<PAGE> PAGE 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
-------- --------
Commission file number 1-8339
NORFOLK SOUTHERN CORPORATION
- ---------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Virginia 52-1188014
- ---------------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
Three Commercial Place
Norfolk, Virginia 23510-2191
- ---------------------------------------- ---------------------------------
(Address of principal executive offices) Zip Code
Registrant's telephone number, including area code (804) 629-2680
--------------------
No Change
- ---------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. (X) Yes ( ) No
The number of shares outstanding of each of the registrant's classes of
Common Stock, as of the last practicable date:
Class Outstanding as of October 31, 1994
----- ----------------------------------
Common Stock (par value $1.00) 134,690,669 shares (excluding
7,252,634 shares held by
registrant's consolidated
subsidiaries)
<PAGE> PAGE 2
NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES (NS)
INDEX
Page
----
Part I. Financial Information:
Item 1. Consolidated Statements of Income
Three Months and Nine Months Ended
September 30, 1994 and 1993 3-4
Consolidated Balance Sheets
September 30, 1994 and December 31, 1993 5
Consolidated Statements of Cash Flows
Nine Months Ended September 30, 1994 and 1993 6
Notes to Consolidated Financial Statements 7-10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11-15
PartII. Other Information:
Item 1. Legal Proceedings 16
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 17
Index to Exhibits 18
<PAGE> PAGE 3
<TABLE>
PART I. FINANCIAL INFORMATION
NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income
(In millions of dollars except per share amounts)
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1994 1993 1994 1993
-------- -------- -------- --------
<S> <C> <C> <C> <C>
TRANSPORTATION OPERATING REVENUES:
Railway:
Coal $ 325.0 $ 300.2 $ 952.4 $ 906.6
Merchandise 622.7 584.2 1,880.7 1,806.5
Other 28.1 29.9 82.8 93.4
-------- -------- -------- --------
Total railway 975.8 914.3 2,915.9 2,806.5
Motor carrier (Note 6) 195.4 174.6 493.5 568.3
-------- -------- -------- --------
Total transportation
operating revenues 1,171.2 1,088.9 3,409.4 3,374.8
-------- -------- -------- --------
TRANSPORTATION OPERATING EXPENSES:
Railway:
Compensation and benefits
(Notes 9 and 10) 340.4 349.3 1,033.5 1,052.0
Materials, services and rents 160.2 158.6 486.5 493.9
Depreciation 95.1 90.5 283.4 269.2
Diesel fuel 47.3 40.0 139.7 130.6
Casualties and other claims 36.4 30.5 103.0 90.7
Other 32.5 33.2 109.0 100.7
-------- -------- -------- --------
Total railway 711.9 702.1 2,155.1 2,137.1
Motor carrier (Note 6) 181.8 161.4 476.2 627.9
-------- -------- -------- --------
Total transportation
operating expenses 893.7 863.5 2,631.3 2,765.0
-------- -------- -------- --------
Income from operations 277.5 225.4 778.1 609.8
Other income (expense):
Interest income 7.4 6.2 18.7 18.9
Interest expense on debt (27.5) (24.5) (75.2) (74.7)
Other-net 8.7 25.9 48.3 98.3
-------- -------- -------- --------
Total other income (expense) (11.4) 7.6 (8.2) 42.5
-------- -------- -------- --------
Income before income taxes
and cumulative effect of
accounting changes 266.1 233.0 769.9 652.3
Income taxes (Note 8):
Provision on pretax earnings 97.8 91.6 278.2 216.8
Adjustment of net deferred tax
liability for federal rate
increase -- 46.2 -- 46.2
-------- -------- -------- --------
Total income taxes 97.8 137.8 278.2 263.0
-------- -------- -------- --------
Income before accounting
changes 168.3 95.2 491.7 389.3
</TABLE>
(Continued)
<PAGE> PAGE 4
<TABLE>
NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income (Continued)
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1994 1993 1994 1993
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Cumulative effect on years prior to
1993 of changes in accounting
principles (Note 7) for:
Income taxes -- -- -- 466.8
Postretirement benefits other than
pensions; and postemployment
benefits - net of taxes -- -- -- (243.5)
-------- -------- -------- --------
NET INCOME $ 168.3 $ 95.2 $ 491.7 $ 612.6
======== ======== ======== ========
PER SHARE AMOUNTS (NOTE 11):
Earnings per share before
accounting changes $ 1.24 $ 0.69 $ 3.59 $ 2.79
Cumulative effect on years prior to
1993 of changes in accounting
principles for:
Income taxes -- -- -- 3.34
Postretirement benefits other than
pensions; and postemployment
benefits -- -- -- (1.74)
-------- -------- -------- --------
EARNINGS PER SHARE $ 1.24 $ 0.69 $ 3.59 $ 4.39
======== ======== ======== ========
DIVIDENDS PER SHARE $ 0.48 $ 0.48 $ 1.44 $ 1.38
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> PAGE 5
<TABLE>
NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(In millions of dollars)
(Unaudited)
<CAPTION>
September 30, December 31,
1994 1993
------------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 136.5 $ 80.5
Short-term investments (Note 4) 320.6 177.7
Accounts receivable - net 763.3 729.9
Materials and supplies 65.7 70.3
Deferred income taxes 144.5 177.7
Other current assets (Note 4) 66.7 327.4
--------- ---------
Total current assets 1,497.3 1,563.5
Investments 173.5 160.3
Properties less accumulated depreciation 8,883.2 8,730.7
Other assets 99.3 65.3
--------- ---------
TOTAL ASSETS $10,653.3 $10,519.8
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt (Note 3) $ 46.9 $ 149.5
Accounts payable 718.7 653.6
Income and other taxes 165.9 135.3
Other current liabilities 133.8 145.8
Current maturities of long-term debt 71.3 113.7
--------- ---------
Total current liabilities 1,136.6 1,197.9
Long-term debt (Note 3) 1,560.0 1,481.5
Other liabilities 1,001.4 1,035.4
Minority interests 53.5 54.5
Deferred income taxes - net 2,173.3 2,129.8
--------- ---------
TOTAL LIABILITIES 5,924.8 5,899.1
--------- ---------
Stockholders' equity:
Common stock $1.00 per share par value 142.8 145.7
Other capital 417.4 417.1
Retained income 4,188.9 4,078.5
Less treasury stock at cost, 7,252,634 shares (20.6) (20.6)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 4,728.5 4,620.7
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $10,653.3 $10,519.8
========= =========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> PAGE 6
<TABLE>
NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In millions of dollars)
(Unaudited)
<CAPTION>
Nine Months Ended
September 30,
1994 1993
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 491.7 $ 612.6
Reconciliation of net income to net cash
provided by operating activities:
Net cumulative effect of changes in
accounting principles -- (223.3)
Special charge payments (30.2) (27.6)
Depreciation 305.7 307.8
Deferred income taxes 68.3 28.5
Nonoperating gains and losses on properties
and investments (13.1) (67.2)
Changes in assets and liabilities affecting
operations:
Accounts receivable (43.6) (1.9)
Materials and supplies 4.6 8.5
Other current assets 16.2 35.9
Current liabilities other than debt 54.6 43.9
Other - net 2.8 28.3
-------- --------
Net cash provided by operating activities 857.0 745.5
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions (491.9) (508.4)
Property sales and other transactions 53.4 94.5
Investments and loans (44.5) (65.5)
Investment sales and other transactions 260.1 46.3
Short-term investments - net (143.3) 50.8
-------- --------
Net cash used for investing activities (366.2) (382.3)
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends (197.9) (193.0)
Common stock issued - net 9.4 12.9
Purchase and retirement of common stock (179.0) (98.6)
Long-term debt proceeds 41.4 15.0
Debt repayments (108.7) (74.1)
-------- --------
Net cash used for financing activities (434.8) (337.8)
-------- --------
Net increase in cash and cash equivalents 56.0 25.4
CASH AND CASH EQUIVALENTS:*
At beginning of year 80.5 111.8
-------- --------
At end of period $ 136.5 $ 137.2
======== ========
- ---------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest (net of amounts capitalized) $ 93.3 $ 95.3
Income taxes $ 154.3 $ 228.0
* Cash equivalents are highly liquid investments purchased three months or
less from maturity.
