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 MARCH 31, 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)		(IRS Employer Identification No.)
Three Commercial Place		23510-2191
Norfolk,	Virginia
(Address of principal executive offices)		(Zip Code)
(757)		629-2680
(Registrant’s telephone number, including area code)
No Change
(Former name, former address and former fiscal year, if changed since last report)

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

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

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

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

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

Large accelerated filer  ☒  Accelerated filer ☐ Non-accelerated filer  ☐

Smaller reporting company  ☐  Emerging growth company  ☐

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

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

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

Class	Outstanding at March 31, 2020
Common Stock ($1.00 par value per share)	256,179,130	(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 First Quarter of 2020 and 2019	3
		Consolidated Statements of Comprehensive Income First Quarter of 2020 and 2019	4
		Consolidated Balance Sheets At March 31, 2020 and December 31, 2019	5
		Consolidated Statements of Cash Flows First Three Months of 2020 and 2019	6
		Consolidated Statements of Changes in Stockholders’ Equity First Quarter of 2020 and 2019	7
		Notes to Consolidated Financial Statements	8
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26
	Item 4.	Controls and Procedures	26
Part II.	Other Information:
	Item 1.	Legal Proceedings	27
	Item 1A.	Risk Factors	27
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28
	Item 6.	Exhibits	29
		Signatures	30

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Income

(Unaudited)

	First Quarter
	2020		2019
	($ in millions, except per share amounts)
Railway operating revenues	$	2,625	$	2,840
Railway operating expenses:
Compensation and benefits	622		727
Purchased services and rents	403		424
Fuel	189		250
Depreciation	292		283
Materials and other	166		190
Loss on asset disposal	385		—
Total railway operating expenses	2,057		1,874
Income from railway operations	568		966
Other income – net	22		44
Interest expense on debt	154		149
Income before income taxes	436		861
Income taxes	55		184
Net income	$	381	$	677
Earnings per share:
Basic	$	1.48	$	2.53
Diluted	1.47		2.51

 See accompanying notes to consolidated financial statements.

3

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income

(Unaudited)

	First Quarter
	2020		2019
	($ in millions)
Net income	$	381	$	677
Other comprehensive income, before tax:
Pension and other postretirement benefits	7		5
Other comprehensive income (loss) of equity investees	5		(1)
Other comprehensive income, before tax	12		4
Income tax expense related to items of
other comprehensive income	(2)		(1)
Other comprehensive income, net of tax	10		3
Total comprehensive income	$	391	$	680

 See accompanying notes to consolidated financial statements.

4

Norfolk Southern Corporation and Subsidiaries

Consolidated Balance Sheets

(Unaudited)

	March 31, 2020		December 31, 2019
	($ in millions)
Assets
Current assets:
Cash and cash equivalents	$	608	$	580
Accounts receivable – net	889		920
Materials and supplies	265		244
Other current assets	240		337
Total current assets	2,002		2,081
Investments	3,470		3,428
Properties less accumulated depreciation of $11,794
and $11,982, respectively	31,179		31,614
Other assets	787		800
Total assets	$	37,438	$	37,923
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	1,284	$	1,428
Income and other taxes	200		229
Other current liabilities	352		327
Current maturities of long-term debt	400		316
Total current liabilities	2,236		2,300
Long-term debt	11,807		11,880
Other liabilities	1,683		1,744
Deferred income taxes	6,828		6,815
Total liabilities	22,554		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	258		259
Additional paid-in capital	2,205		2,209
Accumulated other comprehensive loss	(481)		(491)
Retained income	12,902		13,207
Total stockholders’ equity	14,884		15,184
Total liabilities and stockholders’ equity	$	37,438	$	37,923

 See accompanying notes to consolidated financial statements.

