Item 8. Financial Statements and Supplementary Data

INDEX TO FINANCIAL STATEMENTS

			Page
Report of Management			K40
Report of Independent Registered Public Accounting Firm			K41
Consolidated Statements of Income Years ended December 31, 2023, 2022, and 2021			K45
Consolidated Statements of Comprehensive Income Years ended December 31, 2023, 2022, and 2021			K46
Consolidated Balance Sheets At December 31, 2023 and 2022			K47
Consolidated Statements of Cash Flows Years ended December 31, 2023, 2022, and 2021			K48
Consolidated Statements of Changes in Stockholders’ Equity Years ended December 31, 2023, 2022, and 2021			K49
Notes to Consolidated Financial Statements			K50
Index to Financial Statement Schedules in Item 15			K92

K39

Report of Management

February 5, 2024

To the Stockholders

Norfolk Southern Corporation:

Management is responsible for establishing and maintaining adequate internal control over financial reporting. In order to ensure that Norfolk Southern’s internal control over financial reporting is effective, management regularly assesses such controls and did so most recently as of December 31, 2023. This assessment was based on criteria for effective internal control over financial reporting described in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management has concluded that we maintained effective internal control over financial reporting as of December 31, 2023.

KPMG LLP, independent registered public accounting firm, has audited our financial statements and issued an opinion on our internal control over financial reporting as of December 31, 2023.

/s/ Alan H. Shaw						/s/ Mark R. George						/s/ Claiborne L. Moore
Alan H. Shaw						Mark R. George						Claiborne L. Moore
President and						Executive Vice President						Vice President and
Chief Executive Officer						and Chief Financial Officer						Controller

K40

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

Norfolk Southern Corporation:

Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting

We have audited the accompanying consolidated balance sheets of Norfolk Southern Corporation and subsidiaries (the Company) as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income, cash flows, and changes in stockholders’ equity for each of the years in the three-year period ended December 31, 2023, and the related notes and financial statement schedule of valuation and qualifying accounts as listed in Item 15(A)2 (collectively, the consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

K41

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Sufficiency of audit evidence related to the capitalization of property expenditures

As discussed in Note 1 to the consolidated financial statements, expenditures that extend an asset’s useful life or increase its utility are capitalized. The Company has recorded $33,326 million in net book value of properties at December 31, 2023 and has recorded $2,349 million in property additions for the year ended December 31, 2023. Expenditures capitalized include those that are directly related to a capital project and may include materials, labor and other direct costs, in addition to an allocable portion of indirect costs that relate to a capital project. A significant portion of the Company’s annual capital spending relates to self-constructed assets. Costs related to repair and maintenance activities, that in the Company’s judgment, do not extend an asset’s useful life or increase its utility are expensed when such repairs are performed.

We identified the evaluation of the sufficiency of audit evidence related to capitalization of property expenditures as a critical audit matter. Subjective auditor judgment was required in determining procedures and evaluating audit results related to the capitalization of purchased services and compensation due to their usage for both self-constructed assets and repairs and maintenance.

The following are the primary procedures we performed to address the critical audit matter. We applied auditor judgment to determine the nature and extent of procedures to be performed over capitalized property expenditures. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s process to capitalize property expenditures, including controls over the determination of whether purchased services and compensation expenditures extend an asset’s useful life or increase its utility. For a sample of property additions expenditures, we inquired and inspected support to evaluate that the expenditure extended an asset’s useful life or increased its utility. We evaluated the sufficiency of audit evidence obtained by assessing the results of the procedures performed, including the appropriateness of the nature of such evidence.

K42

Eastern Ohio Incident

As discussed in Note 17 to the consolidated financial statements, the Company has recognized $464 million of liabilities attributable to the Eastern Ohio Incident (the Incident) as of December 31, 2023. For the year-ended December 31, 2023, the Company has recognized $1,116 million of expenses for costs directly attributable to the Incident, which is presented net of $101 million in insurance recoveries in the Consolidated Statements of Income. As of December 31, 2023, the Company recognized probable and reasonably estimable liabilities for environmental matters and legal proceedings and claims (non-environmental). The Company also disclosed certain legal proceedings and claims (non-environmental) where a loss is reasonably possible, but not probable, or is probable but not reasonably estimable, for which no accrual was established. In addition, as a result of the Incident, the Company disclosed that it is subject to inquiries and investigations by various government authorities and regulatory agencies.

We identified the evaluation of the recognition and measurement of liabilities for environmental matters, legal proceedings and claims (non-environmental) and inquiries and investigations arising from the Incident and the sufficiency of the related disclosures as a critical audit matter. A high degree of subjective auditor judgment was required to evaluate certain judgments and assumptions made by management when assessing the likelihood and magnitude of losses incurred and determining whether reasonable estimates of losses can be made. Specifically, the key judgments and assumptions related to the following:

• the nature and extent of future cleanup and removal activities and the extent and duration of governmental oversight

• the final outcome of the legal proceedings and claims (non-environmental)

• the final outcome of any current or future inquiries and investigations arising from the Incident.

The following are the primary procedures that we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s processes to 1) recognize and measure liabilities associated with environmental matters, legal proceedings and claims (non-environmental), and inquiries and investigations and 2) prepare the related financial statement disclosures. We evaluated the Company's assessment of the likelihood and magnitude of losses being incurred including whether the estimates of losses are reasonably estimable for liabilities associated with the Incident by:

• assessing the estimates of environmental cleanup and remediation liabilities by comparing them to incurred costs

• inquiring of management regarding the expected timeline for both probable and reasonably estimable costs for soil and water disposal and air monitoring activities as well as related governmental oversight

• obtaining a legal confirmation letter from external legal counsel, and inquiring of the Company’s internal and external legal counsel regarding the likelihood and magnitude of losses related to environmental matters, legal proceedings and claims (non-environmental) and inquiries and investigations

• obtaining and inspecting correspondence with government authorities and regulatory agencies for environmental matters, legal proceedings and claims (non-environmental) and inquiries and investigations.

K43

We evaluated whether the Company’s disclosures were appropriate and consistent with the information obtained in our procedures.

/s/ KPMG LLP

KPMG LLP

We have served as the Company's auditor since 1982.

Atlanta, Georgia

February 5, 2024

K44

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Income

			Years ended December 31,
			2023						2022						2021
			($ in millions, except per share amounts)
Railway operating revenues			$	12,156					$	12,745					$	11,142
Railway operating expenses
Compensation and benefits			2,819						2,621						2,442
Purchased services and rents			2,070						1,922						1,726
Fuel			1,170						1,459						799
Depreciation			1,298						1,221						1,181
Materials and other			832						713						547
Eastern Ohio incident			1,116						—						—
Total railway operating expenses			9,305						7,936						6,695
Income from railway operations			2,851						4,809						4,447
Other income – net			191						13						77
Interest expense on debt			722						692						646
Income before income taxes			2,320						4,130						3,878
Income taxes			493						860						873
Net income			$	1,827					$	3,270					$	3,005
Earnings per share
Basic			$	8.04					$	13.92					$	12.16
Diluted			8.02						13.88						12.11

See accompanying notes to consolidated financial statements.

K45

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income

			Years ended December 31,
			2023						2022						2021
			($ in millions)
Net income			$	1,827					$	3,270					$	3,005
Other comprehensive income, before tax:
Pension and other postretirement benefits			36						51						226
Other comprehensive income of equity investees			4						17						24
Other comprehensive income, before tax			40						68						250
Income tax expense related to items of
other comprehensive income			(9)						(17)						(58)
Other comprehensive income, net of tax			31						51						192
Total comprehensive income			$	1,858					$	3,321					$	3,197

See accompanying notes to consolidated financial statements.

K46

Norfolk Southern Corporation and Subsidiaries

Consolidated Balance Sheets

			At December 31,
			2023						2022
			($ in millions)
Assets
Current assets:
Cash and cash equivalents			$	1,568					$	456
Accounts receivable – net			1,147						1,148
Materials and supplies			264						253
Other current assets			292						150
Total current assets			3,271						2,007
Investments			3,839						3,694
Properties less accumulated depreciation of $13,265 and
$12,592, respectively			33,326						32,156
Other assets			1,216						1,028
Total assets			$	41,652					$	38,885
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable			$	1,638					$	1,293
Short-term debt			—						100
Income and other taxes			262						312
Other current liabilities			728						341
Current maturities of long-term debt			4						603
Total current liabilities			2,632						2,649
Long-term debt			17,175						14,479
Other liabilities			1,839						1,759
Deferred income taxes			7,225						7,265
Total liabilities			28,871						26,152
Stockholders’ equity:
Common Stock $1.00 per share par value, 1,350,000,000 shares
authorized; outstanding 225,681,254 and 228,076,415 shares,
respectively, net of treasury shares			227						230
Additional paid-in capital			2,179						2,157
Accumulated other comprehensive loss			(320)						(351)
Retained income			10,695						10,697
Total stockholders’ equity			12,781						12,733
Total liabilities and stockholders’ equity			$	41,652					$	38,885

See accompanying notes to consolidated financial statements.