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> PAGE 7
NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of Management, the accompanying unaudited interim
financial statements contain all adjustments (consisting of normal
recurring accruals) necessary to present fairly the financial position
as of September 30, 1994, and the results of operations and cash flows
for the nine months ended September 30, 1994 and 1993.
While Management believes that the disclosures presented are adequate
to make the information not misleading, these consolidated financial
statements should be read in conjunction with the financial statements
and notes included in the Corporation's latest Annual Report on
Form 10-K.
2. Contingencies
There have been no significant changes since year end 1993 in matters
discussed in NOTE 16, CONTINGENCIES, appearing in the NS Annual Report
on Form 10-K for 1993), Notes to Consolidated Financial Statements,
beginning on page 86. An update of the status of certain legal
proceedings was included in Part I, Item 3 - Legal Proceedings, of the
NS Annual Report on Form 10-K for 1993 and in Part II, Item 1 - Legal
Proceedings, of the Form 10-Q for the first quarter of 1994. A
further update is included in Part II, Item 1 - Legal Proceedings, of
this Form 10-Q.
3. Commercial Paper Program
Since 1990, NS has had a revolving credit agreement supporting its
commercial paper program. On March 29, 1994, NS entered into a new
credit agreement effective through March 29, 1999, which increased the
credit limit under its revolving credit facility from $400 million to
$500 million. A portion of commercial paper outstanding, to the
extent of the revolving credit agreement, is classified as long-term
debt. Accordingly, the amount of commercial paper notes classified as
long-term debt in the Consolidated Balance Sheet increased to
$500 million in 1994.
4. Investments
The planned borrowing of the cash surrender value of certain corporate
owned life insurance policies, amounting to approximately $220 million,
resulted in this amount's being reclassified in the December 31, 1993,
Consolidated Balance Sheet from Investments to Other current assets.
The borrowing, which was completed in May 1994, resulted in the decline
in Other current assets with a corresponding increase in Cash and
Short-term investments.
5. Share Purchase Programs
Since 1987, the Board of Directors has authorized the purchase and
retirement of up to 65 million shares of common stock. Purchases
under the programs initially were made with internally generated cash.
Beginning in May 1990, some purchases were financed with proceeds from
the sale of short-term commercial paper notes. In February 1992 and
March 1991, long-term notes totaling $500 million were issued in part
to repay portions of the commercial paper notes, as well as to provide
funds for additional purchases. Since the first purchases in December
1987 through September 30, 1994, NS has purchased and retired
<PAGE> PAGE 8
NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Share Purchase Programs (continued)
56,708,500 shares of its common stock at a cost of approximately
$2.4 billion. Future purchases are dependent on market conditions,
the economy, cash needs and alternative investment opportunities.
6. Motor Carrier Restructuring
In mid-1993, NS began a restructuring of its motor carrier subsidiary,
North American Van Lines, Inc. (NAVL). The restructuring of NAVL's
truckload business resulted in the liquidation or transfer to other
divisions of most of the Commercial Transport Division's assets and,
in December 1993, the sale of Tran-Star's (refrigerated trucking)
operations. NAVL's 1994 revenues and expenses reflect the results
of its remaining operations.
In the second quarter of 1993, as a result of these planned
dispositions, NS recorded a $50.3 million pretax ($32.3 million after-
tax) charge and recognized an additional tax benefit of $36.8 million
associated with the restructuring. The estimated costs of the
restructuring included projected operating losses during the phase-out
period, as well as labor, equipment and facility-related costs.
7. Required Accounting Changes
1994
----
Effective January 1, 1994, NS adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities" (SFAS 115). SFAS 115 addresses the
accounting and reporting for investments in equity securities that
have readily determinable fair values and for all investments in debt
securities. The effect on NS, which had no impact on earnings,
resulted in a $6.3 million increase in stockholders' equity as of
January 1, 1994, ($2.9 million as of September 30, 1994) reflecting
unrealized appreciation on certain investments, net of the related
deferred taxes.
1993
----
Effective January 1, 1993, NS adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" (SFAS 106), and Statement
of Financial Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits" (SFAS 112). The cumulative effects for years
prior to 1993 of adopting SFAS 106 and SFAS 112 increased pretax
expenses $360.2 million ($223.8 million after-tax), and $31.8 million
($19.7 million after-tax), respectively, reducing earnings per share
for the first six months of 1993 by $1.74.
Also effective January 1, 1993, NS adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS
109). SFAS 109 required a change from the deferred method of
accounting for income taxes to the asset and liability method of
accounting for income taxes. The cumulative effect on years prior to
1993 of adopting SFAS 109 increased 1993 net income and earnings per
share by $466.8 million and $3.34, respectively.
<PAGE> PAGE 9
NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. Required Accounting Changes (continued)
The effect on net income and earnings per share as a result of
implementing the accounting changes was to increase net income and
earnings per share by $223.3 million and $1.60 per share,
respectively.
8. Federal Income Tax Rate Increase in 1993
Tax legislation enacted in August 1993 increased the federal corporate
income tax rate from 34 percent to 35 percent, retroactive to January
1, 1993. SFAS 109 (see Note 7) requires full recognition of such a
change in the period of enactment. The effect on NS was to reduce net
income for the third quarter and nine months ended September 30, 1993,
by $51.8 million, or $0.37 per share. The provision for income taxes
includes $46.2 million, or $0.33 per share, related to deferred tax
assets and liabilities reflected in the balance sheet, and
$5.6 million, or $0.04 per share, related to 1993's pretax earnings.
9. Special Charge Reversal in 1993
Based on NS' success in eliminating reserve board positions and other
events occurring in the third quarter of 1993, the accrual included in
the 1991 special charge related to labor was reduced by $46 million and
was reflected as a credit in compensation and benefits expenses. The
principal factor contributing to the reversal was that, in 1993,
agreement on terms for certain further labor savings could not be
reached. Accordingly, it became apparent that a surplus existed in the
labor portion of the provision established in the 1991 special charge.
10. Early Retirement Program in 1993
Third-quarter 1993 compensation and benefits expense included a
$42.4 million charge for a voluntary early retirement program for
salaried employees. The principal benefit for those who participated
in the program was enhanced pension benefits.
11. Earnings Per Share
<TABLE>
Earnings per share are computed by dividing net income by the weighted
average number of common shares outstanding as follows:
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1994 1993 1994 1993
------- ------- ------- -------
(In thousands)
<S> <C> <C> <C> <C>
Average number of
shares outstanding 135,992 139,169 137,105 139,659
</TABLE>
Recent decreases in the average number of outstanding shares of NS
common stock are the result of the share purchase program described in
Note 5.
<PAGE> PAGE 10
NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
RESULTS OF OPERATIONS
Net Income
- ----------
Net income increased $73.1 million, or 77 percent, in the third quarter
of 1994 when compared with third quarter 1993. Last year's results
included a $51.8 million increase in income taxes due to a retroactive
change in the federal corporate income tax rate which became effective
during that quarter (see Note 8). Excluding the Adjustment of net
deferred tax liability for federal rate increase in 1993, third-quarter
net income was up $26.9 million, or 19 percent, over last year.
Net income for the nine months ended September 30, 1994, was up
$56.2 million, or 13 percent, over the same period last year, excluding
the 1993 cumulative effect of accounting changes (see Note 7) and the
Adjustment of net deferred tax liability for federal rate increase
(see Note 8).
<TABLE>
Railway Operating Revenues
- --------------------------
Railway operating revenues increased $61.5 million, or 7 percent, in the
third quarter, and $109.4 million, or 4 percent, for the nine months ended
September 30, 1994, when compared with the same periods last year. The
increases in operating revenues were due to:
<CAPTION>
Third Quarter First Nine Months
1994 vs. 1993 1994 vs. 1993
Increase (Decrease) Increase (Decrease)
------------------ ------------------
(In millions of dollars)
<S> <C> <C>
Traffic volume (carloads) $ 73.6 $ 178.8
Revenue per unit/mix (10.3) (58.8)
Other (1.8) (10.6)
-------- --------
$ 61.5 $ 109.4
======== ========
</TABLE>
<PAGE> PAGE 11
NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
<TABLE>
The principal revenue commodity groups and the changes from the prior year
were as follows:
<CAPTION>
Third Quarter First Nine Months
1994 vs. 1993 1994 vs. 1993
Increase (Decrease) Increase (Decrease)
------------------ ------------------
(In millions of dollars)
<S> <C> <C>
Coal $ 24.8 $ 45.8
Merchandise:
Intermodal * 12.9 16.5
Chemicals 11.3 28.4
Metals/construction 7.4 15.3
Agriculture 3.4 20.2
Automotive 2.6 (6.4)
Paper/forest 0.9 0.2
Other, principally switching
and demurrage (1.8) (10.6)
-------- --------
$ 61.5 $ 109.4
======== ========
* See "Merchandise" discussion for effect related to the Triple
Crown Service Company (TCSC) partnership.