5

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

		First Three Months
		2020		2019
		($ in millions)
Cash flows from operating activities:
	Net income	$	381	$	677
	Reconciliation of net income to net cash provided by operating activities:
	Depreciation	292		283
	Deferred income taxes	11		57
	Gains and losses on properties	(8)		(18)
	Loss on asset disposal	385		—
	Changes in assets and liabilities affecting operations:
	Accounts receivable	32		(39)
	Materials and supplies	(21)		(21)
	Other current assets	(33)		12
	Current liabilities other than debt	(40)		(27)
	Other – net	(44)		(43)
	Net cash provided by operating activities	955		881
Cash flows from investing activities:
	Property additions	(366)		(467)
	Property sales and other transactions	158		152
	Investment purchases	—		(2)
	Investment sales and other transactions	(25)		(33)
	Net cash used in investing activities	(233)		(350)
Cash flows from financing activities:
	Dividends	(242)		(230)
	Common stock transactions	14		2
	Purchase and retirement of common stock	(466)		(500)
	Proceeds from borrowings	—		250
	Net cash used in financing activities	(694)		(478)
	Net increase in cash, cash equivalents, and restricted cash	28		53
Cash, cash equivalents, and restricted cash:
	At beginning of year	580		446
	At end of period	$	608	$	499
Supplemental disclosures of cash flow information:
	Cash paid during the period for:
	Interest (net of amounts capitalized)	$	121	$	112
	Income taxes (net of refunds)	16		9

 See accompanying notes to consolidated financial statements.

6

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity

(Unaudited)

	Common Stock		Additional Paid-in Capital		Accum. Other Comprehensive Loss		Retained Income		Total
	($ in millions, except per share amounts)
Balance at December 31, 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

	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

 See accompanying notes to consolidated financial statements.

7

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 March 31, 2020, and December 31, 2019, our results of operations, comprehensive income and changes in stockholders’ equity for the first quarters of 2020 and 2019, and our cash flows for the first three 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:

	First Quarter
	2020		2019
Merchandise:	($ in millions)
Agriculture, forest and consumer products	$	551	$	558
Chemicals	520		507
Metals and construction	367		370
Automotive	234		251
Merchandise	1,672		1,686
Intermodal	655		719
Coal	298		435
Total	$	2,625	$	2,840

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 to total transit days. We had no material remaining performance obligations as of March 31, 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.

8

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:

	March 31, 2020		December 31, 2019
	($ in millions)
Customer	$	665	$	682
Non-customer	224		238
Accounts receivable – net	$	889	$	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 March 31, 2020 and December 31, 2019. We do not have any material contract assets or liabilities at March 31, 2020 or December 31, 2019.

Certain ancillary services may be provided to customers under their transportation contracts such as switching, demurrage and other incidental service revenues. These are distinct performance obligations that are recognized at a point in time when the services are performed or as contractual obligations are met. This revenue is included within each of the commodity groups and represents 5% of total “Railway operating revenues” on the Consolidated Statements of Income for both the first quarter of 2020 and 2019.

2.  Stock-Based Compensation

	First Quarter
	2020		2019
	($ in millions)
Stock-based compensation expense	$	2	$	16
Total tax benefit	26		23

During the first quarter of 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:

	First Quarter
	Granted	Weighted-Average Grant-Date Fair Value
Stock options	42,720	$	52.37
RSUs	164,160	210.77
PSUs	76,790	213.38

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Stock Options

	First Quarter
	2020		2019
	($ in millions)
Stock options exercised	523,238		406,371
Cash received upon exercise	$	43	$	28
Related tax benefit realized	13		9

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. 

	First Quarter
	2020		2019
	($ in millions)
RSUs vested	202,299		165,549
Common Stock issued net of tax withholding	143,712		118,881
Related tax benefit realized	$	5	$	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.

	First Quarter
	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 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 quarter, we sold 297 of 703 locomotives under the plan. The carrying amount of the remaining assets held for sale of $44 million is classified as “Other current assets” in the Consolidated Balance Sheets at March 31, 2020.

