nsc-20230630

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2023

☐ 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.)


650 West Peachtree Street NW		30308-1925
Atlanta,	Georgia
(Address of principal executive offices)		(Zip Code)
(855)		667-3655
(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
Norfolk Southern Corporation Common Stock (Par Value $1.00)	NSC	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

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


Class	Outstanding at June 30, 2023
Common Stock ($1.00 par value per share)	227,015,277	(excluding 20,320,777 shares held by the registrant’s
	consolidated subsidiaries)

TABLE OF CONTENTS

NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES


		Page
Part I.	Financial Information:
	Item 1.	Financial Statements:
		Consolidated Statements of Income Second Quarter and First Six Months of 2023 and 2022	3
		Consolidated Statements of Comprehensive Income S econd Quarter and First Six Months of 2023 and 2022	4
		Consolidated Balance Sheets At June 3 0 , 2023 and December 31, 2022	5
		Consolidated Statements of Cash Flows First Six Months of 2023 and 2022	6
		Consolidated Statements of Changes in Stockholders’ Equity S e cond Quarter and F irst Six Months of 2023 and 2022	7
		Notes to Consolidated Financial Statements	9
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
	Item 4.	Controls and Procedures	33

Part II.	Other Information:
	Item 1.	Legal Proceedings	35
	Item 1A.	Risk Factors	35
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36
	Item 3.	Defaults Upon Senior Securities	36
	Item 4.	Mine Safety Disclosures	36
	Item 5.	Other Information	36
	Item 6.	Exhibits	37

		Signatures	38

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Income

(Unaudited)


	Second Quarter				First Six Months
	2023		2022		2023		2022
	($ in millions, except per share amounts)

Railway operating revenues	$	2,980	$	3,250	$	6,112	$	6,165

Railway operating expenses
Compensation and benefits	693		614		1,383		1,233
Purchased services and rents	506		481		1,002		918
Fuel	263		408		578		709
Depreciation	321		304		642		606
Materials and other	205		172		417		343
Eastern Ohio incident	416		—		803		—

Total railway operating expenses	2,404		1,979		4,825		3,809

Income from railway operations	576		1,271		1,287		2,356

Other income (expense) – net	57		(14)		113		(19)
Interest expense on debt	170		170		345		338

Income before income taxes	463		1,087		1,055		1,999

Income taxes	107		268		233		477

Net income	$	356	$	819	$	822	$	1,522

Earnings per share
Basic	$	1.56	$	3.46	$	3.61	$	6.39
Diluted	1.56		3.45		3.60		6.37

See accompanying notes to consolidated financial statements.

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income

(Unaudited)


	Second Quarter				First Six Months
	2023		2022		2023		2022
	($ in millions)

Net income	$	356	$	819	$	822	$	1,522
Other comprehensive income (loss), before tax:
Pension and other postretirement benefit (expense)	(6)		5		(11)		11
Other comprehensive income of equity investees	1		2		—		8

Other comprehensive income (loss), before tax	(5)		7		(11)		19
Income tax benefit (expense) related to items of other
comprehensive income (loss)	1		(1)		3		(5)

Other comprehensive income (loss), net of tax	(4)		6		(8)		14

Total comprehensive income	$	352	$	825	$	814	$	1,536

See accompanying notes to consolidated financial statements.

Norfolk Southern Corporation and Subsidiaries

Consolidated Balance Sheets

(Unaudited)


	June 30, 2023		December 31, 2022
	($ in millions)
Assets
Current assets:
Cash and cash equivalents	$	556	$	456

Accounts receivable – net	1,089		1,148
Materials and supplies	272		253
Other current assets	114		150
Total current assets	2,031		2,007

Investments	3,673		3,694
Properties less accumulated depreciation of $13,024
and $12,592, respectively	32,474		32,156
Other assets	1,083		1,028

Total assets	$	39,261	$	38,885

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	1,416	$	1,293
Short-term debt	130		100
Income and other taxes	243		312
Other current liabilities	792		341
Current maturities of long-term debt	405		603
Total current liabilities	2,986		2,649

Long-term debt	14,594		14,479
Other liabilities	1,814		1,759
Deferred income taxes	7,227		7,265

Total liabilities	26,621		26,152

Stockholders’ equity:
Common stock $1.00 per share par value, 1,350,000,000 shares
authorized; outstanding 227,015,277 and 228,076,415 shares,
respectively, net of treasury shares	228		230
Additional paid-in capital	2,160		2,157
Accumulated other comprehensive loss	(359)		(351)
Retained income	10,611		10,697

Total stockholders’ equity	12,640		12,733

Total liabilities and stockholders’ equity	$	39,261	$	38,885

See accompanying notes to consolidated financial statements.

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)


		First Six Months
		2023		2022
		($ in millions)
Cash flows from operating activities
	Net income	$	822	$	1,522
	Reconciliation of net income to net cash provided by operating activities:
	Depreciation	642		606
	Deferred income taxes	(35)		111
	Gains and losses on properties	(25)		(37)
	Changes in assets and liabilities affecting operations:
	Accounts receivable	57		(230)
	Materials and supplies	(19)		(71)
	Other current assets	36		30
	Current liabilities other than debt	460		75
	Other – net	(92)		5

	Net cash provided by operating activities	1,846		2,011

Cash flows from investing activities
	Property additions	(948)		(837)
	Property sales and other transactions	61		100
	Investment purchases	(6)		(7)
	Investment sales and other transactions	152		30

	Net cash used in investing activities	(741)		(714)

Cash flows from financing activities
	Dividends	(615)		(591)
	Common stock transactions	(9)		(14)
	Purchase and retirement of common stock	(303)		(1,454)
	Proceeds from borrowings	724		1,732
	Debt repayments	(802)		(550)

	Net cash used in financing activities	(1,005)		(877)

	Net increase in cash and cash equivalents	100		420

Cash and cash equivalents
	At beginning of year	456		839

	At end of period	$	556	$	1,259

Supplemental disclosures of cash flow information
	Cash paid during the period for:
	Interest (net of amounts capitalized)	$	318	$	294
	Income taxes (net of refunds)	315		321

See accompanying notes to consolidated financial statements.

