased $451 million in the second quarter and $727 million for the first six months compared with the same periods last year. The table below reflects the components of the revenue change by major commodity group ($ in millions).
Second
Quarter
First Six Months
Merchandise
Intermodal
Coal
Merchandise
Intermodal
Coal
Increase (Decrease)
Volume
$
(20)
$
(35)
$
(13)
$
(71)
$
(77)
$
(15)
Fuel
surcharge revenue
121
136
16
188
209
23
Rate, mix and other
72
70
104
120
174
176
Total
$
173
$
171
$
107
$
237
$
306
$
184
Approximately
95% of our revenue base is covered by contracts that include negotiated fuel surcharges. Revenues associated with these surcharges totaled $421 million and $148 million in the second quarters of 2022 and 2021, respectively, and $665 million and $245 million for the first six months of 2022 and 2021, respectively. The increase in fuel surcharge revenues is driven by higher fuel commodity prices. Should the current fuel price environment persist for the remainder of 2022, we expect fuel surcharge revenue to continue to be higher than 2021.
Merchandise
Merchandise revenues increased in both periods due to higher average revenue per unit, driven by higher fuel surcharge revenue and increased pricing, partially offset by decreased volume. Volumes fell in
both periods as declines in metals and construction and agriculture, forest, and consumer products shipments more than offset higher chemical shipments.
Agriculture, forest and consumer products volume decreased in both periods, as declines in corn, fertilizers, and pulp more than offset increases in soybeans and feed. Decreased corn and pulp shipments were due to service disruptions. Lower fertilizer shipments were due to high fertilizer prices causing customers to draw down on existing inventories or delay purchases. Soybean volumes were higher due to increased opportunity for exports and feed shipments were up because of increased customer demand.
Chemicals volume rose in both periods due to growth in shipments of sand and solid waste, driven by growth with existing customers.
Metals
and construction volume fell in both periods, largely the result of decreased shipments of coil steel, iron and steel, aggregates, scrap metal, and cement driven by commodity pricing, service disruptions and slower equipment cycle times.
Automotive volume increased in the second quarter but decreased for the first six months. Higher shipments in the second quarter were primarily due to production shutdowns in the prior year caused by parts supply issues. Volumes for the first six months were impacted by plant shutdowns, as a result of the global microchip shortage, and slower equipment cycle times.
Merchandise revenues for the remainder of the year are expected to be higher due to increased average revenue per unit, driven by higher fuel surcharge revenue and pricing gains, and volume growth.
21
Intermodal
Intermodal
revenues increased in both periods, driven by higher average revenue per unit, a result of higher fuel surcharge revenues, pricing gains and storage service charges, partially offset by lower volume.
Intermodal units (in thousands) by market were as follows:
Second
Quarter
First Six Months
2022
2021
% change
2022
2021
% change
Domestic
670.4
661.9
1%
1,323.8
1,300.9
2%
International
346.1
400.7
(14%)
649.2
778.1
(17%)
Total
1,016.5
1,062.6
(4%)
1,973.0
2,079.0
(5%)
Domestic
volume rose slightly due to strong demand, partially offset by service disruptions and limited chassis availability. International volume decreased as supply chain constraints with terminals, ports, labor, and chassis availability, as well as excess inventory in the warehousing retail sector more than offset strong consumer demand.
Intermodal revenues for the remainder of the year are expected to rise, driven by increased fuel surcharge revenue, volume growth, and pricing gains, partially offset by lower storage service revenues.
Coal
Coal revenues increased in both periods due to higher average revenue per unit, driven by pricing gains and higher fuel surcharge revenue, partially offset by lower volume.
Coal tonnage
(in thousands) by market was as follows:
Second Quarter
First
Six Months
2022
2021
% change
2022
2021
% change
Utility
8,267
8,563
(3%)
17,228
17,109
1%
Export
6,514
6,580
(1%)
12,928
13,273
(3%)
Domestic
metallurgical
2,782
3,325
(16%)
5,212
5,812
(10%)
Industrial
1,083
871
24%
1,886
1,770
7%
Total
18,646
19,339
(4%)
37,254
37,964
(2%)
Coal
tonnage declined in both periods primarily due to decreased domestic metallurgical tonnage. While utility tonnage increased slightly for the first six months, it experienced a decrease in the second quarter due to service disruptions and tight coal supply. Export tonnage decreased due to service disruptions and tight coal supply. Domestic metallurgical coal tonnage fell due to reduced coke shipments related to customer sourcing changes. Industrial coal tonnage increased in both periods due to increased demand.