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4.  Earnings Per Share

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

	Basic				Diluted
	First Quarter
	2020		2019		2020		2019
	($ in millions, except per share amounts, shares in millions)
Net income	$	381	$	677	$	381	$	677
Dividend equivalent payments	(1)		(1)		(1)		—
Income available to common stockholders	$	380	$	676	$	380	$	677
Weighted-average shares outstanding	257.3		267.1		257.3		267.1
Dilutive effect of outstanding options
and share-settled awards					1.4		2.3
Adjusted weighted-average shares outstanding					258.7		269.4
Earnings per share	$	1.48	$	2.53	$	1.47	$	2.51

During the first quarter of 2020 and 2019, dividend equivalent payments were made to certain holders of stock options and RSUs.  For purposes of computing basic earnings per share, dividend equivalent payments made to holders of stock options and RSUs were deducted from net income to determine income available to common stockholders. For purposes of computing diluted earnings per share, we evaluate on a grant-by-grant basis those stock options and RSUs receiving dividend equivalent payments under the two-class and treasury stock methods to determine which method is more dilutive for each grant. For those grants for which the two-class method was more dilutive, net income was reduced by dividend equivalent payments to determine income available to common stockholders. There are no awards outstanding that were antidilutive for the first quarters ended March 31, 2020 and 2019.

11

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)
Three Months Ended March 31, 2020
Pensions and other
postretirement liabilities	$	(421)	$	—	$	5	$	(416)
Other comprehensive income (loss)
of equity investees	(70)		5		—		(65)
Accumulated other
comprehensive loss	$	(491)	$	5	$	5	$	(481)
Three Months Ended March 31, 2019
Pensions and other
postretirement liabilities	$	(497)	$	—	$	4	$	(493)
Other comprehensive loss
of equity investees	(66)		(1)		—		(67)
Accumulated other
comprehensive loss	$	(563)	$	(1)	$	4	$	(560)

6.  Stock Repurchase Program

We repurchased and retired 2.6 million and 2.9 million shares of Common Stock under our stock repurchase program during the first three months of 2020 and 2019, respectively, at a cost of $466 million and $500 million, 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 the jointly owned entity, and CSX has the remainder of the economic and voting interests. Our investment in Conrail was $1.4 billion at both March 31, 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 $35 million and $37 million for the first quarters 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 $9 million and $8 million for the first quarters of 2020 and 2019, respectively.

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“Other liabilities” includes $280 million at both March 31, 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 $60 million and $62 million of expense for the first quarters of 2020 and 2019, respectively. Our equity in the earnings of TTX, which offset the costs and are also included in “Purchased services and rents,” totaled $4 million and $13 million for the first quarters of 2020 and 2019, respectively.

8.  Debt

We have in place an accounts receivable securitization program with maximum borrowing capacity of $450 million and a term expiring in May 2020. We had no amounts outstanding at both March 31, 2020, and December 31, 2019, and our available borrowing capacity was $412 million and $429 million, respectively.

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

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.

13

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

					Other Postretirement
	Pension Benefits				Benefits
	First Quarter
	2020		2019		2020		2019
	($ in millions)
Service cost	$	10	$	9	$	1	$	2
Interest cost	19		23		3		4
Expected return on plan assets	(48)		(45)		(3)		(4)
Amortization of net losses	13		11		—		—
Amortization of prior service benefit	—		—		(6)		(6)
Net benefit	$	(6)	$	(2)	$	(5)	$	(4)

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

10.  Fair Values of Financial Instruments

The fair values of “Cash and cash equivalents,” “Accounts receivable – net,” and “Accounts payable,” approximate carrying values because of the short maturity of these financial instruments. The carrying value of corporate-owned life insurance is recorded at cash surrender value and, accordingly, approximates fair value. There are no other assets or liabilities measured at fair value on a recurring basis at March 31, 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:

	March 31, 2020				December 31, 2019
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	($ in millions)
Long-term debt, including current maturities	$	(12,207)	$	(14,630)	$	(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.

14

In 2007, various antitrust class actions filed against us and other Class I railroads in various Federal district courts regarding fuel surcharges were consolidated in the District of Columbia by the Judicial Panel on Multidistrict Litigation. In 2012, the court certified the case as a class action. The defendant railroads appealed this certification, and the Court of Appeals for the District of Columbia vacated the District Court’s decision and remanded the case for further consideration. On October 10, 2017, the District Court denied class certification. The decision was upheld by the Court of Appeals on August 16, 2019. Since that decision, various individual cases have been filed in multiple jurisdictions. We believe the allegations in the complaints are without merit and intend to vigorously defend the cases. We do not believe the outcome of these proceedings will have a material effect on our financial position, results of operations, or liquidity.