</TABLE>
Coal
- ----
Coal revenues were up 8 percent for the third quarter and 5 percent
for the nine months, when compared with last year. These improvements
resulted primarily from increased utility coal traffic, up 15 percent
for the third quarter and 20 percent year-to-date, compared with 1993.
This compares very favorably with the national increase in electricity
generation of less than 1 percent for the quarter and 2 percent year-to-
date. The growth principally was due to the rebuilding of utility
stockpiles and to new business. Export coal traffic was up slightly
for the quarter, improving over the first and second quarters' declines
related to the weak European economy. Somewhat offsetting these
improvements were reductions in domestic metallurgical coal shipments due
to depressed domestic coke use caused by changes in steel-making
technology. For the remainder of the year, total coal traffic is expected
to exceed last year's levels slightly.
Merchandise
- -----------
Third-quarter merchandise traffic produced revenue gains in all commodity
groups. And, for the year-to-date, all commodity groups except
automotive posted gains over 1993. Intermodal, NS' fastest growing
group, was up 14 percent in the third quarter and 13 percent year-to-
date, compared with last year (adjusted to exclude nonrail Triple Crown
revenues in 1993). Year-to-date intermodal revenue comparisons are
affected by a change in reporting as a result of the TCSC partnership
with Conrail which began on April 1, 1993. Because Norfolk Southern
<PAGE> PAGE 12
NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Corporation indirectly owns 50 percent of TCSC, its revenues are not
consolidated. Accordingly, NS' intermodal operating revenues after
first quarter 1993 include only revenues for rail service provided
to the partnership. Third-quarter and year-to-date intermodal traffic
was up 14 percent and 11 percent, respectively, compared with
last year. The chemicals group, boosted by strong movements
of fertilizer, produced revenue increases of 10 percent for the quarter
and 8 percent year-to-date, compared with 1993. Increased revenues
also were reported in the metals/construction group, up 10 percent for
the quarter and 7 percent year-to-date, compared with 1993. A 12 percent
quarterly gain in steel business as a result of broad market strength
(steel is having its best year since 1973), coupled with increased car
supply and new traffic to Mexico, contributed to these improvements.
Automotive results in 1994 have been disappointing, although the third
quarter showed a small improvement over last year. Retooling downtimes
at certain plants served by NS have been largely responsible for the
declines. However, traffic at automotive assembly plants unaffected
by retooling continues to do well. Over the next few years, growth and
market share may improve steadily, as retooling is completed and new
plants, such as the BMW and Mercedes-Benz facilities, come on line.
The near-term outlook for the other merchandise commodity groups is
for continued strength, as growth is anticipated in most markets,
particularly intermodal and metals/construction.
Railway Operating Expenses
- --------------------------
Despite increased traffic, railway operating expenses increased
only $9.8 million, or 1 percent, in the third quarter of 1994 and
$18.0 million, or just under 1 percent for the nine-month period, when
compared with 1993. The largest increase for the quarter was in Diesel
fuel, up $7.3 million, or 18 percent, due to higher consumption associated
with an 8 percent increase in carloads and to a 6 percent increase in
the average price per gallon. Also increasing were Casualties and other
claims, up $5.9 million, or 19 percent, as a result of higher estimated
claim settlement costs, and Depreciation, up $4.6 million, or 5 percent,
due to increased investment in plant and equipment. Compensation and
benefits expense declined slightly, despite increased business levels,
largely due to lower fringe benefit costs and lower expenses related to
stock-based compensation.
Included in third-quarter 1993 compensation and benefits expense were two
large items described in Notes 9 and 10. The first produced a credit and
was related to the 1991 special charge, which included a reserve for costs
necessary to achieve the productivity gains associated with the then new
crew-consist agreements. During 1993, agreement on terms for certain
further labor savings could not be reached. This, taken with the early
success in reducing excess employees, resulted in a $46 million surplus
in the crew consist reserve which was recorded as a credit to compensation
and benefits expense. The second item resulted from a voluntary early
retirement program completed in September 1993. The program's total
cost was $42.4 million and, in 1994, produced savings of about $12 million.
<PAGE> PAGE 13
NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
The small increase in year-to-date railway operating expenses was the net
result of increases in most expense categories which were largely offset
by declines in Compensation and benefits and in Materials, services and
rents. The principal increases were in Depreciation, up $14.2 million, or
5 percent, due to a larger capital base; Casualties and other claims, up
$12.3 million, or 14 percent, due to higher estimated claim settlement
costs and to environmental clean-up costs associated with a tank car leak;
and Diesel fuel, up $9.1 million, or 7 percent, largely due to increased
consumption driven by a 7 percent rise in carloadings. Also increasing
were Other expenses which rose $8.3 million, or 8 percent, due in part to
higher relocation expenses related to new job assignments following last
year's early retirement program, and to a variety of smaller factors.
Compensation and benefits expenses declined $18.5 million, or 2 percent,
principally as a result of lower employment taxes associated with the
expiration in June 1993 of the Railroad Retirement Repayment Tax and
reduced accruals for postretirement benefits resulting from a change in
the benefit plan's creditable service period. Last year's early
retirement program also had a favorable impact on Compensation and
benefits expenses in 1994.
Motor Carrier Operating Revenues
- --------------------------------
Motor carrier operating revenues were up $20.8 million, or 12 percent, in
the third quarter but declined $74.8 million year-to-date, when compared
with the same periods last year. However, due to last year's
restructuring of NAVL (see Note 6), motor carrier revenues and expenses
in 1994 include only the Relocation Services (RS) and High Value Products
(HVP) divisions; through June 1993, motor carrier results also
reflected the operations of the Commercial Transport (CT) Division and
Tran-Star, Inc. Including only the RS and HVP divisions, year-to-date
revenues were up $61.9 million, or 14 percent. The increased revenues
for both the quarter and year-to-date were attributable primarily to the
HVP Division. However, a substantial portion of the HVP increase was due
to the inclusion of certain specialized freight business which previously
was part of the discontinued CT Division.
Motor Carrier Operating Expenses
- --------------------------------
Motor carrier operating expenses increased $20.4 million, or 13 percent,
for the third quarter but were down $151.7 million, or 24 percent, for
the nine months, compared with the same periods last year. Excluding the
discontinued operations and the 1993 restructuring charge (see related
discussion in Motor Carrier Operating Revenues and Note 6), year-to-date
operating expenses rose $54.3 million, or 13 percent. These increases
were associated with higher volume and with higher expenses in the HVP
Division that resulted from the addition of specialized freight business
from the discontinued CT Division.
Other Income (Expense)
- ----------------------
Other income (expense) was down $19.0 million and $50.7 million, respec-
tively, compared with third quarter and year-to-date 1993. The decrease
was primarily in the Other-net category which declined $17.2 million for
the quarter and $50.0 million year-to-date. Significantly lower gains on
<PAGE> PAGE 14
NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
property dispositions and the absence of gains on investment sales caused
most of the 1994 decline. Interest income was up $1.2 million, or
19 percent, for the quarter and was about flat, year-to-date. The
quarterly improvement primarily was due to an increase in invested cash
which resulted from the corporate owned life insurance borrowing (see
Note 4). Interest expense on debt was up $3.0 million, or 12 percent,
and $0.5 million, or 1 percent, for the third quarter and year-to-date,
respectively, principally due to an adjustment of capitalized interest.