Coal revenues for the remainder of the year are expected to rise due to increased volumes.
22
Railway Operating Expenses
Railway
operating expenses summarized by major classifications follow ($ in millions):
Second Quarter
First
Six Months
2022
2021
% change
2022
2021
% change
Compensation
and benefits
$
614
$
624
(2%)
$
1,233
$
1,235
—%
Purchased services and rents
481
429
12%
918
822
12%
Fuel
408
188
117%
709
365
94%
Depreciation
304
294
3%
606
586
3%
Materials
and other
172
97
77%
343
248
38%
Total
$
1,979
$
1,632
21%
$
3,809
$
3,256
17%
Compensation
and benefits expense decreased in both periods as follows:
•incentive and stock-based compensation (down $32 million for the quarter and $24 million for the first six months),
•employee activity levels (up $2 million for the quarter but down $15 million for the first six months),
•overtime (up $4 million for the quarter and $13 million for the first six months),
•increased pay rates (up $11 million for the quarter and $21 million for the first six months), and
•other (up $5 million for the quarter and $3 million for the first six months).
Average
rail headcount for the quarter was up by over 100 compared with the second quarter of 2021, and up over 600 compared with the fourth quarter of 2021.
Purchased services and rents increased in both periods as follows ($ in millions):
Second
Quarter
First Six Months
2022
2021
% change
2022
2021
% change
Purchased
services
$
387
$
352
10%
$
736
$
670
10%
Equipment rents
94
77
22%
182
152
20%
Total
$
481
$
429
12%
$
918
$
822
12%
Purchased
services increased in both periods due to inflationary pressures which resulted in higher intermodal-related expenses, increased operational and transportation expenses, as well as, higher technology-related costs. Equipment rents increased in both periods as lower network fluidity led to greater time-and-mileage expenses and increased automotive equipment expenses. Additionally, both periods had lower equity in TTX earnings.
Fuel expense, which includes the cost of locomotive fuel as well as other fuel used in railway operations, increased in both periods due to higher locomotive fuel prices (up 124% in the second quarter and 102% in the first six months), partially offset by decreased consumption (down 3% in both the second quarter and first six months). Should the current fuel price environment persist for the remainder of 2022, we expect fuel expenses to continue to be higher
compared to 2021.
23
Materials and other expenses increased in both periods as follows ($ in millions):
Second
Quarter
First Six Months
2022
2021
% change
2022
2021
% change
Materials
$
70
$
61
15%
$
132
$
122
8%
Claims
64
43
49%
113
81
40%
Other
38
(7)
643%
98
45
118%
Total
$
172
$
97
77%
$
343
$
248
38%
Materials
expense increased in both periods due to increased track and freight car materials costs. Locomotive maintenance costs were also higher in the second quarter. Claims expense increased in both periods as a result of higher costs associated with personal injuries, environmental remediation matters, and derailments. Other expense increased in both periods due to lower gains from operating property sales and litigation-related expenses. Gains from operating property sales totaled $28 million and $67 million for the second quarters of 2022 and 2021, respectively, and $34 million and $71 million in the first six months of 2022 and 2021, respectively.
Other income (expense) – net
Other income (expense) – net decreased $49 million in the second quarter and $61 million for the first six months. Both periods experienced lower net returns on COLI partially
offset by a higher net pension benefit.
Income taxes
The second-quarter and six month effective tax rates for 2022 were 24.7% and 23.9%, compared with 21.3% and 21.8%, respectively, for the same periods last year. The increases in the effective rates for 2022 reflect lower returns on COLI and lower tax benefits on stock-based compensation. Additionally, in 2021, we recognized a $23 million reduction in deferred taxes associated with a state tax law change.
On July 8, 2022, House Bill 1342 was signed into law in the Commonwealth of Pennsylvania, making significant changes to its corporate income tax rate. The bill reduces its corporate income tax rate from 9.99% to 4.99%, with reductions occurring in phases beginning each
tax year from January 1, 2023 through January 1, 2031. GAAP requires companies to recognize the effect of tax law changes in the period of enactment. As a result, it is expected that there will be a decrease in “Deferred income taxes” on the Consolidated Balance Sheet and a corresponding decrease in “Income taxes” on the Income Statement in the third quarter of 2022. We currently estimate that the impact will be approximately $135 million.