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

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

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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 $56 million at both March 31, 2020 and December 31, 2019 of which $15 million is classified as a current liability at both dates. At March 31, 2020, the liability represents our estimates of the probable cleanup, investigation, and remediation costs based on available information at 109 known locations and projects compared with 110 locations and projects at December 31, 2019. At March 31, 2020, fifteen sites accounted for $39 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 twelve 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.

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Insurance

We obtain on behalf of ourself and our subsidiaries insurance for potential losses for third-party liability and first-party property damages.  With limited exceptions, we are currently insured above $75 million and below $1.1 billion ($1.5 billion for specific perils) per occurrence and/or policy year for bodily injury and property damage to third parties and above $25 million and below $200 million per occurrence and/or policy year for property owned by us or in our care, custody, or control.

12. New Accounting Pronouncements

On January 1, 2020, we adopted 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 Financial Accounting Standards Board (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.  Norfolk Southern is 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.

During the first quarter of 2020, the execution of our strategic plan, including our new operating plan, continued to deliver financial and operational efficiencies. However, the rapidly developing COVID-19 pandemic has generated significant uncertainty in the economy and our outlook for the remainder of 2020 and could have a material adverse impact on our results of operations, financial condition, and liquidity. While the magnitude and duration of the outbreak, including its impact on our customers and general economic conditions, is uncertain, we experienced volume declines that accelerated through the end of the quarter and have continued to accelerate in the weeks subsequent to the quarter-end. As a result, we expect overall revenues for the full year to decline, driven by volume declines in merchandise, intermodal, and coal, with the magnitude of the decline unknown. The pandemic has influenced, and will continue to influence, the demand for our services and affect our revenues, with year-over-year volume declines in the first several weeks of April approximating 30%. As a result, the impact on the full year 2020 railway operating ratio (a measure of the amount of operating revenues consumed by operating expense) is uncertain.

Our immediate response to the COVID-19 pandemic included protecting our employees and continuing to provide an excellent transportation service product for our customers. We are continuing to monitor the impact of the pandemic on the availability of our employee base, which was not significantly adversely affected in the first quarter of 2020. We proactively established procedures to protect our employees, including implementing social distancing, transitioning to remote work for certain office employees, and establishing rigorous cleaning protocols for their work environments.

SUMMARIZED RESULTS OF OPERATIONS

($ in millions, except per share amounts)

	First Quarter
	2020		2019		% change
Income from railway operations	$	568	$	966	(41	%)
Net income	$	381	$	677	(44	%)
Diluted earnings per share	$	1.47	$	2.51	(41	%)
Railway operating ratio (percent)	78.4		66.0		19	%

First quarter 2020 results were adversely impacted by a $385 million loss on asset disposal. During the first quarter of 2020, we recorded a charge related to the loss on sale of approximately 300 locomotives disposed of in the first quarter, and a write-down of approximately 400 additional locomotives that we are actively marketing to sell. For more information on the impact of the charge, see Note 3.

The following table adjusts our 2020 GAAP financial results to exclude the effects of the charge. We use these non-GAAP financial measures internally and believe this information provides useful supplemental information to

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investors to facilitate making period-to-period comparisons by excluding the 2020 charge. 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 First Quarter
	Reported 2020 (GAAP)		2020 Loss on Asset Disposal		Adjusted 2020 (non-GAAP)
	($ in millions, except per share amounts)
Railway operating expenses	$	2,057	$	(385)	$	1,672
Income from railway operations	$	568	$	385	$	953
Net income	$	381	$	288	$	669
Diluted earnings per share	$	1.47	$	1.11	$	2.58
Railway operating ratio (percent)	78.4		(14.7)		63.7

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

	First Quarter
	Adjusted 2020 (non-GAAP)		2019		Adjusted 2020 (non-GAAP) vs. 2019
	($ in millions, except per share amounts)				% change
Railway operating expenses	$	1,672	$	1,874	(11	%)
Income from railway operations	$	953	$	966	(1	%)
Net income	$	669	$	677	(1	%)
Diluted earnings per share	$	2.58	$	2.51	3	%
Railway operating ratio (percent)	63.7		66.0		(3	%)

Railway operating revenues decreased 8%, driven by an 11% decline in volumes partially offset by increased revenue per unit. Nearly offsetting the revenue decline was an 11% reduction in adjusted railway operating expenses, and the resulting decline in adjusted income from railway operations was $13 million, or 1%. Adjusted diluted earnings per share was up 3% as the 1% decline in adjusted net income was more than offset by a lower share count due to our share repurchase program. Our adjusted railway operating ratio improved to 63.7 percent.