K47

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Cash Flows

			Years ended December 31,
			2023						2022						2021
			($ in millions)
Cash flows from operating activities
Net income			$	1,827					$	3,270					$	3,005
Reconciliation of net income to net cash provided by operating activities:
Depreciation			1,298						1,221						1,181
Deferred income taxes			(49)						83						184
Gains and losses on properties			(49)						(82)						(86)
Changes in assets and liabilities affecting operations:
Accounts receivable			(2)						(171)						(133)
Materials and supplies			(11)						(35)						3
Other current assets			(54)						(18)						(6)
Current liabilities other than debt			435						23						283
Other – net			(216)						(69)						(176)
Net cash provided by operating activities			3,179						4,222						4,255
Cash flows from investing activities
Property additions			(2,349)						(1,948)						(1,470)
Property sales and other transactions			86						263						159
Investment purchases			(124)						(12)						(10)
Investment sales and other transactions			205						94						99
Net cash used in investing activities			(2,182)						(1,603)						(1,222)
Cash flows from financing activities
Dividends			(1,225)						(1,167)						(1,028)
Common Stock transactions			3						(4)						17
Purchase and retirement of Common Stock			(622)						(3,110)						(3,390)
Proceeds from borrowings			3,293						1,832						1,676
Debt repayments			(1,334)						(553)						(584)
Net cash provided by (used in) financing activities			115						(3,002)						(3,309)
Net increase (decrease) in cash and cash equivalents			1,112						(383)						(276)
Cash and cash equivalents
At beginning of year			456						839						1,115
At end of year			$	1,568					$	456					$	839
Supplemental disclosures of cash flow information
Cash paid during the year for:
Interest (net of amounts capitalized)			$	653					$	619					$	579
Income taxes (net of refunds)			681						750						654

See accompanying notes to consolidated financial statements.

K48

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity

			Common Stock						Additional Paid-in Capital						Accum. Other Comprehensive Loss						Retained Income						Total
			($ in millions, except per share amounts)
Balance at December 31, 2020			$	254					$	2,248					$	(594)					$	12,883					$	14,791
Comprehensive income:
Net income																					3,005						3,005
Other comprehensive income															192												192
Total comprehensive income																											3,197
Dividends on Common Stock,
$4.16 per share																					(1,028)						(1,028)
Share repurchases			(13)						(106)												(3,271)						(3,390)
Stock-based compensation			1						73												(3)						71
Balance at December 31, 2021			242						2,215						(402)						11,586						13,641
Comprehensive income:
Net income																					3,270						3,270
Other comprehensive income															51												51
Total comprehensive income																											3,321
Dividends on Common Stock,
$4.96 per share																					(1,167)						(1,167)
Share repurchases			(13)						(108)												(2,989)						(3,110)
Stock-based compensation			1						50												(3)						48
Balance at December 31, 2022			230						2,157						(351)						10,697						12,733
Comprehensive income:
Net income																					1,827						1,827
Other comprehensive income															31												31
Total comprehensive income																											1,858
Dividends on Common Stock,
$5.40 per share																					(1,225)						(1,225)
Share repurchases			(3)						(24)												(600)						(627)
Stock-based compensation									46												(4)						42
Balance at December 31, 2023			$	227					$	2,179					$	(320)					$	10,695					$	12,781

See accompanying notes to consolidated financial statements.

K49

Norfolk Southern Corporation and Subsidiaries

Notes to Consolidated Financial Statements

The following Notes are an integral part of the Consolidated Financial Statements. Certain prior year information has been reclassified to conform to current year presentation.

1. Summary of Significant Accounting Policies

Description of Business

Norfolk Southern Corporation is a Georgia-based holding company engaged principally in the rail transportation business, operating 19,100 route miles primarily in the Southeast, East, and Midwest. These consolidated financial statements include Norfolk Southern and its majority-owned and controlled subsidiaries (collectively, NS, we, us, and our). Norfolk Southern’s major subsidiary is NSR. All significant intercompany balances and transactions have been eliminated in consolidation.

NSR and its railroad subsidiaries transport raw materials, intermediate products, and finished goods classified in the following commodity groups (percent of total railway operating revenues in 2023): intermodal (25%); agriculture, forest and consumer products (21%); chemicals (17%); coal (14%); metals and construction (14%); and automotive (9%). Although most of our customers are domestic, ultimate points of origination or destination for some of the products transported (particularly coal bound for export and some intermodal shipments) may be outside the U.S. Approximately 80% of our railroad employees are covered by collective bargaining agreements with various labor unions.

Use of 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 revenues and expenses during the reporting period. We periodically review our estimates, including those related to the recoverability and useful lives of assets, as well as liabilities for litigation, environmental remediation, casualty claims, income taxes and pension and other postretirement benefits. Changes in facts and circumstances may result in revised estimates.

Revenue Recognition

Transportation revenues are recognized proportionally as a shipment moves from origin to destination, and related expenses are recognized as incurred. Certain of our contract refunds (which are primarily volume-based incentives) are recorded as a reduction to revenues on the basis of our best estimate of projected liability, which is based on historical activity, current shipment counts and expectation of future activity. Certain ancillary services, such as switching, demurrage and other incidental activities, may be provided to customers 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.

Cash Equivalents

“Cash equivalents” are highly liquid investments purchased three months or less from maturity.

Allowance for Doubtful Accounts

Our allowance for doubtful accounts was $7 million and $9 million at December 31, 2023 and 2022, respectively. To determine our allowance for doubtful accounts, we evaluate historical loss experience (which has not been significant), the characteristics of current accounts, and general economic conditions and trends.

K50

Materials and Supplies

“Materials and supplies,” consisting mainly of items for maintenance of property and equipment, are stated at the lower of average cost or net realizable value. The cost of materials and supplies expected to be used in property additions or improvements is included in “Properties.”

Investments

Investments in entities over which we have the ability to exercise significant influence but do not control the entity are accounted for using the equity method, whereby the investment is carried at the cost of the acquisition plus our equity in undistributed earnings or losses since acquisition.

Properties

“Properties” are stated principally at cost and are depreciated using the group method whereby assets with similar characteristics, use, and expected lives are grouped together in asset classes and depreciated using a composite depreciation rate. This methodology treats each asset class as a pool of resources, not as singular items. We use approximately 75 depreciable asset classes.

Depreciation expense is based on our assumptions concerning expected service lives of our properties as well as the expected net salvage that will be received upon their retirement. In developing these assumptions, we utilize periodic depreciation studies that are performed by an independent outside firm of consulting engineers and approved by the STB. Our depreciation studies are conducted about every three years for equipment and every six years for track assets and other roadway property. The frequency of these studies is consistent with guidelines established by the STB. We adjust our rates based on the results of these studies and implement the changes prospectively. The studies may also indicate that the recorded amount of accumulated depreciation is deficient (or in excess) of the amount indicated by the study. Any such deficiency (or excess) is amortized as a component of depreciation expense over the remaining service lives of the affected class of property, as determined by the study.

Key factors that are considered in developing average service life and salvage estimates include:

• statistical analysis of historical retirement data and surviving asset records,

• review of historical salvage received and current market rates,

• review of our operations including expected changes in technology, customer demand, maintenance practices and asset management strategies,

• review of accounting policies and assumptions, and

• industry review and analysis.

The composite depreciation rate for rail in high density corridors is derived based on consideration of annual gross tons as compared to the total or ultimate capacity of rail in these corridors. Our experience has shown that traffic density is a leading factor in the determination of the expected service life of rail in high density corridors. In developing the respective depreciation rate, consideration is also given to several rail characteristics including age, weight, condition (new or second-hand) and type (curved or straight).

We capitalize interest on major projects during the period of their construction. Expenditures, including those on leased assets, that extend an asset’s useful life or increase its utility are capitalized. Expenditures capitalized include those that are directly related to a capital project and may include materials, labor, and other direct costs, in addition to an allocable portion of indirect costs that relate to a capital project. A significant portion of our annual capital spending relates to self-constructed assets. Removal activities occur in conjunction with replacement and are estimated based on the average percentage of time employees replacing assets spend on removal functions. Costs related to repairs and maintenance activities that, in our judgment, do not extend an asset’s useful life or increase its utility are expensed when such repairs are performed.

K51

When depreciable operating road and equipment assets are sold or retired in the ordinary course of business, the cost of the assets, net of sales proceeds or salvage, is charged to accumulated depreciation, and no gain or loss is recognized in earnings. Actual historical cost values are retired when available, such as with most equipment assets. The use of estimates in recording the retirement of certain roadway assets is necessary based on the impracticality of tracking individual asset costs. When retiring rail, ties and ballast, we use statistical curves that indicate the relative distribution of the age of the assets retired. The historical cost of other roadway assets is estimated using a combination of inflation indices specific to the rail industry and those published by the U.S. Bureau of Labor Statistics. The indices are applied to the replacement value based on the age of the retired assets. These indices are used because they closely correlate with the costs of roadway assets. Gains and losses on disposal of operating land are included in “Materials and other” expenses. Gains and losses on disposal of non-operating land and non-rail assets are included in “Other income – net” since such income is not a product of our railroad operations.

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. Gains or losses from abnormal retirements are recognized in income from railway operations.

We review the carrying amount of properties whenever events or changes in circumstances indicate that such carrying amount may not be recoverable based on future undiscounted cash flows. Assets that are deemed impaired as a result of such review are recorded at the lower of carrying amount or fair value.

New Accounting Pronouncements

In November 2021, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 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. We adopted the new standard on January 1, 2022 and there was no material impact to the financial statements upon adoption.

In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” This update requires additional reportable segment disclosures, primarily through enhanced disclosures about significant segment expenses and information used to assess performance. The ASU is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. We will not early adopt the standard and are currently evaluating the effect on our financial statements.

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” This update requires additional disclosures including greater disaggregation of information in the reconciliation of the statutory rate to the effective rate and income taxes paid disaggregated by jurisdiction. The ASU is effective for fiscal years ending after December 15, 2024. We will not early adopt the standard and are currently evaluating the effect on our financial statements.