FINANCIAL CONDITION AND LIQUIDITY
Cash provided by operating activities, our principal source of liquidity, was $2.0 billion for the first six months of 2022, compared
with $2.1 billion for the same period of 2021. We had working capital of $248 million and negative working capital of $354 million at June 30, 2022 and December 31, 2021, respectively. Cash and cash equivalents totaled $1.3 billion at June 30, 2022.
Cash used in investing activities was $714 million for the first six months of 2022, compared with $529 million for the same period last year. The increase was primarily driven by higher property additions.
Cash used in financing activities was $877 million for the first six months of 2022, while $1.0 billion was used in financing activities for the same period last year, reflecting increased proceeds from borrowing partially offset by higher debt
repayments and dividends. We repurchased $1.5 billion of Common Stock in the first six months of both 2022 and 2021. On March 29, 2022, our Board of Directors authorized a new program for the repurchase of
24
up to an additional $10.0 billion of Common Stock beginning April 1, 2022. Our previous share repurchase program terminated on March 31, 2022. The timing and volume of future share repurchases will be guided by our assessment of market conditions and other pertinent factors. Repurchases may be executed in the open market, through derivatives, accelerated repurchase and other negotiated
transactions and through plans designed to comply with Rule 10b5-1(c) and Rule 10b-18 under the Securities and Exchange Act of 1934. Any near-term purchases under the program are expected to be made with internally-generated cash, cash on hand, or proceeds from borrowings.
In June 2022, we issued $750 million of 4.55% senior notes due 2053.
In May 2022, we renewed our accounts receivable securitization program with a maximum borrowing capacity of $400 million. The term expires in May 2023. We had no amounts outstanding under this program
and our available borrowing capacity was $400 million at both June 30, 2022, and December 31, 2021.
In February 2022, we issued $600 million of 3.00% senior notes due 2032 and $400 million of 3.70% senior notes due 2053.
We also have in place and available an $800 million credit agreement expiring in March 2025, which provides for borrowings at prevailing rates and includes covenants. We had no amounts outstanding under this facility at June 30, 2022 or December 31, 2021.
In addition, we have investments in general purpose corporate-owned life insurance policies and had the ability
to borrow against these policies up to $630 million and $715 million at June 30, 2022 and December 31, 2021, respectively.
We expect cash on hand combined with cash provided by operating activities will be sufficient to meet our ongoing obligations. In addition, we believe our currently-available borrowing capacity, access to additional financing, and ability to reduce or defer expenditures on property additions and decrease 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 decline of cash inflows from operations. There have been no material changes to the information on future contractual obligations, including those that may have material
cash requirements, contained in our Form 10-K for the year ended December 31, 2021, with the exception of additional senior notes (see Note 7) and approximately $1.0 billion of additional unconditional purchase obligations, which extend through 2025.
CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of 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 critical accounting estimates contained in our Form 10-K at December 31, 2021.
25
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. Moratorium provisions in the labor agreements govern when the railroads and unions may propose changes to the agreements. We largely bargain nationally in concert with other major railroads, represented by the National Carriers’ Conference Committee. After management and the unions served their formal proposals in November 2019 for changes to the collective bargaining agreements, negotiations began in 2020 following the expiration of the last moratorium. On June 17, 2022, the National Mediation Board notified the parties that all practical
methods of ending the dispute had been exhausted without effecting a settlement and that its mediation services had been terminated. Although negotiations between the parties continue, this release allowed either party to engage in self-help (strike or lockout) after a 30-day cooling off period. However, because the dispute threatens to interrupt commerce and deprive certain segments of the domestic economy of essential transportation service, President Biden created Presidential Emergency Board (PEB) No. 250, effective July 18, 2022, to investigate the facts of the dispute and make recommendations. The creation of the PEB delays any potential self-help for 60 days while the PEB makes recommendations (expected 30 days from the date the PEB was created) and the parties engage in further negotiations (for a period of 30 days). The outcome of the negotiations cannot be determined at this time; however, if the dispute
is not resolved during this final period of negotiations and either party rejects the recommendations of the PEB, self-help could occur in mid-September. As has occurred during prior labor agreement negotiations, the parties could potentially reach an agreement during post-PEB negotiations, or Congress could take legislative action to preempt self-help and avert a service disruption. A service disruption, depending on the duration, could have a material adverse effect on our financial position, results of operations, or liquidity. In addition, changes in our labor agreements could significantly increase our costs for health care, wages, and other benefits.