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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.

	First Quarter
Revenues	2020		2019		% change
Merchandise:
Agriculture, forest and consumer products	$	551	$	558	(1	%)
Chemicals	520		507		3	%
Metals and construction	367		370		(1	%)
Automotive	234		251		(7	%)
Merchandise	1,672		1,686		(1	%)
Intermodal	655		719		(9	%)
Coal	298		435		(31	%)
Total	$	2,625	$	2,840	(8	%)

Units
Merchandise:
Agriculture, forest and consumer products	181.5	190.7	(5	%)
Chemicals	142.3	145.0	(2	%)
Metals and construction	154.9	164.4	(6	%)
Automotive	90.4	98.1	(8	%)
Merchandise	569.1	598.2	(5	%)
Intermodal	955.1	1,071.0	(11	%)
Coal	163.5	236.3	(31	%)
Total	1,687.7	1,905.5	(11	%)

Revenue per Unit
Merchandise:
Agriculture, forest and consumer products	$	3,036	$	2,927	4	%
Chemicals	3,653		3,495		5	%
Metals and construction	2,370		2,255		5	%
Automotive	2,593		2,557		1	%
Merchandise	2,939		2,819		4	%
Intermodal	685		671		2	%
Coal	1,826		1,839		(1	%)
Total	1,556		1,490		4	%

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, units, and revenue per unit have been reclassified to conform to the current presentation.

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Railway operating revenues decreased $215 million in the first quarter compared with the same period last year. The table below reflects the components of the revenue change by major commodity group ($ in millions).

	First Quarter
	Increase (Decrease)
	Merchandise		Intermodal		Coal
Volume	$	(82)	$	(78)	$	(134)
Fuel surcharge revenue	(6)		(10)		(6)
Rate, mix and other	74		24		3
Total	$	(14)	$	(64)	$	(137)

Approximately 90% of our revenue base is covered by contracts that include negotiated fuel surcharges. Revenues associated with these surcharges totaled $131 million and $153 million in the first quarters of 2020 and 2019, respectively.

Merchandise

Merchandise revenue decreased for the quarter as lower volumes were partially offset by higher average revenue per unit driven by pricing gains. Overall, volumes fell in all merchandise commodity groups.

Agriculture, forest and consumer products volume decreased, largely driven by declines in shipments of corn, soybeans, wood chips, sweeteners, and feed products, with an increase in wheat shipments. Chemicals volume decreased, driven by reduced shipments of sand, natural gas liquids and inorganic chemicals, which were partially offset by gains in crude oil shipments. Metals and construction volume fell, largely the result of decreases in shipments of aggregates, iron and steel, coil, and scrap metal. These declines were partially offset by higher cement shipments. Automotive volume declined due to unplanned automotive plant shutdowns, including those associated with the COVID-19 pandemic.

Intermodal

Intermodal revenue declined, the result of decreased volumes partially offset by higher revenue per unit. Revenue per unit increased, a result of pricing gains.

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

	First Quarter
	2020	2019	% change
Domestic	598.3	656.3	(9	%)
International	356.8	414.7	(14	%)
Total	955.1	1,071.0	(11	%)

Domestic and international volumes fell, the result of stronger over-the-road competition and supply chain disruption resulting from COVID-19 related shutdowns.

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Coal

Coal revenues decreased, primarily driven by volume declines.

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

	First Quarter
	2020	2019	% change
Utility	8,898	15,755	(44	%)
Export	6,069	6,388	(5	%)
Domestic metallurgical	2,276	2,931	(22	%)
Industrial	981	1,222	(20	%)
Total	18,224	26,296	(31	%)

Utility coal tonnage declined due to low natural gas prices, additional renewable energy generating capacity, and mild winter weather. Export coal tonnage declined as a result of weak thermal seaborne pricing. Domestic metallurgical coal and coke tonnage fell due to softening domestic steel demand, customer sourcing changes, and idled customer facilities. Industrial coal tonnage decreased as a result of customer sourcing changes and continued pressure from natural gas conversions.