K52

2. Railway Operating Revenues

The following table disaggregates our revenues by major commodity group:

						2023						2022						2021
						($ in millions)
Merchandise:
Agriculture, forest and consumer products						$	2,530					$	2,493					$	2,251
Chemicals						2,054						2,148						1,951
Metals and construction						1,634						1,652						1,562
Automotive						1,135						1,038						905
Merchandise						7,353						7,331						6,669
Intermodal						3,090						3,681						3,163
Coal						1,713						1,733						1,310
Total						$	12,156					$	12,745					$	11,142

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 December 31, 2023 and 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 5%, 7% and 7%, respectively, of total “Railway operating revenues” on the Consolidated Statements of Income for the years ended December 31, 2023, 2022, and 2021.

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:

						December 31,
						2023						2022
						($ in millions)
Customer						$	882					$	895
Non-customer						265						253
Accounts receivable – net						$	1,147					$	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 December 31, 2023 and 2022.

K53

3. Other Income – Net

			2023						2022						2021
			($ in millions)
Pension and other postretirement benefits (Note 12)			$	117					$	126					$	102
COLI – net			65						(77)						17
Other			9						(36)						(42)
Total			$	191					$	13					$	77

4. Income Taxes

			2023						2022						2021
			($ in millions)
Current:
Federal			$	437					$	645					$	553
State			105						132						136
Total current taxes			542						777						689
Deferred:
Federal			(27)						206						186
State			(22)						(123)						(2)
Total deferred taxes			(49)						83						184
Income taxes			$	493					$	860					$	873

Reconciliation of Statutory Rate to Effective Rate

“Income taxes” on the Consolidated Statements of Income differs from the amounts computed by applying the statutory federal corporate tax rate as follows:

			2023												2022												2021
			Amount						%						Amount						%						Amount						%
			($ in millions)
Federal income tax at statutory rate			$	487					21.0						$	867					21.0						$	814					21.0
State income taxes, net of federal tax effect			65						2.9						143						3.5						139						3.6
Tax credits			(27)						(1.2)						(10)						(0.2)						(10)						(0.3)
State law changes			—						—						(136)						(3.3)						(34)						(0.8)
Other, net			(32)						(1.4)						(4)						(0.2)						(36)						(1.0)
Income taxes			$	493					21.3						$	860					20.8						$	873					22.5

On July 8, 2022, House Bill 1342 was signed into law in the Commonwealth of Pennsylvania, which reduced its corporate income tax rate from 9.99% to 4.99%, through a series of phased reductions 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, in 2022, we recognized a $136 million benefit in “Income taxes” with a corresponding reduction in “Deferred income taxes.”

K54

Deferred Tax Assets and Liabilities

Certain items are reported in different periods for financial reporting and income tax purposes. Deferred tax assets and liabilities are recorded in recognition of these differences. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows:

			December 31,
			2023						2022
			($ in millions)
Deferred tax assets:
Accruals, including casualty and other claims			$	360					$	110
Compensation and benefits, including postretirement benefits			55						99
Other			155						164
Total gross deferred tax assets			570						373
Less valuation allowance			(31)						(41)
Net deferred tax assets			539						332
Deferred tax liabilities:
Property			(7,218)						(7,050)
Other			(546)						(547)
Total deferred tax liabilities			(7,764)						(7,597)
Deferred income taxes			$	(7,225)					$	(7,265)

Except for amounts for which a valuation allowance has been provided, we believe that it is more likely than not that the results of future operations will generate sufficient taxable income to realize the deferred tax assets. The valuation allowance at the end of each year primarily relates to subsidiary state income tax net operating losses and state investment tax credits that may not be utilized prior to their expiration. The total valuation allowance decreased by $10 million in 2023, decreased by $19 million in 2022, and increased by $3 million in 2021.

Uncertain Tax Positions

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

			December 31,
			2023						2022
			($ in millions)
Balance at beginning of year			$	22					$	21
Additions based on tax positions related to the current year			30						3
Additions for tax positions of prior years			9						1
Reductions for tax positions of prior years			(1)						—
Settlements with taxing authorities			—						(2)
Lapse of statutes of limitations			(5)						(1)
Balance at end of year			$	55					$	22

K55

Included in the balance of unrecognized tax benefits at December 31, 2023 are potential benefits of $45 million that would affect the effective tax rate if recognized. Unrecognized tax benefits are adjusted in the period in which new information about a tax position becomes available or the final outcome differs from the amount recorded.

The statute of limitations on Internal Revenue Service examinations has expired for all years prior to 2020. State income tax returns are generally subject to examination for a period of three to four years after the return. In addition, we are generally obligated to report changes in taxable income arising from federal income tax examinations to the states within a period of up to two years from the date the federal examination is final. We have various state income tax returns either under examination, administrative appeal, or litigation.

5. Fair Value Measurements

FASB Accounting Standards Codification (ASC) 820-10, “Fair Value Measurements,” established a framework for measuring fair value and a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels, as follows:

Level 1			Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that we have the ability to access.
Level 2			Inputs to the valuation methodology include:
			• quoted prices for similar assets or liabilities in active markets, • quoted prices for identical or similar assets or liabilities in inactive markets, • inputs other than quoted prices that are observable for the asset or liability, and • inputs that are derived principally from or corroborated by observable market data by correlation or other means.
			If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.
Level 3			Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The asset or liability’s fair value measurement level within the hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

Fair Values of Financial Instruments

The fair values of “Cash and cash equivalents,” “Accounts receivable – net,” “Accounts payable,” and “Short-term debt” approximate carrying values because of the short maturity of these financial instruments. The carrying value of COLI 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 December 31, 2023 or 2022. The carrying amounts and estimated fair values, based on Level 1 inputs, of long-term debt consist of the following at December 31:

			2023												2022
			Carrying Amount						Fair Value						Carrying Amount						Fair Value
			($ in millions)
Long-term debt, including current maturities			$	(17,179)					$	(16,631)					$	(15,082)					$	(13,846)

K56

6. Investments

			December 31,
			2023						2022
			($ in millions)
Long-term investments:
Equity method investments:
Conrail			$	1,656					$	1,584
TTX			964						918
Other			428						421
Total equity method investments			3,048						2,923
COLI at net cash surrender value			774						752
Other investments			17						19
Total long-term investments			$	3,839					$	3,694

Investment in Conrail

Through a limited liability company, we and CSX jointly own Conrail, whose primary subsidiary is 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. We are amortizing the excess of the purchase price over Conrail’s net equity using the principles of purchase accounting, based primarily on the estimated useful lives of Conrail’s depreciable property and equipment, including the related deferred tax effect of the differences in book and tax accounting bases for such assets, as all of the purchase price at acquisition was allocable to Conrail’s tangible assets and liabilities. At December 31, 2023, our investment in Conrail exceeds our share of Conrail’s underlying net equity by $480 million.

CRC owns and operates certain properties (the Shared Assets Areas) for the joint and exclusive benefit of 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 $164 million in 2023, $156 million in 2022, and $147 million in 2021. Future payments for access fees due to CRC under the Shared Assets Areas agreements are as follows: $44 million in each of 2024 through 2028 and $17 million thereafter. We provide certain general and administrative support functions to Conrail, the fees for which are billed in accordance with several service-provider arrangements and approximate $6 million annually.

“Accounts payable” includes $198 million at December 31, 2023, and $173 million at December 31, 2022, due to Conrail for the operation of the Shared Assets Areas. “Other liabilities” includes $534 million at December 31, 2023 and 2022, respectively, for long-term advances from Conrail, maturing in 2050 that bear interest at an average rate of 1.31%.

Our equity in Conrail’s earnings, net of amortization, was $70 million for 2023, $58 million for 2022, and $56 million for 2021. These amounts partially offset the costs of operating the Shared Assets Areas and are included in “Purchased services and rents.” Equity in Conrail’s earnings is included in the “Other – net” line item within operating activities in the Consolidated Statements of Cash Flows.

K57

Investment in TTX

We and six other North American railroads collectively own 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 19.78% ownership interest in TTX.

Expenses incurred for use of TTX equipment are included in “Purchased services and rents.” This amounted to $274 million, $256 million, and $246 million, respectively, for the years ended December 31, 2023, 2022 and 2021. Our equity in TTX’s earnings partially offsets these costs and totaled $47 million for 2023 and $53 million for both 2022 and 2021. Equity in TTX’s earnings is included in the “Other – net” line item within operating activities in the Consolidated Statements of Cash Flows.

7. Properties

									Accumulated						Net Book						Depreciation
December 31, 2023			Cost						Depreciation						Value						Rate (1)
			($ in millions)
Land			$	2,439					$	—					$	2,439					—
Roadway:
Rail and other track material			8,011						(2,006)						6,005						2.41		%
Ties			6,205						(1,773)						4,432						3.42		%
Ballast			3,224						(937)						2,287						2.80		%
Construction in process			522						—						522						—
Other roadway			14,663						(4,290)						10,373						2.72		%
Total roadway			32,625						(9,006)						23,619
Equipment:
Locomotives			6,091						(2,105)						3,986						3.64		%
Freight cars			2,792						(1,037)						1,755						2.42		%
Computers and software			1,042						(542)						500						9.36		%
Construction in process			271						—						271						—
Other equipment			1,241						(501)						740						4.61		%
Total equipment			11,437						(4,185)						7,252
Other property			90						(74)						16						2.48		%
Total properties			$	46,591					$	(13,265)					$	33,326

K58

									Accumulated						Net Book						Depreciation
December 31, 2022			Cost						Depreciation						Value						Rate (1)
			($ in millions)
Land			$	2,405					$	—					$	2,405					—
Roadway:
Rail and other track material			7,589						(1,971)						5,618						2.42		%
Ties			5,981						(1,696)						4,285						3.49		%
Ballast			3,126						(873)						2,253						2.84		%
Construction in process			431						—						431						—
Other roadway			14,270						(3,948)						10,322						2.69		%
Total roadway			31,397						(8,488)						22,909
Equipment:
Locomotives			5,878						(2,060)						3,818						3.66		%
Freight cars			2,701						(1,033)						1,668						2.51		%
Computers and software			926						(476)						450						9.10		%
Construction in process			206						—						206						—
Other equipment			1,145						(463)						682						4.51		%
Total equipment			10,856						(4,032)						6,824
Other property			90						(72)						18						2.26		%
Total properties			$	44,748					$	(12,592)					$	32,156

(1)Composite annual depreciation rate for the underlying assets, excluding the effects of the amortization of any deficiency (or excess) that resulted from our depreciation studies.