Provision for Income Taxes
- --------------------------
The provision for income taxes in the third quarter totaled
$97.8 million, for an effective tax rate of 36.8 percent, compared with
an effective tax rate of 59.1 percent in 1993. For the first nine months
of 1994, income taxes were $278.2 million for an effective tax rate of
36.1 percent, compared with an effective tax rate of 40.3 percent in
1993. The unusually high effective rates in 1993 primarily were related
to the retroactive 1 percent increase in the federal corporate income tax
rate (see Note 8). Excluding the retroactive increase, third-quarter and
year-to-date 1993 effective tax rates would have been 36.9 percent and
32.4 percent, respectively. The low 1993 nine-month effective rate was
largely due to the tax benefits associated with the NAVL restructuring
(see Note 6). The provision for income taxes in 1994 benefited from
several minor adjustments primarily related to prior years. The effective
tax rate in 1994 benefited in the first quarter from favorable adjustments
resulting from an audit settlement of the consolidated federal income tax
returns for the years 1988 and 1989; in the second quarter from an
adjustment to the valuation allowance for a deferred tax asset; and in
the third quarter from a favorable return adjustment upon filing the 1993
tax return.
<TABLE>
FINANCIAL CONDITION AND LIQUIDITY
<CAPTION>
September 30, 1994 December 31, 1993
------------------ -----------------
(In millions of dollars)
<S> <C> <C>
Cash and short-term investments $457.1 $258.2
Working capital $360.7 $365.6
Current ratio 1.3 1.3
Debt to total capitalization 26.2% 27.4%
</TABLE>
CASH FLOWS FROM OPERATING ACTIVITIES are NS' principal source of
liquidity and were sufficient to cover cash outflows for dividends, debt
repayments and capital spending (see Consolidated Statements of Cash
Flows on page 6). The increase in Net cash provided by operating
activities compared with the first nine months of 1993 primarily was
due to lower income tax payments made in 1994 combined with higher
income from operations.
CASH FLOWS FROM INVESTING ACTIVITIES were affected principally by
capital spending for property additions which included approximately
$71 million for the first-quarter acquisition of coal reserves in West
Virginia and Kentucky. Excluding this large property acquisition,
<PAGE> PAGE 15
NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
railway and motor carrier capital expenditures, as anticipated, were
well below last year. The Property sales and other transactions figure
principally reflects proceeds from dispositions of nonoperating property,
while Investment sales and other transactions primarily reflects gains on
the sale of investment securities and borrowings on corporate owned
life insurance (COLI). Approximately $220.0 million of COLI cash
surrender value, which was reflected in Other current assets in the
December 31, 1993, Consolidated Balance Sheet, was borrowed in second
quarter 1994 and is principally responsible for the source of cash in
Investment sales and other transactions in the Consolidated Statements
of Cash Flows and for the increase in Cash and short-term investments
in the table on page 14.
CASH FLOWS FROM FINANCING ACTIVITIES reflect primarily uses of cash, as
total debt issued was only $41.4 million for the nine months
ended September 30, 1994. A portion of the proceeds from this debt
issuance had not been spent as of the end of the quarter and is
reflected in Other assets in the Consolidated Balance Sheet. Open-
market purchases of NS common stock have continued in accordance with
the share purchase program described in Note 5.
OTHER
Lease renewal negotiations continue with respect to 300 miles of leased
road in North Carolina. These leases are scheduled to expire at the end
of 1994. If the leases are not renewed, NS' railroads could be required to
continue using the lines subject to conditions prescribed by the ICC, or
they might find it necessary ultimately to operate over an alternate route
or routes. It is not expected that the resolution of this matter, whether
resulting in renewal of the leases, continued use of the leased lines
under prescribed conditions or operation over one or more alternate
routes, will have a material effect on NS' consolidated financial
position.
<PAGE> PAGE 16
PART II - OTHER INFORMATION
---------------------------
NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES
Item 1. Legal Proceedings
-----------------
New Orleans, Louisiana - Tank Car Fire. A number of lawsuits
have been filed as a result of a tank car fire which occurred in New
Orleans, La., on September 9, 1987, and resulted in the evacuation of
many residents of the surrounding area. Plaintiffs allege that they were
injured and sustained other economic loss when a chemical called
butadiene leaked from a tank car under the control of either CSX
Transportation, Inc., or New Orleans Terminal Company (a subsidiary of
Norfolk Southern Railway) or both. In addition to the rail defendants,
defendants in one or more of the suits include the City of New Orleans,
the owner of the tank car (General American Transportation Corporation),
the loader of the tank car (GATX Terminals Corporation), and the shipper
(Mitsui & Co. (USA Inc.)). The suits, which are pending in the Civil
District Court for the parish of Orleans, seek damages ranging from
$10,000 to $20,000,000,000. Management, after consulting with legal
counsel, is of the opinion that NS' ultimate liability in this matter
will not materially affect the consolidated financial position of NS.
Accordingly, unless circumstances result in a reassessment of NS'
financial exposure that is material--not currently anticipated--
Management expects to make no further report about this matter, which has
been reported previously by NS in Part II, Item 1, of its Form 10-Q
Reports for the quarters ending September 30, 1987, and March 31, 1990;
and in Part I, Item 3, of its Form 10-K Annual Reports for 1987, 1988,
1989, 1990, 1991, 1992 and 1993.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
Form of Severance Agreement
Computation of Earnings Per Share
Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed for the three months ended
September 30, 1994.
<PAGE> PAGE 17
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
NORFOLK SOUTHERN CORPORATION
-----------------------------------------
(Registrant)
Date: November 9, 1994 /s/ Dezora M. Martin
------------------- -----------------------------------------
Dezora M. Martin
Assistant Corporate Secretary (Signature)
Date: November 9, 1994 /s/ John P. Rathbone
------------------- -----------------------------------------
John P. Rathbone
Vice President and Controller
(Principal Accounting Officer) (Signature)
<PAGE> PAGE 18
NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES
INDEX TO EXHIBITS
-----------------
Electronic
Submission
Exhibit
Number Description Page
- ----------- --------------------------------------------- ----
10 Form of Severance Agreement, dated as of
September 1, 1994, between the Corporation
and certain executive officers: D. R. Goode,
J. R. Turbyfill, R. A. Brogan, J. S. Shannon,
S. C. Tobias, D. H. Watts and H. C. Wolf 19-39
11 Statement re Computation of Earnings Per Share 40-43
27 Financial Data Schedule (This exhibit is
required to be submitted electronically
pursuant to the rules and regulations of
the Securities and Exchange Commission and
shall not be deemed filed for purposes of
Section 11 of the Securities Act of 1933
or Section 18 of the Securities Exchange
Act of 1934.) 44
<PAGE> PAGE 19
EXHIBIT 10 Page 1
AGREEMENT
This agreement, dated as of September 1, 1994, between Norfolk Southern
Corporation ("Corporation") and _________________________ ("Agreement")
(1) memorializes your entitlement to certain rights and benefits
hereinafter detailed that mature upon, and only upon, your Termination
(this and other terms not defined in the text are defined in Attachment A
hereto) following a Change in Control; (2) absent such Termination, is not
intended to affect, and shall not be construed as affecting, the
compensation and benefits you are entitled to receive; and (3) is not under
any circumstances a contract or guarantee of employment with the
Corporation. Moreover, upon the happening of such conditions, your rights
under any and all employee retirement income or welfare benefit policies,
plans, programs or arrangements of the Corporation in which you participate
shall be governed by the terms thereof and, except as herein expressly
provided, shall not be enlarged hereunder or otherwise affected hereby.
You are intended to rely on this Agreement. Its terms and protections
reflect the Corporation's beliefs that, in the event of a potential Change
in Control, (a) the best interests of its stockholders require management
focus and continuity; and (b) such focus and continuity will be enhanced by
providing economic protection to officers and other key employees whose
employment is most likely to be affected adversely by such a change. At
the recommendation of its Compensation and Nominating Committee
("Committee"), which is composed entirely of non-employee directors, the
Board of Directors of the Corporation ("Board") has directed the
Corporation to offer this Agreement to you.
I. Effective Date and Term
-----------------------
The Agreement is effective and its term ("Term") begins on the date hereof;
the Term ends on the earliest of (a) the date, prior to a Change in
Control, you cease to be an employee of the Corporation, (b) the date,
prior to a Change in Control, you cease to be eligible to participate in
the Corporation's Management Incentive Plan (or any successor[s]) and
(c) the date, prior to a Change in Control, that is twenty-four (24) months
after you or the Corporation gives notice to the other of the termination
of this Agreement, provided, however, that if a Change in Control occurs
during the Term hereof, this Agreement shall terminate after a period of
twenty-four (24) months, beginning on the first day of the month next
following the month in which the Change in Control occurs (such period, the
"Change in Control Period").