Railway Operating Expenses

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

	First Quarter
	2020		2019		% change
Compensation and benefits	$	622	$	727	(14	%)
Purchased services and rents	403		424		(5	%)
Fuel	189		250		(24	%)
Depreciation	292		283		3%
Materials and other	166		190		(13	%)
Loss on asset disposal	385		—
Total	$	2,057	$	1,874	10	%

Compensation and benefits expense decreased as follows:

•employment levels (down $76 million),

•health and welfare benefits for agreement employees (down $18 million),

•overtime and recrews (down $17 million),

•stock-based and incentive compensation (down $17 million),

•lower capitalized labor ($10 million of additional expense),

•increased pay rates (up $16 million), and

•other (down $3 million).

Average rail headcount for the quarter was down by about 5,000 compared with the first quarter 2019.

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

	First Quarter
	2020		2019		% change
Purchased services	$	321	$	346	(7	%)
Equipment rents	82		78		5	%
Total	$	403	$	424	(5	%)

The decline in purchased services was largely the result of decreased intermodal-related costs and decreased transportation expenses. Equipment rents increased, primarily the result of lower TTX equity earnings partially offset by decreased intermodal volume-related expenses.

Fuel expense, which includes the cost of locomotive fuel as well as other fuel used in railway operations, decreased primarily due to decreased consumption (down 15%), as well as lower locomotive fuel prices (down 12%).

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

	First Quarter
	2020		2019		% change
Materials	$	72	$	87	(17	%)
Claims	42		49		(14	%)
Other	52		54		(4	%)
Total	$	166	$	190	(13	%)

Materials costs decreased, due primarily to lower locomotive repair costs as a result of fewer locomotives in service. Claims expenses decreased, driven by lower costs related to environmental remediation matters. Other expense decreased slightly, as lower gains from sales of operating properties were fully offset by lower travel-related expenses. Gains from operating property sales amounted to $11 million and $17 million in 2020 and 2019, respectively.

Other income – Net

Other income – net decreased $22 million, primarily driven by lower investment returns on corporate-owned life insurance. Coal royalties were also lower due to the completed sale of the natural resource assets in the first quarter of 2020. In 2019, coal royalties were $24 million for the full year.

Income taxes

The first-quarter effective tax rate was 12.6% compared with 21.4% for the same period last year. Both periods benefited from favorable tax benefits on stock-based compensation. The current year reflects a $97 million tax benefit associated with the loss on asset disposal. The current quarter also benefited by a $19 million reduction of taxes upon the resolution of our 2012 amended federal return.

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FINANCIAL CONDITION AND LIQUIDITY

Cash provided by operating activities, our principal source of liquidity, was $955 million for the first three months of 2020, compared with $881 million for the same period of 2019. We had negative working capital of $234 million at March 31, 2020 and $219 million at December 31, 2019. Cash and cash equivalents totaled $608 million at March 31, 2020.

Cash used in investing activities was $233 million for the first three months of 2020, compared with $350 million in the same period last year. The decrease was primarily driven by lower property additions in 2020.

Cash used in financing activities was $694 million for the first three months of 2020, compared with $478 million in the same period last year, reflecting lower proceeds from borrowing, partially offset by lower repurchases of Common Stock. We repurchased 2.6 million shares of Common Stock totaling $466 million in the first three months of 2020 compared to 2.9 million shares, totaling $500 million 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 45.1% at March 31, 2020, and 44.5% at December 31, 2019.

In March 2020, we renewed and amended our five-year credit agreement which expires in May 2025 and provides for borrowings at prevailing rates and includes covenants. We increased the program’s borrowing capacity from $750 million to $800 million. We had no amounts outstanding under this facility at both March 31, 2020, and December 31, 2019, and we are in compliance with all of its covenants. We have in place an accounts receivable securitization program with maximum borrowing capacity of $450 million and a term expiring in May 2020, which we intend to renew. We had no amounts outstanding at both March 31, 2020, and December 31, 2019, and our available borrowing capacity was $412 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 $652 million against these policies at March 31, 2020.