Capitalized Interest

Total interest cost incurred on debt was $743 million, $708 million, and $657 million during 2023, 2022 and 2021, respectively, of which $21 million, $16 million, and $11 million was capitalized during 2023, 2022 and 2021, respectively.

K59

8. Current Liabilities

			December 31,
			2023						2022
			($ in millions)
Accounts payable:
Accounts and wages payable			$	997					$	712
Due to Conrail (Note 6)			198						173
Casualty and other claims (Note 17)			186						170
Vacation liability			144						136
Other			113						102
Total			$	1,638					$	1,293
Other current liabilities:
Current Eastern Ohio incident liability (Note 17)			$	346					$	—
Interest payable			193						157
Current operating lease liability (Note 10)			105						94
Pension benefit obligations (Note 12)			21						20
Other			63						70
Total			$	728					$	341

9. Debt

Debt maturities are presented below:

			December 31,
			2023						2022
			($ in millions)
Notes and debentures, with weighted-average interest rates as of December 31, 2023:
4.20% maturing to 2028			$	2,370					$	3,370
4.03% maturing 2029 to 2033			3,094						1,995
4.32% maturing 2034 to 2064			11,247						9,247
5.22% maturing 2097 to 2121			1,384						1,384
Securitization borrowings and finance leases			17						116
Discounts, premiums, and debt issuance costs			(933)						(930)
Total debt			17,179						15,182
Less current maturities and short-term debt			(4)						(703)
Long-term debt excluding current maturities and short-term debt			$	17,175					$	14,479

K60

Long-term debt maturities subsequent to 2024 are as follows:
2025									$	556
2026									602
2027									621
2028									602
2029 and subsequent years									14,794
Total									$	17,175

In November 2023, we issued $400 million of 5.55% senior notes due 2034 and $600 million of 5.95% senior notes due 2064.

In August 2023, we issued $600 million of 5.05% senior notes due 2030 and $1.0 billion of 5.35% senior notes due 2054.

In February 2023, we issued $500 million of 4.45% senior notes due 2033.

In May 2023, we renewed our accounts receivable securitization program with a maximum borrowing capacity of $400 million. Amounts under our accounts receivable securitization program are borrowed and repaid from time to time in the ordinary course for general corporate and cash management purposes. The term of our accounts receivable securitization program expires in May 2024. Amounts received under this facility are accounted for as borrowings. We had no amounts outstanding at December 31, 2023 and $100 million (at an average variable interest rate of 5.05%) outstanding under this program at December 31, 2022, which is included within “Short-term debt”. Our available borrowing capacity was $400 million and $300 million at December 31, 2023 and December 31, 2022, respectively. Our accounts receivable securitization program was supported by $903 million and $883 million in receivables at December 31, 2023 and December 31, 2022, respectively, which are included in “Accounts receivable – net”.

Credit Agreement and Debt Covenants

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 either December 31, 2023 or December 31, 2022, and we are in compliance with all of its covenants.

Subsequent Events

In January 2024, we renewed and amended our $800 million credit agreement. The amended agreement expires in January 2029, and provides for borrowings at prevailing rates and includes covenants.

In January 2024, we also entered into a term loan credit agreement that established a 364-day, $1.0 billion, unsecured delayed draw term loan facility under which we can borrow for general corporate purposes. The term loan credit agreement provides for borrowing at prevailing rates and includes covenants that align with the $800 million credit agreement.

K61

10. Leases

We are committed under long-term lease agreements for equipment, lines of road, and other property. We combine lease and non-lease components for new and reassessed leases. Some of these agreements are variable lease agreements that include usage-based payments. These agreements contain payment provisions that depend on an index or rate, initially measured using the index or rate at the lease commencement date, and are therefore not included in our future minimum lease payments. Our long-term lease agreements do not contain any material restrictive covenants.

Our equipment leases have remaining terms of less than 1 year to 7 years and our lines of road and land leases have remaining terms of less than 1 year to 134 years. Some of these leases include options to extend the leases for up to 99 years and some include options to terminate the leases within 30 days. Because we are not reasonably certain to exercise these renewal options, the options are not considered in determining the lease term, and associated payments are excluded from future minimum lease payments.

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

Operating lease amounts included on the Consolidated Balance Sheets are as follows:

						December 31,
						2023						2022
						($ in millions)
			Classification
Assets
Right-of-use (ROU) assets			Other assets			$	390					$	407
Liabilities
Current lease liabilities			Other current liabilities			$	105					$	94
Non-current lease liabilities			Other liabilities			287						316
Total lease liabilities						$	392					$	410

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

			2023						2022						2021
			($ in millions)
Operating lease expense			$	115					$	101					$	106
Variable lease expense			84						55						44
Short-term lease expense			15						18						9
Total lease expense			$	214					$	174					$	159

In March 2019, we entered into a non-cancellable lease for an office building. In 2021, the construction of the office building was completed and the lease commenced. The initial lease term is five years with options to renew, purchase, or sell the office building at the end of the lease term. The lease contains a residual value guarantee of up to eighty-three percent of the total construction cost of $499 million.

K62

We currently operate approximately 337 miles of railway that extends from Cincinnati, Ohio to Chattanooga, Tennessee under an operating lease agreement. Lease expense associated with this agreement totaled $26 million, $25 million, and $24 million in 2023, 2022, and 2021, respectively. In 2022, we entered into an asset purchase and sale agreement with the Board of Trustees of the Cincinnati Southern Railway to purchase this line (see further discussion in Note 17). The total purchase price is expected to be approximately $1.7 billion and will close on March 15, 2024. At close, the existing lease arrangement will terminate and the assets purchased will be reflected in “Properties.”

Other information related to operating leases is as follows:

			December 31,
			2023						2022
Weighted-average remaining lease term (years) on operating leases			6.12						6.67
Weighted-average discount rates on operating leases			3.78		%				3.16		%

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

During 2023 and 2022, respectively, ROU assets obtained in exchange for new operating lease liabilities were $65 million and $57 million, respectively. Cash paid for amounts included in the measurement of lease liabilities was $117 million and $100 million in 2023 and 2022, respectively, and is included in operating cash flows.

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

			December 31, 2023
			($ in millions)
2024			$	116
2025			105
2026			85
2027			42
2028			30
2029 and subsequent years			66
Total lease payments			444
Less: Interest			52
Present value of lease liabilities			$	392

K63

			December 31, 2022
			($ in millions)
2023			$	103
2024			95
2025			87
2026			69
2027			27
2028 and subsequent years			81
Total lease payments			462
Less: Interest			52
Present value of lease liabilities			$	410

11. Other Liabilities

			December 31,
			2023						2022
			($ in millions)
Long-term advances from Conrail (Note 6)			$	534					$	534
Non-current operating lease liability (Note 10)			287						316
Net pension benefit obligations (Note 12)			279						255
Casualty and other claims (Note 17)			221						218
Net other postretirement benefit obligations (Note 12)			172						204
Non-current Eastern Ohio incident liability (Note 17)			118						—
Deferred compensation			80						91
Other			148						141
Total			$	1,839					$	1,759

12. Pensions 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.

K64

Pension and Other Postretirement Benefit Obligations and Plan Assets

			Pension Benefits												Other Postretirement Benefits
			2023						2022						2023						2022
			($ in millions)
Change in benefit obligations:
Benefit obligation at beginning of year			$	2,051					$	2,777					$	326					$	417
Service cost			25						40						4						6
Interest cost			108						67						17						9
Actuarial losses (gains)			122						(677)						1						(70)
Plan amendments			—						(4)						(5)						—
Benefits paid			(155)						(152)						(33)						(36)
Benefit obligation at end of year			2,151						2,051						310						326
Change in plan assets:
Fair value of plan assets at beginning of year			2,260						2,861						122						173
Actual return on plan assets			375						(470)						21						(28)
Employer contributions			23						21						28						13
Benefits paid			(155)						(152)						(33)						(36)
Fair value of plan assets at end of year			2,503						2,260						138						122
Funded status at end of year			$	352					$	209					$	(172)					$	(204)
Amounts recognized in the Consolidated Balance Sheets:
Other assets			$	652					$	484					$	—					$	—
Other current liabilities			(21)						(20)						—						—
Other liabilities			(279)						(255)						(172)						(204)
Net amount recognized			$	352					$	209					$	(172)					$	(204)
Amounts included in accumulated other comprehensive
loss (before tax):
Net (gain) loss			$	574					$	623					$	(28)					$	(19)
Prior service benefit			(5)						(6)						(156)						(177)

Our accumulated benefit obligation for our defined benefit pension plans is $2.0 billion and $1.9 billion at December 31, 2023 and 2022, respectively. Our unfunded pension plans, included above, which in all cases have no assets, had projected benefit obligations of $300 million and $275 million at December 31, 2023 and 2022, respectively, and had accumulated benefit obligations of $273 million and $249 million at December 31, 2023 and 2022, respectively.