II. Binding on Successors
---------------------
The Corporation shall require any successor (whether direct or indirect, by
purchase, merger, consolidation, reorganization, share exchange or
otherwise) to all or substantially all of the business and/or assets of the
Corporation ("Successor"; and such result, "Succession") by agreement, in
form and substance satisfactory to the Corporation's chief legal officer or
his designee(s), serving immediately prior to the Change in Control,
expressly to assume and agree to perform this Agreement in the same manner
and to the same extent the Corporation would have been required to perform
it had no such Succession occurred. This Agreement shall be binding upon
and inure to the benefit of the Corporation and any Successor (and, from
<PAGE> PAGE 20
EXHIBIT 10 Page 2
and after any such Succession, that Successor shall be deemed the
"Corporation" for purposes of this Agreement), but otherwise the
Corporation shall not assign or transfer any of its rights, or delegate any
of its duties or obligations, hereunder.
III. Protection Afforded by the Agreement During the Change in
Control Period
---------------------------------------------------------
Except as limited by subparagraph (vii) concerning retirement, in the event
of your Termination during the Change in Control Period, the Corporation
shall (1) pay you within ten (10) business days after your Termination Date
the amounts indicated in subparagraphs (i), (ii) and (iii); (2) continue to
provide the Additional Benefits detailed in subparagraph (iv); (3) pay or
afford the other amounts or credits provided in subparagraphs (v) and (vi);
and (4) pay and provide the Tax Assistance Payments and other benefits
defined and called for herein:
(i) SEVERANCE PAY. In lieu of, and in full satisfaction of any and
all claims you have or may have thereafter to receive cash
compensation or awards under or otherwise participate in or
under any feature of any compensation policy, plan, program or
arrangement of the Corporation, a lump-sum payment ("Severance
Pay") in an amount that is three (3) times the sum of:
(A) an amount equal to your Base Pay (determined in accordance
with (C)(ii) in Attachment A); and
(B) an amount equal to your Incentive Pay (determined in
accordance with (H) and (I)(ii) in Attachment A).
(ii) PERFORMANCE SHARE EQUIVALENT. In lieu of your having any
entitlement to unearned Performance Share Units that you have
been awarded and as to which a performance cycle has not been
completed on your Termination Date, you shall receive for each
incomplete cycle a cash payment equal to the Performance Share
Equivalent (determined in accordance with Item K in
Attachment A).
(iii) OPTION EQUIVALENT. Except in the case of persons at the time
subject to Section 16 of the Securities Exchange Act of 1934, in
lieu of your having any entitlement on and after your
Termination Date to exercise options then held by you to acquire
shares of a Security, you shall receive, as to each then-
exercisable option grant, a cash payment equal to the Option
Equivalent (determined in accordance with Item J in
Attachment A).
(iv) ADDITIONAL BENEFITS. For the twenty-four (24) months next
following your Termination Date, the Corporation shall arrange
to provide you with Additional Benefits substantially similar to
those you were entitled to receive immediately prior to your
Termination Date (and if and to the extent that such benefits
shall not or cannot be paid or provided under any policy, plan,
program or arrangements of the Corporation for whatever reason,
the Corporation shall itself pay or provide for the payment
<PAGE> PAGE 21
EXHIBIT 10 Page 3
of such Additional Benefits to you, your dependents and your
beneficiaries). Without otherwise limiting the purposes or
effects of the provisions under the caption "No Mitigation
Obligation," infra, Additional Benefits to which you are
entitled pursuant to the first sentence of this subparagraph
(iv) shall be reduced to the extent you actually receive
comparable Additional Benefits from another employer during such
period following your Termination Date, and you shall report to
the Corporation any such benefits actually received.
(v) CERTAIN PRORATA INCENTIVE PAY. For that portion of the calendar
year prior to your Termination Date, you shall be entitled to
receive, on the date such pay is paid to other employees of the
Corporation, as bonus or incentive pay, an amount equal to the
product of (i) the amount you would have received, had you been
employed on December 31 of the year that includes your
Termination Date, under the Corporation's Management Incentive
Plan (or any successor[s]) in effect for that year, multiplied
by (ii) the percentage (carried to three decimal places) derived
by dividing (a) the number of calendar days in that year which
immediately precede your Termination Date by (b) 365;
(vi) CREDITABLE SERVICE FOR RETIREMENT. For purposes of determining
your creditable service under the Corporation's various plans,
including without limitation any agreement(s) with you,
providing retirement income, you shall receive an additional
thirty-six (36) months of creditable service, unless the
crediting of such additional service would violate Section
401(a) of the Internal Revenue Code of 1986, as amended
("Code"), provided, however, that in the case of a Board-
appointed officer, such creditable service shall not be greater
than the number that is equal to the number of months
(calculated in accordance with the terms of the applicable plan)
between (a) that officer's Termination Date and (b) the date on
which such officer attains the mandatory retirement date for
that officer in effect at the time of the Change in Control.
Your rights under such programs and plans shall be governed by
the terms thereof and, except as herein expressly provided,
shall not be enlarged hereunder or otherwise affected hereby.
(vii) SPECIAL PROVISO FOR THOSE ELIGIBLE TO RETIRE. If on your
Termination Date you are eligible to retire under the provisions
of any of the Corporation's retirement plans, as in effect
either immediately preceding the Change in Control or on your
Termination Date, you may elect to retire on your Termination
Date by giving the Corporation written notice, postmarked or
accepted for next-day delivery by a private delivery service no
later than noon on the business day next succeeding your
Termination Date. If and only if you make this election, your
retirement will be deemed to have occurred simultaneously with
your Termination Date (provided, however, that the "effective
date" of such retirement for purposes of such retirement plans
shall be as provided under such plans), and your rights
concerning Performance Shares, options, Additional Benefits
<PAGE> PAGE 22
EXHIBIT 10 Page 4
and prorata incentive pay shall be governed by the retiree
(or any specific change in control) provisions of the
applicable plans, as in effect either immediately preceding
the Change in Control or on your Termination Date, and not by
subparagraphs (ii), (iii), (iv) and (v) hereof.
There shall be no right of setoff or counterclaim in respect of any claim,
debt or obligation against any payment to, or benefit for, you provided for
in this Agreement, except as expressly provided in subsection (iv).
Without limiting your rights to arbitration, at law or in equity, if the
Corporation fails on a timely basis to make any payment required to be made
pursuant to provisions under this caption, the Corporation shall pay
interest on the amount thereof at an annualized rate of interest equal to
three percent (3%) above the then-applicable Prime Rate ("Prime Rate" means
the rate of interest publicly announced by Morgan Guaranty Trust Company of
New York in New York City from time to time as its prime rate).
IV. Certain Tax Payments by the Corporation
---------------------------------------
Notwithstanding anything in the Agreement to the contrary, in the event of
(a) your Termination during the Change in Control Period and (b) the
determination (as hereinafter provided) that any required payment by the
Corporation to or for your benefit, whether paid or payable pursuant to the
terms of the Agreement or otherwise pursuant to or by reason of any other
agreement, policy, plan, program or arrangement, including without
limitation any stock option, stock appreciation right, or similar right, or
the lapse or termination of any restriction on the vesting or
exercisability of any of the foregoing including without limitation
acceleration of the termination of Share Retention Agreements under the
Corporation's Long-Term Incentive Plan (individually and collectively,
"Payment"), would be subject to the excise tax imposed by Section 4999 of
the Code or any successor provision thereto by reason of the Payment's
being considered "contingent on a change in ownership or control" of the
Corporation within the meaning of Section 280G of the Code (or any
successor provision thereto), or any interest or penalties with respect to
such excise tax (collectively, "Excise Tax"), then you shall be entitled to
receive an additional payment or payments (individually or collectively,
"Tax Assistance Payment"), which shall include an amount such that, after
you pay (1) all taxes (including any interest or penalties imposed with
respect to such taxes) and (2) any Excise Tax imposed upon the Tax
Assistance Payment, you retain so much of the Tax Assistance Payment as is
equal to the Excise Tax imposed on the Payment.