New Accounting Pronouncements
For a detailed discussion of new accounting pronouncements, see Note 11.
Inflation
In
preparing financial statements, GAAP requires the use of historical cost that disregards the effects of inflation on the replacement cost of property. As a capital-intensive company, we have most of our capital invested in long-lived assets. The replacement cost of these assets, as well as the related depreciation expense, would be substantially greater than the amounts reported on the basis of historical cost.
FORWARD-LOOKING STATEMENTS
Certain statements in Management’s Discussion and Analysis of Financial Condition and Results of Operations are “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, as amended. These statements
relate to future events or our future financial performance and involve known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance, or our achievements or those of our industry to be materially different from those expressed or implied by any forward-looking statements. In some cases, forward-looking statements can be identified by terminology such as “may,”“will,”“could,”“would,”“should,”“expect,”“plan,”“anticipate,”“intend,”“believe,”“estimate,”“project,”“consider,”“predict,”“potential,”“feel,” or other comparable terminology. We have based these forward-looking statements on our current expectations, assumptions, estimates, beliefs, and projections. While we believe these expectations, assumptions, estimates, beliefs, and projections are reasonable, such forward-looking statements
are only predictions and involve known and unknown risks and uncertainties, many of which involve factors or circumstances that are beyond our control. These and other important factors, including those discussed 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
26
expressed or implied by these forward-looking statements. The forward-looking statements herein are made only as of the date they were first issued, and unless otherwise required by applicable securities laws, we disclaim any intention or obligation to update or revise any forward-looking statements, whether as a
result of new information, future events, or otherwise.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The information required by this item is included in Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”
under the heading “Financial Condition and Liquidity.”
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our Chief Executive Officer and Chief Financial Officer, with the assistance of management, evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (Exchange Act)) at June 30, 2022. Based on such evaluation, our officers have concluded that, at June 30, 2022, our disclosure controls
and procedures were effective in alerting them on a timely basis to material information required to be included in our periodic filings under the Exchange Act.
Changes in Internal Control Over Financial Reporting
During the second quarter of 2022, 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.
27
PART
II. OTHER INFORMATION
Item 1. Legal Proceedings
For information on our legal proceedings, see Note 10 “Commitments and Contingencies” in the Consolidated Financial Statements.
Item 1A. Risk Factors
The risks set forth in “Risk Factors” included in our 2021 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.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Period
(a)
Total Number of Shares (or Units) Purchased(1)
(b) Average Price Paid per Share (or Unit)
(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs (2)
(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that may yet be purchased under the Plans or Programs (2)
April
1-30, 2022
907,332
$
262.17
907,332
$
9,762,127,094
May 1-31, 2022
1,266,662
244.19
1,266,662
9,452,824,147
June
1-30, 2022
1,327,298
230.97
1,327,298
9,146,255,336
Total
3,501,292
3,501,292
(1)Of
this amount, no shares were tendered by employees in connection with the exercise of options under the stockholder-approved LTIP.
(2)On March 29, 2022, our Board of Directors authorized a new program for the repurchase of up to $10.0 billion of Common Stock beginning April 1, 2022. As of June 30, 2022, $9.1 billion remains authorized for repurchase. Our previous share repurchase program terminated on March 31, 2022.
The following financial information from Norfolk Southern Corporation’s Quarterly Report on Form 10-Q for the second quarter of 2022, formatted in Inline Extensible Business Reporting Language (iXBRL) includes (i) the Consolidated Statements of Income for the second quarter and first six months of 2022 and 2021; (ii) the Consolidated Statements of Comprehensive Income for the second quarter and first six months of 2022 and 2021; (iii) the Consolidated Balance Sheets at June 30, 2022 and December 31, 2021; (iv) the Consolidated Statements of Cash Flows for the first six months of 2022 and 2021; (v) the Consolidated Statements of Changes in
Stockholders’ Equity for the second quarter and first six months of 2022 and 2021; and (vi) the Notes to Consolidated Financial Statements.
104*
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
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.