K65

Pension and Other Postretirement Benefit Cost Components

			2023						2022						2021
			($ in millions)
Pension benefits:
Service cost			$	25					$	40					$	43
Interest cost			108						67						55
Expected return on plan assets			(208)						(213)						(193)
Amortization of net losses			4						49						66
Amortization of prior service benefit			(1)						—						—
Net benefit			$	(72)					$	(57)					$	(29)
Other postretirement benefits:
Service cost			$	4					$	6					$	6
Interest cost			17						9						7
Expected return on plan assets			(11)						(13)						(12)
Amortization of net losses			—						—						1
Amortization of prior service benefit			(26)						(25)						(26)
Net benefit			$	(16)					$	(23)					$	(24)

Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income

			2023
			Pension Benefits						Other Postretirement Benefits
			($ in millions)
Net gains arising during the year			$	(45)					$	(9)
Prior service effect of plan amendment			—						(5)
Amortization of net losses			(4)						—
Amortization of prior service benefit			1						26
Total recognized in other comprehensive income			$	(48)					$	12
Total recognized in net periodic cost and other comprehensive income			$	(120)					$	(4)

Net gains arising during the year for both pension benefits and other postretirement benefits were due primarily to higher actual returns on plan assets offset by a decrease in discount rates.

The estimated net losses and prior service credits for the pension plans that will be amortized from accumulated other comprehensive loss into net periodic cost over the next year are $16 million. The estimated net gains and prior service benefit for the other postretirement benefit plans that will be amortized from accumulated other comprehensive loss into net periodic benefit over the next year is $26 million.

K66

Pension and Other Postretirement Benefits Assumptions

Costs for pension and other postretirement benefits are determined based on actuarial valuations that reflect appropriate assumptions as of the measurement date, ordinarily the beginning of each year. The funded status of the plans is determined using appropriate assumptions as of each year end. A summary of the major assumptions follows:

			2023						2022						2021
Pension funded status:
Discount rate			5.23		%				5.56		%				2.97		%
Future salary increases			4.44		%				4.44		%				4.44		%
Other postretirement benefits funded status:
Discount rate			5.11		%				5.45		%				2.72		%
Pension cost:
Discount rate - service cost			5.75		%				3.25		%				3.14		%
Discount rate - interest cost			5.40		%				2.45		%				1.95		%
Return on assets in plans			8.00		%				8.00		%				8.00		%
Future salary increases			4.44		%				4.44		%				4.44		%
Other postretirement benefits cost:
Discount rate - service cost			5.56		%				3.01		%				2.71		%
Discount rate - interest cost			5.23		%				2.13		%				1.57		%
Return on assets in plans			7.75		%				7.75		%				7.75		%
Health care trend rate			7.00		%				6.50		%				6.00		%

To determine the discount rates used to measure our benefit obligations, we utilize analyses in which the projected annual cash flows from the pension and other postretirement benefit plans were matched with yield curves based on an appropriate universe of high-quality corporate bonds. We use the results of the yield curve analyses to select the discount rates that match the payment streams of the benefits in these plans.

We use a spot rate approach to estimate the service cost and interest cost components of net periodic benefit cost for our pension and other postretirement benefit plans.

Health Care Cost Trend Assumptions

For measurement purposes at December 31, 2023, increases in the per capita cost of pre-Medicare covered health care benefits were assumed to be 6.5% for 2024. We assume the rate will ratably decrease to an ultimate rate of 5.0% for 2030 and remain at that level thereafter.

Asset Management

Thirteen investment firms manage our defined benefit pension plan’s assets under investment guidelines approved by our Benefits Investment Committee that is composed of members of our management. Investments are restricted to domestic and international equity securities, domestic and international fixed income securities, and unleveraged exchange-traded options and financial futures. Limitations restrict investment concentration and use of certain derivative investments. The target asset allocation for equity is 75% of the pension plan’s assets. Fixed income investments must consist predominantly of securities rated investment grade or higher. Equity investments must be in liquid securities listed on national exchanges. No investment is permitted in our securities (except through commingled pension trust funds).

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Our pension plan’s weighted-average asset allocations, by asset category, were as follows:

			Percentage of Plan Assets at December 31,
			2023						2022
Domestic equity securities			50		%				53		%
Debt securities			24		%				26		%
International equity securities			24		%				20		%
Cash and cash equivalents			2		%				1		%
Total			100		%				100		%

The other postretirement benefit plan assets consist primarily of trust-owned variable life insurance policies with an asset allocation at December 31, 2023 of 66% in equity securities and 34% in debt securities compared with 64% in equity securities and 36% in debt securities at December 31, 2022. The target asset allocation for equity is between 50% and 75% of the plan’s assets.

The plans’ assumed future returns are based principally on the asset allocations and historical returns for the plans’ asset classes determined from both actual plan returns and, over longer time periods, expected market returns for those asset classes. For 2024, we assume an 8.00% return on pension plan assets.

Fair Value of Plan Assets

The following is a description of the valuation methodologies used for pension plan assets measured at fair value.

Common stock: Shares held by the plan at year end are valued at the official closing price as defined by the exchange or at the most recent trade price of the security at the close of the active market.

Common collective trusts: The readily determinable fair value is based on the published fair value per unit of the trusts. The common collective trusts hold equity securities, fixed income securities and cash and cash equivalents.

Fixed income securities: Valued based on quotes received from independent pricing services or at an estimated price at which a dealer would pay for the security at year end using observable market-based inputs.

Commingled funds: The readily determinable fair value is based on the published fair value per unit of the funds. The commingled funds hold equity securities.

Cash and cash equivalents: Short-term Treasury bills or notes are valued at an estimated price at which a dealer would pay for the security at year end using observable market-based inputs; money market funds are valued at the closing price reported on the active market on which the funds are traded.

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The following table sets forth the pension plan’s assets by valuation technique level, within the fair value hierarchy. There were no level 3 valued assets at December 31, 2023 or 2022.

			December 31, 2023
			Level 1						Level 2						Total
			($ in millions)
Common stock			$	1,192					$	—					$	1,192
Common collective trusts:
International equity securities			—						371						371
Debt securities			—						310						310
Domestic equity securities			—						166						166
Fixed income securities:
Government and agencies securities			—						170						170
Corporate bonds			—						93						93
Mortgage and other asset-backed securities			—						32						32
Commingled funds			—						122						122
Cash and cash equivalents			47						—						47
Total investments			$	1,239					$	1,264					$	2,503

			December 31, 2022
			Level 1						Level 2						Total
			($ in millions)
Common stock			$	1,011					$	—					$	1,011
Common collective trusts:
International equity securities			—						336						336
Debt securities			—						291						291
Domestic equity securities			—						160						160
Fixed income securities:
Government and agencies securities			—						158						158
Corporate bonds			—						100						100
Mortgage and other asset-backed securities			—						28						28
Commingled funds			—						121						121
Cash and cash equivalents			55						—						55
Total investments			$	1,066					$	1,194					$	2,260

The following is a description of the valuation methodologies used for other postretirement benefit plan assets measured at fair value.

Trust-owned life insurance: Valued at our interest in trust-owned life insurance issued by a major insurance company. The underlying investments owned by the insurance company consist of a U.S. stock account and a U.S. bond account but may retain cash at times as well. The U.S. stock account and U.S. bond account are valued based on readily determinable fair values.

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The other postretirement benefit plan assets consisted of trust-owned life insurance with fair values of $138 million and $122 million at December 31, 2023 and 2022, respectively, and are valued under level 2 of the fair value hierarchy. There were no level 1 or level 3 valued assets.

Contributions and Estimated Future Benefit Payments

In 2024, we expect to contribute approximately $22 million to our unfunded pension plans for payments to pensioners and approximately $31 million to our other postretirement benefit plans for retiree health and death benefits. We do not expect to contribute to our funded pension plan in 2024.

Benefit payments, which reflect expected future service, as appropriate, are expected to be paid as follows:

			Pension Benefits						Other Postretirement Benefits
			($ in millions)
2024			$	151					$	31
2025			149						30
2026			148						29
2027			148						28
2028			148						27
Years 2029 – 2033			743						127

Other Postretirement Coverage

Under collective bargaining agreements, Norfolk Southern and certain subsidiaries participate in a multi-employer benefit plan, which provides certain postretirement health care and life insurance benefits to eligible craft employees. Premiums under this plan are expensed as incurred and totaled $11 million, $13 million, and $21 million in 2023, 2022, 2021, respectively.

Section 401(k) Plans

Norfolk Southern and certain subsidiaries provide Section 401(k) savings plans for employees. Under the plans, we match a portion of employee contributions, subject to applicable limitations. Our matching contributions, recorded as an expense, totaled $25 million, $22 million, and $23 million in 2023, 2022, 2021, respectively.

13. Stock-Based Compensation

Under the stockholder-approved LTIP, the Human Capital Management and Compensation Committee (Committee), which is made up of nonemployee members of the Board, or the Chief Executive Officer (when delegated authority by such Committee), may grant stock options, stock appreciation rights (SARs), restricted stock units (RSUs), restricted shares, performance share units (PSUs), and performance shares, up to a maximum of 104,125,000 shares of our Common Stock, of which 7,731,573 remain available for future grants as of December 31, 2023.

The number of shares remaining for issuance under the LTIP is reduced (i) by 1 for each award granted as a stock option or stock-settled SAR, or (ii) by 1.61 for an award made in the form other than a stock option or stock-settled SAR. Under the Board-approved Thoroughbred Stock Option Plan (TSOP), the Committee may grant stock options up to a maximum of 6,000,000 shares of Common Stock. We use newly issued shares to satisfy any exercises and awards under the LTIP and the TSOP.