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, 2022	$	230	$	2,157	$	(351)	$	10,697	$	12,733

Comprehensive income:
Net income							466		466
Other comprehensive loss					(4)				(4)
Total comprehensive income									462
Dividends on common stock,
$1.35 per share							(307)		(307)
Share repurchases	(1)		(6)				(156)		(163)
Stock-based compensation			4				(2)		2

Balance at March 31, 2023	229		2,155		(355)		10,698		12,727

Comprehensive income:
Net income							356		356
Other comprehensive loss					(4)				(4)
Total comprehensive income									352
Dividends on common stock,
$1.35 per share							(308)		(308)
Share repurchases	(1)		(4)				(135)		(140)
Stock-based compensation			9						9

Balance at June 30, 2023	$	228	$	2,160	$	(359)	$	10,611	$	12,640

See accompanying notes to consolidated financial statements.

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, 2021	$	242	$	2,215	$	(402)	$	11,586	$	13,641

Comprehensive income:
Net income							703		703
Other comprehensive income					8				8
Total comprehensive income									711
Dividends on common stock,
$1.24 per share							(297)		(297)
Share repurchases	(2)		(19)				(579)		(600)
Stock-based compensation			7				(1)		6

Balance at March 31, 2022	240		2,203		(394)		11,412		13,461

Comprehensive income:
Net income							819		819
Other comprehensive income					6				6
Total comprehensive income									825
Dividends on common stock,
$1.24 per share							(294)		(294)
Share repurchases	(4)		(29)				(821)		(854)
Stock-based compensation			16						16

Balance at June 30, 2022	$	236	$	2,190	$	(388)	$	11,116	$	13,154

See accompanying notes to consolidated financial statements.

Norfolk Southern Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

In the opinion of management, the accompanying unaudited interim consolidated financial statements contain all adjustments (consisting of normal recurring accruals) necessary to present fairly Norfolk Southern Corporation (Norfolk Southern) and subsidiaries’ (collectively, NS, we, us, and our) financial position at June 30, 2023 and December 31, 2022, our results of operations, comprehensive income and changes in stockholders’ equity for the second quarters and first six months of 2023 and 2022, and our cash flows for the first six months of 2023 and 2022 in conformity with U.S. Generally Accepted Accounting Principles (GAAP).

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

1. Railway Operating Revenues

The following table disaggregates our revenues by major commodity group:


	Second Quarter				First Six Months
	2023		2022		2023		2022
	($ in millions)
Merchandise:
Agriculture, forest and consumer products	$	627	$	624	$	1,280	$	1,197
Chemicals	503		552		1,044		1,050
Metals and construction	415		420		815		795
Automotive	281		257		565		483
Merchandise	1,826		1,853		3,704		3,525
Intermodal	745		972		1,559		1,826
Coal	409		425		849		814

Total	$	2,980	$	3,250	$	6,112	$	6,165

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, 2023 and December 31, 2022.

We may provide customers ancillary services, such as switching, demurrage and other incidental activities, under their transportation contracts. The revenues associated with these distinct performance obligations are recognized when the services are performed or as contractual obligations are met. These revenues are included within each of the commodity groups and represent approximately 4% and 6% of total “Railway operating revenues” on the Consolidated Statements of Income for the second quarters of 2023 and 2022, respectively, and 5% and 7% for the first six months of 2023 and 2022, respectively.

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 fifteen days of billing the customer, thus there are no significant financing components. “Accounts receivable – net” on the Consolidated Balance Sheets includes both customer and non-customer receivables as follows:


	June 30, 2023		December 31, 2022
	($ in millions)

Customer	$	818	$	895
Non-customer	271		253

Accounts receivable – net	$	1,089	$	1,148

Non-customer receivables include non-revenue-related amounts due from other railroads, governmental entities, and others. We do not have any material contract assets or liabilities at June 30, 2023 and December 31, 2022.

2. Stock-Based Compensation


	Second Quarter				First Six Months
	2023		2022		2023		2022
	($ in millions)

Stock-based compensation expense	$	11	$	13	$	22	$	36
Total tax benefit	3		4		9		17

During 2023, 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	—	$	—	69,580	$	77.60
RSUs	20,150	199.33		193,371	233.71
PSUs	920	209.22		58,960	236.25

Stock Options


	Second Quarter				First Six Months
	2023		2022		2023		2022
	($ in millions)

Options exercised	10,461		39,546		77,272		158,889
Cash received upon exercise	$	1	$	4	$	6	$	14
Related tax benefits realized	—		1		3		6

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.


	Second Quarter				First Six Months
	2023		2022		2023		2022
	($ in millions)

RSUs vested	3,908		3,652		153,030		246,953
Common Stock issued net of tax withholding	2,811		2,612		107,419		174,976
Related tax benefits realized	$	—	$	—	$	1	$	5

Performance Share Units

PSUs provide for awards ba

SEC Form 10-Q filed by Norfolk Southern Corporation