We expect cash on hand combined with cash provided by operating activities will be sufficient to meet our ongoing obligations. We are monitoring the ongoing impacts of the COVID-19 pandemic, which could lead to a decline of cash inflows from operations. However, 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, will allow us to meet our cash flow needs. There have been no material changes to the information on future contractual obligations contained in our Form 10-K for the year ended December 31, 2019.

APPLICATION OF CRITICAL ACCOUNTING POLICIES

The preparation of financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. These estimates and assumptions may require judgment about matters that are inherently uncertain, and future events are likely to occur that may require us to make changes to these estimates and assumptions. Accordingly, we regularly review these estimates and assumptions based on historical experience, changes in the business environment, and other factors we believe to be reasonable under the circumstances.  There have been no significant changes to the application of the critical accounting policies disclosure contained in our Form 10-K at December 31, 2019. 

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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 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.

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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 March 31, 2020.  Based on such evaluation, our officers have concluded that, at March 31, 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 first 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. 

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PART II. OTHER INFORMATION

Item 1.  Legal Proceedings.

In 2007, various antitrust class actions filed against us and other Class I railroads in various Federal district courts regarding fuel surcharges were consolidated in the District of Columbia by the Judicial Panel on Multidistrict Litigation. In 2012, the court certified the case as a class action. The defendant railroads appealed this certification, and the Court of Appeals for the District of Columbia vacated the District Court’s decision and remanded the case for further consideration. On October 10, 2017, the District Court denied class certification. The decision was upheld by the Court of Appeals on August 16, 2019. Since that decision, various individual cases have been filed in multiple jurisdictions. We believe the allegations in the complaints are without merit and intend to vigorously defend the cases. We do not believe the outcome of these proceedings will have a material effect on our financial position, results of operations, or liquidity.

Item 1A. Risk Factors.

The 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 is rapidly developing and generating significant uncertainty in the economy, and it could have a material adverse impact on our financial position, results of operations, or liquidity, dependent on numerous uncertainties. The magnitude and duration of the outbreak, its impact on our customers and general economic conditions, and the extent of social distancing measures and non-essential business shutdowns 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.

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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)
January 1-31, 2020	864,012	$	202.17	861,977	27,184,804
February 1-29, 2020	665,607	204.15		664,679	26,520,125
March 1-31, 2020	1,067,802	146.63		1,067,254	25,452,871
Total	2,597,421			2,593,910

⁽¹⁾Of this amount, 3,511 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 March 31, 2020, 25.5 million shares remain authorized for repurchase.

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Item 6. Exhibits.

3(ii)	The Bylaws of Norfolk Southern Corporation, as amended March 23, 2020, are incorporated by reference to Exhibit 3(ii) to Norfolk Southern Corporation’s Form 8-K filed on March 24, 2020.
10.1	Credit Agreement dated as of March 27, 2020, establishing a 5-year, $800 million, unsecured revolving credit facility of the Registrant is incorporated by reference herein from Exhibit 10.1 to Norfolk Southern Corporation's Form 8-K filed on March 30, 2020.
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 first quarter of 2020, formatted in Inline Extensible Business Reporting Language (iXBRL) includes (i) the Consolidated Statements of Income for the first quarter of 2020 and 2019; (ii) the Consolidated Statements of Comprehensive Income for the first quarter of 2020 and 2019; (iii) the Consolidated Balance Sheets at March 31, 2020 and December 31, 2019; (iv) the Consolidated Statements of Cash Flows for the first three months of 2020 and 2019; (v) the Consolidated Statements of Changes in Stockholders’ Equity for the first quarter 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.

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SIGNATURES

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

		NORFOLK SOUTHERN CORPORATION Registrant
Date:	April 29, 2020	/s/ Jason A. Zampi
		Jason A. Zampi Vice President and Controller (Principal Accounting Officer) (Signature)
Date:	April 29, 2020	/s/ Denise W. Hutson
		Denise W. Hutson Corporate Secretary (Signature)

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