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The LTIP also permits the payment, on a current or a deferred basis and in cash or in stock, of dividend equivalents on shares of Common Stock covered by stock options, RSUs, or PSUs in an amount commensurate with regular quarterly dividends paid on Common Stock. With respect to stock options, if employment of the participant is terminated for any reason, including retirement, disability, or death, we have no further obligation to make any dividend equivalent payments. Regarding RSUs, we have no further obligation to make any dividend equivalent payments unless employment of the participant is terminated as a result of qualifying retirement or disability. Should an employee terminate employment, they are not required to forfeit dividend equivalent payments already received. Outstanding PSUs do not receive dividend equivalent payments.

The Committee granted stock options, RSUs and PSUs pursuant to the LTIP for the last three years as follows:

			2023												2022												2021
			Granted						Weighted- Average Grant-Date Fair Value						Granted						Weighted- Average Grant-Date Fair Value						Granted						Weighted- Average Grant-Date Fair Value
Stock options			69,580						$	77.60					140,080						$	61.32					42,770						$	62.49
RSUs			214,936						230.12						180,306						265.21						183,093						240.09
PSUs			59,200						236.16						58,945						272.22						50,100						240.72

Recipients of certain RSUs and PSUs pursuant to the LTIP who retire prior to October 1st will forfeit awards received in the current year. Receipt of certain LTIP awards is contingent on the recipient having executed a non-compete agreement with the company.

We account for our grants of stock options, RSUs, PSUs, and dividend equivalent payments in accordance with FASB ASC 718, “Compensation - Stock Compensation.” Accordingly, all awards result in charges to net income while dividend equivalent payments, which are all related to equity classified awards, are charged to retained income. Compensation cost for the awards is recognized on a straight-line basis over the requisite service period for the entire award. Related compensation costs and tax benefits during the years were:

			2023						2022						2021
			($ in millions)
Stock-based compensation expense			$	40					$	53					$	54
Total tax benefit			15						27						34

Stock Options

Option exercise prices will be at least the higher of (i) the average of the high and low prices at which Common Stock is traded on the grant date, or (ii) the closing price of Common Stock on the grant date. All options are subject to a vesting period of at least one year, and the term of the option will not exceed ten years. Holders of the options granted under the LTIP who remain actively employed receive cash dividend equivalent payments for four years in an amount equal to the regular quarterly dividends paid on Common Stock.

For all years, options granted under the LTIP and the TSOP may not be exercised prior to the fourth and third anniversaries of the date of grant, respectively, or if the optionee retires or dies before that anniversary date, may not be exercised before the later of one year after the grant date or the date of the optionee’s retirement or death.

The fair value of each option awarded was measured on the date of grant using the Black-Scholes valuation model. Expected volatility is based on implied volatility from traded options on, and historical volatility of, Common Stock. Historical data is used to estimate option exercises and employee terminations within the valuation model. Historical exercise data is used to estimate the average expected option term. The average risk-free interest rate is

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based on the U.S. Treasury yield curve in effect at the time of grant. A dividend yield of zero was used for the LTIP options during the vesting period. For 2023, 2022, and 2021, a dividend yield of 2.24%, 1.85%, and 1.64%, respectively, was used for the vested period during the remaining expected option term for LTIP options.

The assumptions for the LTIP grants for the last three years are shown in the following table:

			2023						2022						2021
Average expected volatility			27		%				27		%				26		%
Average risk-free interest rate			3.54		%				1.80		%				0.75		%
Average expected option term			7.0 years						6.5 years						7.5 years

A summary of changes in stock options is presented below:

			Stock Options						Weighted- Average Exercise Price
Outstanding at December 31, 2022			880,002						$	134.66
Granted			69,580						241.18
Exercised			(206,016)						96.68
Forfeited			(169)						69.83
Outstanding at December 31, 2023			743,397						155.17

The aggregate intrinsic value of options outstanding at December 31, 2023 was $66 million with a weighted-average remaining contractual term of 4.0 years. Of these options outstanding, 570,428 were exercisable and had an aggregate intrinsic value of $66 million with a weighted-average exercise price of $123.27 and a weighted-average remaining contractual term of 1.6 years.

The following table provides information related to options exercised for the last three years:

			2023						2022						2021
			($ in millions)
Options exercised			206,016						307,660						470,632
Total intrinsic value			$	27					$	54					$	83
Cash received upon exercise			19						25						42
Related tax benefits realized			6						12						17

At December 31, 2023, total unrecognized compensation related to options granted under the LTIP was $3 million, and is expected to be recognized over a weighted-average period of approximately 2.4 years.

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Restricted Stock Units

RSUs granted primarily have a four-year ratable restriction period and will be settled through the issuance of shares of Common Stock. Certain RSU grants include cash dividend equivalent payments during the restriction period in an amount equal to regular quarterly dividends paid on Common Stock. The fair value of each RSU was measured on the date of grant as the average of the high and low prices at which Common Stock is traded on the grant date, adjusted for the impact of dividend equivalent payments as applicable.

			2023						2022						2021
			($ in millions)
RSUs vested			157,417						249,138						260,307
Common Stock issued net of tax withholding			110,069						175,781						184,319
Related tax benefits realized			$	1					$	5					$	7

A summary of changes in RSUs is presented below:

			RSUs						Weighted- Average Grant-Date Fair Value
Nonvested at December 31, 2022			387,381						$	236.53
Granted			214,936						230.12
Vested			(157,417)						220.04
Forfeited			(11,042)						241.50
Nonvested at December 31, 2023			433,858						239.21

At December 31, 2023, total unrecognized compensation related to RSUs was $45 million, and is expected to be recognized over a weighted-average period of approximately 2.5 years.

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.

			2023						2022						2021
			($ in millions)
PSUs earned			58,599						86,420						78,727
Common Stock issued net of tax withholding			40,255						54,651						49,967
Related tax benefits realized			$	—					$	1					$	1

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A summary of changes in PSUs is presented below:

			PSUs						Weighted- Average Grant-Date Fair Value
Balance at December 31, 2022			142,437						$	236.70
Granted			59,200						236.16
Earned			(58,599)						213.12
Unearned			(4,751)						213.12
Forfeited			(1,578)						246.64
Balance at December 31, 2023			136,709						247.28

At December 31, 2023, total unrecognized compensation related to PSUs granted under the LTIP was $2 million, and is expected to be recognized over a weighted-average period of approximately 1.7 years.

Shares Available and Issued

Shares of Common Stock available for future grants and issued in connection with all features of the LTIP and the TSOP at December 31, were as follows:

			2023						2022						2021
Available for future grants:
LTIP			7,731,573						8,238,993						8,609,075
TSOP			436,571						436,402						435,867
Issued:
LTIP			315,700						503,090						632,279
TSOP			40,640						35,002						72,639

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14. Stockholders’ Equity

Common Stock

Common Stock is reported net of shares held by our consolidated subsidiaries (Treasury Shares). Treasury Shares at December 31, 2023 and 2022 amounted to 20,320,777, with a cost of $19 million at both dates.

Accumulated Other Comprehensive Loss

The components of “Other comprehensive income” reported in the Consolidated Statements of Comprehensive Income and 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						Reclassification Adjustments						Balance at End of Year
			($ in millions)
Year ended December 31, 2023
Pensions and other postretirement liabilities			$	(319)					$	44					$	(17)					$	(292)
Other comprehensive income of equity investees			(32)						4						—						(28)
Accumulated other comprehensive loss			$	(351)					$	48					$	(17)					$	(320)
Year ended December 31, 2022
Pensions and other postretirement liabilities			$	(356)					$	20					$	17					$	(319)
Other comprehensive income of equity investees			(46)						14						—						(32)
Accumulated other comprehensive loss			$	(402)					$	34					$	17					$	(351)

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Other Comprehensive Income

“Other comprehensive income” reported in the Consolidated Statements of Comprehensive Income consisted of the following:

			Pretax Amount						Tax (Expense) Benefit						Net-of-Tax Amount
			($ in millions)
Year ended December 31, 2023
Net gain arising during the year:
Pensions and other postretirement benefits			$	59					$	(15)					$	44
Reclassification adjustments for costs included in net income			(23)						6						(17)
Subtotal			36						(9)						27
Other comprehensive income of equity investees			4						—						4
Other comprehensive income			$	40					$	(9)					$	31
Year ended December 31, 2022
Net gain arising during the year:
Pensions and other postretirement benefits			$	27					$	(7)					$	20
Reclassification adjustments for costs included in net income			24						(7)						17
Subtotal			51						(14)						37
Other comprehensive income of equity investees			17						(3)						14
Other comprehensive income			$	68					$	(17)					$	51
Year ended December 31, 2021
Net gain arising during the year:
Pensions and other postretirement benefits			$	185					$	(46)					$	139
Reclassification adjustments for costs included in net income			41						(10)						31
Subtotal			226						(56)						170
Other comprehensive income of equity investees			24						(2)						22
Other comprehensive income			$	250					$	(58)					$	192

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15. Stock Repurchase Programs

We repurchased and retired 2.8 million, 12.6 million, and 12.7 million shares of Common Stock under our stock repurchase programs in 2023, 2022, and 2021, respectively, at a cost of $627 million, $3.1 billion, and $3.4 billion, respectively, inclusive of excise taxes in 2023.

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 December 31, 2023, $6.9 billion remains authorized for repurchase. Our previous share repurchase program terminated on March 31, 2022.