Subject to the provisions hereinafter concerning your providing notice of a
claim by the Internal Revenue Service, all determinations required to be
made under these provisions, including whether an Excise Tax is payable by
you, the amount of such Excise Tax and whether the Corporation is required
to pay you a Tax Assistance Payment and the amount of such Tax Assistance
Payment, if any, shall be made by a nationally recognized accounting firm
you, in your sole discretion, select ("Accounting Firm"). You shall direct
the Accounting Firm to submit its determination and detailed supporting
calculations to both you and the Corporation within thirty (30) days after
the Termination Date, if applicable, and any such other time or times as
<PAGE> PAGE 23
EXHIBIT 10 Page 5
you or the Corporation may request. If the Accounting Firm determines that
any Excise Tax is payable by you, the Corporation shall pay the required
Tax Assistance Payment to you within ten (10) business days after the
Corporation receives such determination and calculations with respect to
any Payment to you.
Any federal tax returns you file shall be prepared and filed on a basis
consistent with the determination of the Accounting Firm with respect to
the Excise Tax payable by you. If the Accounting Firm determines that you
are required to pay no Excise Tax, it shall (at the same time it makes such
determination) furnish you and the Corporation an opinion that you have
substantial authority not to report any Excise Tax on your federal income
tax return. However, in view of uncertainty concerning application of
Section 4999 of the Code (or any successor provision thereto) at the time
of any determination made hereunder by the Accounting Firm, it is possible
that a Tax Assistance Payment that should have been made by the Corporation
will not have been made ("Underpayment"), consistent with the calculations
required to be made hereunder. In the event the Corporation exhausts or
fails to pursue its remedies pursuant to the provisions concerning notice
of a claim by the Internal Revenue Service, and you thereafter are required
to make a payment of any Excise Tax, you shall direct the Accounting Firm
to determine the amount of the Underpayment and to submit its determination
and detailed supporting calculations as promptly as possible both to you
and to the Corporation, which shall pay the amount of such Underpayment to
you or for your benefit within ten (10) business days following the
Corporation's receipt of such determination and calculations.
Each of you and the Corporation shall provide the Accounting Firm access to
and copies of any books, records and documents in your or its possession,
as the case may be, reasonably requested by the Accounting Firm, and shall
otherwise cooperate with the Accounting Firm in connection with the
preparation and issuance of the determination and calculations required or
contemplated hereunder.
The Corporation shall bear the fees and expenses of the Accounting Firm for
services hereunder. If, for any reason, you initially pay such fees and
expenses, the Corporation shall reimburse you the full amount of the same
within ten (10) business days following receipt from you of a statement and
reasonable evidence of your payment thereof.
You shall notify the Corporation in writing of any claim by the Internal
Revenue Service that, if successful, would require the Corporation to pay a
Tax Assistance Payment. You shall give such notification as promptly as
practicable, but in no event later than the tenth (10th) business day next
following your receipt of such claim, and you further shall apprise the
Corporation of the nature of such claim and the date on which it is
required to be paid (in each case, to the extent known to you). You shall
not pay or otherwise satisfy such claim prior to the earlier of (a) the
expiration of the thirty (30)-calendar-day period next following the date
on which you give notice to the Corporation or (b) the date any payment of
<PAGE> PAGE 24
EXHIBIT 10 Page 6
the amount with respect to such claim is due. If the Corporation notifies
you in writing prior to the expiration of such period that it desires to
contest such claim, you shall:
(1) provide the Corporation any written records or documents in your
possession relating to such claim and reasonably requested by the
Corporation;
(2) take such action in connection with contesting such claim as the
Corporation reasonably shall request in writing from time to time,
including without limitation accepting legal representation with
respect to such claim by an attorney competent in respect of the
subject matter and reasonably selected by the Corporation;
(3) cooperate with the Corporation in good faith in order effectively to
contest such claim; and
(4) permit the Corporation to participate in any proceedings relating to
such claim,
provided, however, that the Corporation directly shall bear and pay all
costs and expenses (including without limitation, interest and penalties)
incurred in connection with such contest and shall indemnify you and hold
you harmless, on an after-tax basis, from and against any and all Excise
Tax or income tax (including without limitation, interest and penalties
with respect thereto), imposed as a result of such representation and
payment of costs and expenses. Without limiting the foregoing, the
Corporation shall control all proceedings taken in connection with the
contest of any claim contemplated by these provisions and, at its sole
option, may pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect
of such claim (provided, however, that you may participate therein at your
own cost and expense) and may, at its option, either direct you to pay the
tax claimed and sue for a refund or contest the claim in any permissible
manner, and you agree to prosecute such contest to a determination before
any administrative tribunal, in a court of initial jurisdiction and in one
or more appellate courts, as the Corporation shall determine; provided,
however, that if the Corporation directs you to pay the tax claimed and to
sue for a refund, the Corporation shall advance the amount of such payment
to you, and pay on a current basis all costs of litigation, including
without limitation attorneys' fees, on an interest-free basis and shall
agree to and shall indemnify you and hold you harmless, on an after-tax
basis, from any Excise Tax or income tax, including without limitation,
interest and penalties with respect thereto, imposed with respect to such
advance; and provided further, however, that any extension of the statute
of limitations relating to payment of taxes for your taxable year with
respect to which the contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, the Corporation's control of
any such contested claim shall be limited to issues with respect to which a
Tax Assistance Payment would be payable hereunder, and you shall be
entitled to settle or to contest, as the case may be, any other issue(s)
raised by the Internal Revenue Service or any other taxing authority.
<PAGE> PAGE 25
EXHIBIT 10 Page 7
If, after you receive an amount advanced by the Corporation pursuant to
provisions of the last full paragraph, you receive any refund with respect
to such claim, you shall (subject to the Corporation's complying with any
applicable provisions of the same paragraph) promptly pay to the
Corporation the amount of such refund (together with any interest paid or
credited thereon after any taxes applicable thereto). If, after you
receive such an amount advanced by the Corporation, a determination is made
that you shall not be entitled to any refund with respect to such claim and
the Corporation does not notify you in writing of its intent to contest
such denial or refund prior to expiration of thirty (30) calendar days
after such determination, then such advance shall be forgiven and shall not
be required to be repaid, and the amount of such advance shall offset, to
the extent thereof, the amount of the Tax Assistance Payment the
Corporation is required to pay you hereunder.
V. No Mitigation Obligation
------------------------
You and the Corporation acknowledge that it will be difficult, and that it
may be time-consuming or impossible, for you to find reasonably comparable
employment following the Termination Date. Accordingly, you and the
Corporation agree that payments made by the Corporation pursuant to this
Agreement will be liquidated damages (and in lieu of any claim for any
breach whatsoever of this Agreement by the Corporation) and that you will
not be required to mitigate the amount of any such payment by seeking other
employment or otherwise, nor shall any profits, income, earnings or other
benefits from any source whatsoever create any mitigation, offset reduction
or other obligation on your part hereunder or otherwise, except as
expressly provided in the materials, supra, concerning Additional Benefits.
VI. Arbitration
-----------
Except as otherwise expressly provided under the caption "Certain Tax
Payments by the Corporation," any controversy or claim between you and the
Corporation arising out of or relating to the existence, enforceability,
terms or application of this Agreement or any breach or alleged breach
thereof, shall be settled by three (3) arbitrators, one of whom shall be
appointed by the Corporation, one by you and the third of whom shall be
appointed by the first two arbitrators. If the first two arbitrators
cannot agree on the third arbitrator required to be appointed hereunder,
then such arbitrator shall be appointed by the Chief Judge of the United
States District Court for the district having jurisdiction of the city or
other municipality in which the arbitration is to be held. The arbitration
shall be conducted in accordance with the rules of the American Arbitration
Association, except with respect to the selection of arbitrators, which
shall be as hereinbefore provided. Judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof. The
arbitrators shall have no authority to award punitive, incidental or
consequential damages, and they shall apply the substantive law of the
Commonwealth of Virginia in reaching a decision.