16. Earnings Per Share

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

			Basic																		Diluted
			2023						2022						2021						2023						2022						2021
			($ in millions except per share amounts, shares in millions)
Net income			$	1,827					$	3,270					$	3,005					$	1,827					$	3,270					$	3,005
Dividend equivalent payments			(3)						(2)						(2)						(3)						(1)						—
Income available to common stockholders			$	1,824					$	3,268					$	3,003					$	1,824					$	3,269					$	3,005
Weighted-average shares outstanding			226.9						234.8						246.9						226.9						234.8						246.9
Dilutive effect of outstanding options
and share-settled awards																					0.5						0.8						1.2
Adjusted weighted-average shares outstanding																					227.4						235.6						248.1
Earnings per share			$	8.04					$	13.92					$	12.16					$	8.02					$	13.88					$	12.11

In each year, 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: 0.1 million for the years ended December 31, 2023 and 2022, and none for the year ended December 31, 2021.

17. Commitments and Contingencies

Eastern Ohio Incident

Summary

On February 3, 2023, a train operated by us derailed in East Palestine, Ohio. The derailed equipment included 38 railcars, 11 of which were non-Company-owned tank cars containing hazardous materials. Fires associated with the derailment threatened certain of the tank cars. There was concern about the risk that the contents of five of the tank cars carrying vinyl chloride might polymerize, which would have posed the risk of a catastrophic explosion. As a

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consequence, on February 6, 2023, the local incident commander (the East Palestine Fire Chief)—in consultation with the incident command that included, among others, federal, state and local officials and Norfolk Southern—opted to conduct a controlled vent and burn of five derailed tank cars, all of which contained vinyl chloride. This procedure involved creating holes in the five tank cars to drain the vinyl chloride into adjacent trenches that had been dug into the ground where such vinyl chloride was then burned, with any material remaining after burning of the vinyl chloride being remediated. The February 3rd derailment, the associated fire, and the resulting vent and burn of the tank cars containing vinyl chloride on February 6th is hereinafter referred to as the “Incident.”

In response to the Incident, we have been working to clean the site safely and thoroughly, including those activities described in the Environmental Matters section below with respect to potentially impacted air, soil and water and to monitor for any impact on public health and the environment. We are working with federal, state, and local officials to mitigate impacts from the Incident, including, among other efforts, conducting environmental monitoring and clean-up activities (as more fully described below), operating a family assistance center to provide financial support to affected members of the East Palestine and surrounding communities, and committing additional financial support to the community.

Financial Impact

Although we cannot predict the final outcome or estimate the reasonably possible range of loss with certainty, we recognized $1.1 billion of expense in 2023 for costs directly attributable to the Incident (including amounts accrued for the probable and reasonably estimable liabilities for those environmental and non-environmental matters described below) which is presented in “Eastern Ohio incident” on the Consolidated Statements of Income. The total expense recognized includes the impact of $101 million in insurance recoveries received in 2023 from claims made under our insurance policies. We recorded a deferred tax asset (Note 4) of $249 million related to the Incident expecting that certain expenses will be deductible for tax purposes in future periods or offset with insurance recoveries. During 2023, our cash expenditures attributable to the Incident, net of insurance proceeds received, were $652 million, which are presented in “Net cash provided by operating activities” on the Consolidated Statements of Cash Flows. The difference between the recognized expense and cash expenditures during 2023 of $464 million comprises primarily of our current estimates of probable and reasonably estimable liabilities principally associated with environmental matters and legal proceedings, which are discussed in further detail below.

Certain costs recorded in 2023 may be recoverable under our insurance policies in effect at the date of the Incident or from third parties. To date, we have recognized $101 million in insurance recoveries. Any additional amounts recoverable under our insurance policies or from third parties will be reflected in future periods in which recovery is considered probable. For additional information about our insurance coverage, see “Insurance” below.

Environmental Matters – In response to the Incident, we have been working with federal, state, and local officials such as the U.S. Environmental Protection Agency (EPA), the Ohio EPA, the Pennsylvania Department of Environmental Protection (DEP), and the Columbiana County Health District to conduct environmental response and remediation activities, including but not limited to, air monitoring, indoor air quality screenings, municipal water and private water well testing, residential, commercial, and agricultural soil sampling, surface water and groundwater sampling, re-routing a local waterway around the affected site, capturing and shipping stormwater that enters the impacted derailment site to proper disposal facilities, and excavating and disposing of potentially affected soil at hazardous waste landfills or incinerators. The U.S. EPA issued a Unilateral Administrative Order (UAO) on February 21, 2023 containing various requirements, including the submission of numerous work plans to assess and remediate various environmental media and performance of certain removal actions at the affected site. On February 24, 2023, we submitted to the U.S. EPA our Notice of Intent to Comply with the UAO and are currently cooperating with U.S. EPA as well as the Ohio EPA and Pennsylvania DEP, pursuant to the UAO and the directives issued thereunder. On October 18, 2023, the U.S. EPA issued a second unilateral order under Section 311(c) of the Clean Water Act (CWA), requiring preparation of additional environmental work

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plans. We timely submitted our Notice of Intent to Comply with the CWA order and continue to cooperate with the U.S. EPA, as well as state agencies, in compliance with the CWA order.

We are also subject to the following legal proceedings that principally relate to the environmental impact of the Incident:

• The DOJ and the U.S. EPA filed a civil complaint (the DOJ Complaint) in the Northern District of Ohio (Eastern Division) seeking injunctive relief, cost recovery and civil penalties for violations of the Clean Water Act and seeking cost recovery under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). The Ohio Attorney General (AG) also filed a CERCLA lawsuit (the Ohio Complaint) in the Northern District of Ohio (Eastern Division) seeking statutory damages for a variety of tort and environmental claims under CERCLA and various state laws. The DOJ and Ohio AG cases have been consolidated for discovery purposes. We have filed an answer, and on June 30, 2023, we filed a third-party complaint bringing in numerous parties involved in the Incident.

In connection with the foregoing items, we recognized $836 million of expense during 2023, of which $517 million was paid during 2023, related to probable obligations that are reasonably estimable, in accordance with FASB ASC 410-30, “Environmental Obligations.” Our current estimate includes ongoing and future environmental cleanup activities and remediation efforts, governmental oversight costs (including those incurred by the U.S. EPA and the Ohio EPA), and other related costs, including those in connection with the DOJ Complaint (including potential civil penalties related to violations of the Clean Water Act). Our current estimates of future environmental cleanup and remediation liabilities related to the Incident may change over time due to various factors, including but not limited to, the nature and extent of required future cleanup and removal activities (including those resulting from soil, water, sediment, and air assessment and investigative activities that are currently being, and will continue to be, conducted at the site), and the extent and duration of governmental oversight, amongst other factors. As clean-up efforts progress and more information is available, we will review these estimates and revise as appropriate.

Legal Proceedings and Claims (Non-Environmental) – To date, numerous non-environmental legal actions have commenced with respect to the Incident, including those more specifically set forth below.

• There is a consolidated putative class action pending in the Northern District of Ohio (Eastern Division) in which plaintiffs allege various claims, including negligence, gross negligence, strict liability, and nuisance, and seeking as relief compensatory and punitive damages, medical monitoring and business losses. The putative class is defined by reference to a class area covering a 30-mile radius. On July 12, 2023, we filed a third-party complaint bringing in multiple parties involved in the Incident. The court in the putative class action has established a fact discovery deadline of February 5, 2024. Another putative class action is pending in the Western District of Pennsylvania, brought by Pennsylvania school districts and students. On August 22, 2023, three school districts voluntarily dismissed their actions, then individual lawsuits. On the same day, six Pennsylvania school districts and students filed a putative class action lawsuit alleging negligence, strict liability, nuisance, and trespass, and seeking damages and health monitoring. On December 8, 2023, the school districts amended their complaint to add additional companies as defendants in the action. The putative class action and individual lawsuits are collectively referred to herein as the Incident Lawsuits. In accordance with FASB ASC 450, “Contingencies,” we have recognized a $116 million loss during 2023 with respect to the Incident Lawsuits and related contingencies, of which $34 million has been paid. At this time, we are unable to estimate the possible loss or range of loss in excess of the amounts accrued regarding the Incident Lawsuits. However, for the reasons set forth below, our estimated loss or range of loss with respect to the Incident Lawsuits may change from time to time, and it is reasonably possible that we will incur actual losses in excess of the amounts currently accrued and such additional amounts may be material. While we continue to

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work with parties with respect to potential resolution pathways, no assurance can be given that we will be successful in doing so and we cannot predict the outcome of these matters.

• We have received securities and derivative litigation and multiple shareholder document and litigation demand letters, including a securities class action lawsuit under the Securities Exchange Act of 1934 initially filed in the Southern District of Ohio alleging multiple securities law violations but since transferred to the Northern District of Georgia, a securities class action lawsuit under the Securities Act of 1933 filed in the Southern District of New York alleging misstatements in association with our debt offerings, and a shareholder derivative complaint in Virginia state court asserting claims for breach of fiduciary duties, waste of corporate assets, and unjust enrichment in connection with safety of the Company's operations (collectively, the Shareholder Matters). On February 2, 2024, defendants filed a motion to dismiss the amended complaint in the Securities Act lawsuit. No responsive pleadings have been filed yet with respect to the other Shareholder Matters.

With respect to the Incident-related litigation and regulatory matters, we record a liability for loss contingencies through a charge to earnings when we conclude that it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated, and disclose such liability if we conclude it to be material. Any adjustments to the recorded liability will be reflected in earnings in the periods in which such adjustments become known. Because the final outcome of any of these legal proceedings cannot be predicted with certainty, developments related to the progress of such legal proceedings or other unfavorable or unexpected developments or outcomes could result in additional costs or new or additionally accrued amounts that could be material to our results of operations in a particular year or quarter. In addition, if it is reasonably possible that we will incur Incident-related losses in excess of the amounts currently recorded as a loss contingency, we disclose the potential range of loss, if reasonably estimable, or we disclose that we cannot reasonably estimate such an amount at this time. For Incident-related litigation and regulatory matters where a loss may be reasonably possible, but not probable, or probable but not reasonably estimable, no accrual is established but the matter, if potentially material, is disclosed.

Our estimates of probable losses and reasonably possible losses are based upon currently available information and involve significant judgement and a variety of assumptions, given that (1) these legal and regulatory proceedings are in early stages; (2) discovery may not be completed; (3) damages sought in these legal and regulatory proceedings can be unsubstantiated or indeterminate; (4) there are often significant facts in dispute; and/or (5) there is a wide range of possible outcomes. Accordingly, our estimated range of loss with respect to these matters may change from time to time, and actual losses may exceed current estimates. At this time, we are unable to estimate the possible loss or range of loss in excess of the amounts accrued with respect to the matters described above.

In addition to the costs associated with environmental matters and legal proceedings and claims, we incurred $265 million in other expenses directly related to the Incident in 2023 pertaining to legal fees, community support, and other response-related activities. The amounts recorded by us in 2023 do not include any estimate of loss for the following additional items, for which we believe a loss is either not probable or not reasonably estimable for the reasons noted: (i) the overall cost to us for the healthcare fund being developed in conjunction with relevant stakeholders, including the Ohio AG, for affected residents (given the preliminary nature of such discussions), which amount will impact our loss contingency analysis with respect to the Incident Lawsuits described above, or (ii) any fines or penalties (in excess of the liabilities established for Clean Water Act-related civil penalties) that may be imposed as a result of the Incident Inquiries and Investigations, as more specifically set forth and defined below (the outcome of which are uncertain at this time). Additionally, with the exception of amounts recognized during 2023, potential recoveries under our insurance coverage, which may apply to various Incident-related expenses or liabilities as more specifically set forth further below, have not yet been recorded (given the preliminary nature of discussions with our insurers). No amounts have been recorded related to potential recoveries

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from other third parties, which may reduce amounts payable by our insurers under our applicable insurance coverage.

Inquiries and Investigations

As set forth above, we are subject to inquiries and investigations by numerous federal, state, and local government authorities and regulatory agencies regarding the Incident, including but not limited to, the DOJ and the U.S. EPA, the Ohio EPA, the NTSB, the FRA, the Occupational Safety and Health Administration, the Ohio AG, and the Pennsylvania AG. Further details regarding the NTSB and FRA investigations are set forth below. We are cooperating with all inquiries and investigations, including responding to civil and criminal subpoenas and other requests for information (the aforementioned inquiries and investigations, as well as the civil and criminal subpoenas are collectively referred to herein as the Incident Inquiries and Investigations). Aside from the FRA Safety Assessment (defined and described below), the outcome of any current or future Incident Inquiries and Investigations is uncertain at this time, including any related fines, penalties or settlements. Therefore, our expenses for 2023 do not include estimates of the total amount that we may incur for any such fines, penalties or settlements.

Subsequent to the Incident, investigators from the NTSB examined railroad equipment and track conditions; reviewed data from the signal system, wayside defect detectors, local surveillance cameras, and the lead locomotive’s event recorder and forward-facing and inward-facing image recorders; and completed certain interviews (the NTSB Investigation). The NTSB issued a preliminary report indicating that one of the cars involved in the derailment appeared to have a wheel bearing in the final stage of overheat failure moments before the derailment. Their preliminary report also indicates that the rail crew was operating the train within our rules; the rail crew operated the train below the track speed limit, the wayside heat detectors were operating as designed; and once the rail crew was alerted by the wayside detector, they immediately began to stop the train. The NTSB conducted a subsequent investigative field hearing in East Palestine, Ohio on June 22 and 23, 2023. The NTSB’s investigation remains ongoing. We expect the NTSB to issue a final report, with a probable cause determination and safety recommendations, in 2024.

Concurrent with the NTSB Investigation, the FRA is also investigating the Incident. Similar in scope to the NTSB Investigation, the FRA is examining railroad equipment, track conditions, hazardous materials train placement and routing, and emergency response (the FRA Incident Investigation). The FRA Incident Investigation may result in the assessment of civil penalties. In addition to the FRA Incident Investigation, the FRA completed a 60-day supplemental safety assessment (the FRA Safety Assessment). The FRA Safety Assessment included a review of findings from a previously completed 2022 system audit and an assessment of operational elements including, but not limited to: track, signal, and rolling stock maintenance, inspection and repair practices; protection of employees; communications between transportation departments and mechanical and engineering staff; operation control center procedures and dispatcher training. The overall scope of the FRA Safety Assessment was to examine our safety culture. The FRA issued a public report in early August and included its findings and recommended corrective actions. The FRA Incident Investigation remains ongoing.

Other 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 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

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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.

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 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. On January 3, 2023, the court granted summary judgment to us on all of the compensatory claims but denied summary judgment for all equitable relief claims. On January 18, 2023, the court dismissed the federal equitable relief claims, leaving the state equitable relief claims as the sole remaining issue under consideration. On April 19, 2023, the court disposed of all remaining state equitable relief claims. The court's dismissals were appealed and the case is currently before the United States Court of Appeals for the Fourth Circuit. We will 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 (including the related appeal) will not be material. Until such appeal is final, we cannot reasonably estimate the potential loss or range of loss associated with this matter.

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 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 – Other than Incident-related matters noted above, 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

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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.

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.

In addition to environmental claims associated with the Incident, our Consolidated Balance Sheets include liabilities for other environmental exposures of $60 million at December 31, 2023, and $66 million at December 31, 2022, of which $15 million is classified as a current liability at the end of both periods. At December 31, 2023, the liability represents our estimates of the probable cleanup, investigation, and remediation costs based on available information at 81 known locations and projects compared with 85 locations and projects at December 31, 2022. At December 31, 2023, twenty-one sites accounted for $48 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 five years; however, some costs will be paid out over a longer period.

At eight locations, one or more of our subsidiaries in conjunction with a number of other parties have been identified as potentially responsible parties under CERCLA 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.

As set forth above, with respect to known environmental sites (whether identified by us or by the U.S. EPA 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

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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.

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.

The latest round of national bargaining concluded in December 2022, when agreements were either ratified or enacted through legislative action for all twelve of our unions. With the conclusion of national bargaining, neither party can compel mandatory bargaining around any new proposals until November 1, 2024.

In addition, we understand the imperative to continue improving quality of life for our craft employees and remain actively engaged with our unions in voluntary local discussions (none of which carry the risk of a work stoppage) on this important issue.

Insurance

We purchase insurance covering legal liabilities for bodily injury and property damage to third parties. Our current liability insurance provides limits for approximately 93% of covered losses above $75 million and below $734 million per occurrence and/or policy year. In addition, we purchase insurance for damage to property owned by us or in our care, custody, or control. Our current property insurance provides limits for approximately 82% of covered losses above $75 million and below $275 million per occurrence and/or policy year.

Insurance coverage with respect to the Incident is subject to certain conditions, including but not limited to our insurers’ reservation of rights to further investigate and contest coverage, the express restrictions and sub-limits of coverage, and various policy exclusions, including those for some governmental fines or penalties. Some (re)insurers have disputed certain payments we have made, for example, as part of our effort to respond to, mitigate, and compensate for the impact to the community and affected residents and businesses. We are pursuing coverage with respect to the Incident, and we have recognized $101 million in insurance recoveries in 2023, principally from excess liability (re)insurers.

Purchase Commitments

At December 31, 2023, we had outstanding purchase commitments totaling $1.4 billion through 2053 for locomotive modernizations, long-term technology support and development contracts, track material, and vehicles.

Asset Purchase and Sale Agreement

In November 2022, we entered into an asset purchase and sale agreement with the Board of Trustees of the Cincinnati Southern Railway to purchase approximately 337 miles of railway line that extends from Cincinnati, Ohio to Chattanooga, Tennessee which we currently operate under a lease agreement. The agreement is conditioned upon the following, among other items: (i) approval by the voters of the City of Cincinnati (Cincinnati Voter Approval), which was obtained in November 2023, and (ii) the receipt of regulatory approval from the U.S. Surface

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Transportation Board (STB), which occurred in September 2023. In June 2023, we entered into an amended and restated asset purchase and sale agreement which increased the purchase price by $500,000 and clarified the impact of Cincinnati Voter Approval on the closing timeline. Following the June 2023 amendment, the total purchase price for the line and other associated real and personal property included in the transaction is expected to be approximately $1.7 billion. The transaction is scheduled to close on March 15, 2024.

Change-In-Control Arrangements

We have compensation agreements with certain officers and key employees that become operative only upon a change in control of Norfolk Southern, as defined in those agreements. The agreements provide generally for payments based on compensation at the time of a covered individual’s involuntary or other specified termination and for certain other benefits.

Indemnifications

In a number of instances, we have agreed to indemnify lenders for additional costs they may bear as a result of certain changes in laws or regulations applicable to their loans. Such changes may include impositions or modifications with respect to taxes, duties, reserves, liquidity, capital adequacy, special deposits, and similar requirements relating to extensions of credit by, deposits with, or the assets or liabilities of such lenders. The nature and timing of changes in laws or regulations applicable to our financings are inherently unpredictable, and therefore our exposure in connection with the foregoing indemnifications cannot be quantified. No liability has been recorded related to these indemnifications.

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