If you determine in good faith to retain legal counsel and/or to incur
other reasonable costs or expenses in connection with any such arbitration
or to enforce any or all of your rights under this Agreement or under any
arbitration award, the Corporation shall pay all such attorneys' fees,
costs and expenses you incur in connection with non-frivolous applications
<PAGE> PAGE 26
EXHIBIT 10 Page 8
to interpret or enforce your rights, including enforcement of any
arbitration award in court, regardless of the final outcome. In addition,
during the pendency of such arbitration, the Corporation will continue to
pay you, with the customary frequency, the greater of your Base Pay as in
effect immediately prior to the Change in Control or immediately prior to
your Termination and to provide Benefits until the controversy or claim
finally is resolved in accordance herewith. These payments and the
provision of Benefits hereunder shall be in addition to, and not in
derogation or mitigation of any other payment or benefit due you under this
Agreement.
Notwithstanding any other provision hereof, the parties' respective rights
and obligations under this Caption will survive a termination or expiration
of this Agreement or the Termination of your employment for any reason
whatsoever.
VII. Employment Rights
-----------------
Nothing expressed or implied in this Agreement shall create any right or
duty on your part or that of the Corporation to have you remain in the
employment of the Corporation prior to or following any Change in Control.
VIII. Withholding of Taxes
--------------------
The Corporation may withhold from any amounts payable under this Agreement
all federal, state, city, local or other taxes as shall be required
pursuant to any law or governmental regulation or ruling.
IX. Personal Nature of Agreement
----------------------------
This Agreement is personal in nature, and neither you nor the Corporation
(except as provided under the caption "Binding on Successors"), without the
prior written consent of the other, shall assign or transfer any of its
rights, or delegate any of its duties or obligations, except as expressly
provided under this caption. Without limiting the generality and effect of
the foregoing, your right to receive payments hereunder shall not be
assignable or transferable, whether by pledge, creation of a security
interest or otherwise, other than by a transfer by will or by the laws of
descent and distribution; in no event shall the Corporation have any
obligation or liability to recognize or honor any attempted
assignment or transfer that is contrary hereto.
X. Notice
------
For all purposes of this Agreement, all communications, including without
limitation, notices, consents, requests and approvals, provided for herein
shall be in writing and shall be deemed to have been duly given when
(1) actually delivered or (2) if mailed, five (5) business days after
having been mailed by United States registered or certified mail, return
receipt requested, postage prepaid,
(i) if to the Corporation, to the attention of its Corporate
Secretary at its principal executive office at the time, and
(ii) if to you, at the address at the time on file with the
Corporation as your principal residence address, or
<PAGE> PAGE 27
EXHIBIT 10 Page 9
(iii) in either case, to such other address as either the Corporation
or you shall have furnished the other in writing and in
accordance herewith, provided, however, that notices of change of
address hereunder shall be effective only upon actual receipt.
XI. Governing Law
-------------
The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the Commonwealth of Virginia,
without giving effect to the Commonwealth's principles of conflict of law,
save those permitting the parties to an agreement to stipulate the
substantive law applicable to the agreement and the procedural law
applicable to suits, actions or proceeding relating to it.
XII. Validity/Severability
---------------------
If any provision of this Agreement or the application of any provision
hereof to any person (including a Person) or circumstance is held invalid,
illegal, inconsistent with the Corporation's right to account for the
result of the Change in Control as a pooling of interests, or
unenforceable, the remainder of this Agreement and the application of such
provision to any other person (including a Person) shall not be affected,
and the provision(s) so held to be invalid, illegal, inconsistent or
unenforceable shall be reformed or excised in good faith by the
Corporation, without the necessity of your agreeing thereto, to the extent
(and only to the extent) necessary to make it or them valid, legal,
consistent or enforceable.
XIII. Miscellaneous
-------------
No provision of this Agreement may be amended, modified, waived or
discharged unless such amendment, modification, waiver or discharge is
agreed to in a writing signed by you and the Corporation. No waiver by
either party hereto at any time of any breach or of compliance with any
condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set
forth expressly in this Agreement.
<PAGE> PAGE 28
EXHIBIT 10 Page 10
XIV. Counterparts
------------
This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original, and all of which together shall constitute but
one and the same instrument.
IN WITNESS WHEREOF, the Board of Directors of the Corporation has directed
that this Agreement be executed and delivered on its behalf by one or more
officers of the Corporation thereunto duly authorized, as of the day and
year first above written, and you have indicated your acceptance of and
intent to be bound by this Agreement in the space provided below.
NORFOLK SOUTHERN CORPORATION
By
---------------------------------------
ATTEST Name:
-----------------------------
{SEAL} Title:
-----------------------------
- ----------------------------------------
Corporate Secretary
Accepted:
By
-------------------------------------
Name:
-----------------------------
Being the same individual named
in the preamble hereto and referred
to as "You" in the text.
<PAGE> PAGE 29
EXHIBIT 10 Page 11
ATTACHMENT A
CERTAIN DEFINITIONS
-------------------
For purposes of this Agreement:
(A) Actual Incentive Pay in any given year means the amount actually paid
or payable, prior to a Change in Control, pursuant to the
Corporation's Management Incentive Plan (or any successor[s]) ("MIP").
(B) Additional Benefits refers to, as to each listed plan, the greater of
all those benefits associated with or accruing as a result of your
continued participation in the following plans, or portions of plans,
of the Corporation in which you are participating or are eligible to
participate (whether funded by actual insurance or self-insured by the
Corporation) immediately prior to (a) the Change in Control or (b)
your Termination:
1. Norfolk Southern Corporation Comprehensive Benefits Plan
(Only Paragraphs E, F and H of Article III, "ChoicePlus,"
providing medical, dental and life insurance benefits),
2. Norfolk Southern Corporation Executive Life Insurance Plan,
3. Norfolk Southern Corporation Executive Accident Plan,
4. Death Benefit Plan of Norfolk Southern Corporation and
Participating Subsidiary Companies
The term "Additional Benefits" shall not include benefits of any type
under any other plans, policies or programs.
(C) Base Pay means
(i) in determining whether a Termination has occurred, the gross
amount of your annual salary in effect on the date of a Change in
Control (the gross amount you actually were paid in the pay
period coinciding with or immediately preceding the date of the
Change in Control, multiplied by the number of pay periods in the
year or otherwise determined and expressed as an annual amount).
(ii) in calculating the amount of Severance Pay, the greater of
(a) the amount calculated under Item (C)(i);
(b) the amount calculated as provided in Item (C)(i), but
substituting "Termination Date" for "Change in Control"
wherever the latter term appears.
<PAGE> PAGE 30
EXHIBIT 10 Page 12
(D) Beneficial Owner means any Person who, under Rule 13d-3 (or successor
rules or regulations thereto) promulgated under the Securities
Exchange Act of 1934, would be deemed beneficially to own Voting
Stock.
(E) Benefits means any of the perquisites, benefits and service credit for
benefits provided under any and all employee retirement income or
welfare benefit policies, plans, programs or arrangements in which you
participate immediately prior to the Change in Control, including
without limitation any stock option, stock purchase, stock
appreciation, savings, pension, supplemental executive retirement or
other retirement income or welfare benefit, deferred compensation,
incentive compensation, group and/or executive life, health, medical/
hospital or other insurance (whether funded by actual insurance or
self-insured by the Corporation), disability, salary continuation,
expense reimbursement or other employee benefit policies, plans,
programs or arrangements that now exist, or any equivalent successor
policies, plans, programs or arrangements that may be adopted
hereafter by the Corporation providing perquisites, benefits and
service credit for benefits at least as great as are payable
thereunder prior to a Change in Control, provided, however, that your
rights under such policies, plans, programs or arrangements shall be
governed by the terms thereof and shall not be enlarged hereunder or
otherwise affected hereby.
(F) Cause refers to your having engaged in any of the following if the
result of the same is materially harmful to the Corporation:
(i) an intentional act of fraud, embezzlement or theft in connection
with your duties or in the course of your employment with the
Corporation;
(ii) intentional wrongful damage to property of the Corporation;
(iii) intentional wrongful disclosure of secret processes or of
confidential information of the Corporation; or
(iv) intentional violation of the Corporation's Code of
Conduct/Ethics (or any successor[s]) as in effect immediately
prior to a Change in Control.
For these purposes, an act or failure to act on your part shall be
deemed "intentional" only if you acted or omitted to act otherwise
than in accordance with your good faith business judgment of the best
interests of the Corporation; in determining whether this standard has
been satisfied, you shall be afforded all the presumptions and be
entitled to all the protections available to directors under Section
13.1-690 of the Virginia Stock Corporation Act.
<PAGE> PAGE 31
EXHIBIT 10 Page 13
(G) A Change in Control occurs upon any of the following circumstances or
events:
(i) The Corporation consummates a transaction or transactions
(however denominated or effectuated) with another corporation or
other Person ("Combination"), and immediately thereafter less
than eighty percent (80%) of the combined voting power of the
then-outstanding securities of such corporation or Person is
held in the aggregate by the holders of securities entitled,
immediately prior to such Combination, to vote generally in the
election of directors of the Corporation ("Voting Stock");
(ii) The Corporation consummates any stockholder-approved
consolidation (however denominated or effectuated) pursuant to a
recommendation of the Board;
(iii) At any time, Continuing Directors (as herein defined) shall not
constitute a majority of the members of the Board ("Continuing
Director" means (i) each individual who has been a director of
the Corporation for at least twenty-four (24) consecutive months
before such time and (ii) each individual who was nominated or
elected to be a director of the Corporation by at least two
thirds of the Continuing Directors at the time of such
nomination or election);
(iv) The Corporation sells all or substantially all of its assets to
any other corporation or other Person, and less than eighty
percent (80%) of the combined voting power of the then-
outstanding securities of such corporation or Person immediately
after such transaction is held in the aggregate by the holders
of Voting Stock immediately prior to such sale;
(v) A report is filed on Schedule 13D or Schedule 14D-1 (or any
successor schedule, form or report), pursuant to the Securities
Exchange Act of 1934, as amended ("Exchange Act"), disclosing
that any Person has become the Beneficial Owner of 20 or more
percent of the voting power of Voting Stock; or
(vi) The Board determines by a majority vote that, because of the
occurrence, or the threat or imminence of the occurrence, of
another event or situation with import or effects similar to the
foregoing, those who have accepted an agreement of this type are
entitled to its protections.
Notwithstanding the provisions of the foregoing subparagraph
(v), unless otherwise determined in a specific case by majority vote
of the Board, a Change in Control for purposes of this Agreement shall
not be deemed to have occurred solely because (a) the Corporation,
(b) an entity of which the Corporation is the direct or indirect
Beneficial Owner (as herein defined) of 50 or more percent of the
voting securities or (c) any Corporation-sponsored employee stock
ownership plan or any other employee benefit plan of the
<PAGE> PAGE 32
EXHIBIT 10 Page 14
Corporation either files or becomes obligated to file a report or a
proxy statement under or in response to Schedule 13D, Schedule 14D-1,
Form 8-K, or Schedule 14A (or any successor schedule, form or report
or item therein) under the Exchange Act, disclosing beneficial
ownership by it of shares of Voting Stock, whether in excess of
20 percent or otherwise, or because the Corporation reports that a
change in control of the Corporation has or may have occurred or will
or may occur in the future by reason of such beneficial ownership.
(H) Incentive Pay in a given year or at a given time means the amount
equal to the product of (a) your Base Pay in that year or at that
time, multiplied by (b) your Incentive Opportunity.
(I) Incentive Opportunity means
(i) in determining whether a Termination has occurred, the percentage
of your salary or other fixed compensation that, in accordance
with all applicable provisions of MIP - including without
limitation earnings and return targets - in effect immediately
prior to the Change in Control, could be earned as incentive pay.
(ii) in calculating the amount of Severance Pay, the larger of the
percentages determined in accordance with the following:
the mean (rounded, if necessary, to three decimal places) of
the product, calculated for each of three calendar years in
which Actual Incentive Pay is paid that immediately precede
(i) the Change in Control or (ii) your Termination Date, of:
(1) the maximum percentage, as determined by the Board for
any year pursuant to MIP, of your base compensation
that may be earned as Incentive Pay, and
(2) the percentage (rounded, if necessary, to three decimal
places) of that maximum actually awarded by the Board
pursuant to MIP,
provided, however, that if a Change in Control occurs/your Termination
Date is (a) on or after the date the Board determines the percentage
of the maximum that actually will be awarded and (b) before the date
established for payment of your Incentive Pay, that payment will be
included in the computation of the three-year mean.
Example 1: In each of 199a, 199b, 199c and 199d, the maximum
amount of a person's base compensation that could be awarded as
Incentive Pay is 60%; the percentages of that maximum actually
awarded as Incentive Pay were, respectively, 100%, 90%, 0% and
80%; A Change in Control occurs on/Your Termination Date is
January 2, 199e.
<PAGE> PAGE 33
EXHIBIT 10 Page 15
Your Incentive Opportunity would be 54% - representing the mean
of 60% (60%, times 100% in 199a); 54% (60%, times 90% in 199b);
and 48% (60%, times 80% in 199d) (as no Incentive Pay was paid in
199c, that year is not considered in the computation).
Example 2: Same facts as in Example 1, except:
The Change in Control occurs on/your Termination Date is a date
in 199e that falls between (a) the date the Board determines the
percentage of the maximum that actually will be awarded and
(b) the date established for payment of your Incentive Payment;
and the percentage of maximum actually awarded in 199e is 95%.
Your Incentive Opportunity would be 53% - representing the mean
of 54% (60%, times 90% in 199b); 48% (60%, times 80% in 199d) and
57% (60%, times 95% in 199e) (again, as no Incentive Pay was paid
in 199c, that year is not considered in the computation; because
199e is included in the three-year mean, 199a is not).
Note that your Incentive Opportunity is to be computed as of a
date that is immediately prior to the Change in Control and
immediately prior to your Termination - and you are to use the
larger of the two percentages so computed. If, following a
Change in Control (a) you are advanced to a position that permits
a larger percentage of your base compensation to be awarded as
Incentive Pay or (b) the Board awards 100% of maximum for results
in the calendar year immediately prior to your Termination, this
computation should give you the benefit of such an advancement or
such corporate results.
(J) Option Equivalent means that positive number that is the product of
(i) the total number of shares of the type of Norfolk Southern or
successor security ("Security") that the option entitles you to
acquire, and
(ii) the number that is equal to the difference between
(a) the Fair Market Value of the type of Security (the mean of
the high and low prices at which shares of that Security
trade on the Applicable Date (as hereinafter defined) as
reported in the Composite Transactions for such date by The
Wall Street Journal) for which the option is exercisable on
your Termination Date, less
(b) the option exercise or strike price on your Termination
Date.
"Applicable Date" means the later of (i) your Termination Date, if at
least 100,000 shares of the Security trade on that date on the New
York Stock Exchange ("Exchange") or (ii) the immediately preceding day
on which at least 100,000 shares trade on the Exchange, provided,
however, that if, at the time of the Change in Control or during the
Change in Control Period, the Norfolk Southern security for which the
option could be exercised ceases to be listed on the Exchange
<PAGE> PAGE 34
EXHIBIT 10 Page 16
("Cessation Date") and the option is not exercisable for the number of
shares of a successor security into which the Norfolk Southern
security could have been converted, for which it could have been
exchanged or to which it otherwise is equal, then "Applicable Date"
shall be defined (and Fair Market Value determined) with reference to
the "Cessation Date" rather than "your Termination Date."
(K) Performance Share Equivalent means the product of the (a) Fair Market
Value (as hereinafter defined) of the Security which could be earned
out as Performance Shares, multiplied by (b) the number of Equivalent
Shares (as hereinafter defined) to which you are deemed to be entitled
on your Termination Date, calculated as follows:
(i) If on your Termination Date the Security is listed on the New
York Stock Exchange ("Exchange"),
(a) The Fair Market Value of each such unearned Performance
Share Unit shall be the value of a share of such Security
(i) on your Termination Date or (ii) if fewer than 100,000
shares of such Security were traded on the Exchange on your
Termination Date, then on the next succeeding day on which
at least 100,000 shares trade on the Exchange. Value, on
any date, is the mean of the high and low prices at which
shares of the Security trade on such date as reported in the
Composite Transactions for such date by The Wall Street
Journal.
(b) Equivalent Shares is the whole number (any fraction/decimal
to be rounded to the next whole number) that is equal to the
number of shares of the Security you would have been
entitled to receive as Performance Shares, prorated (rounded
to three decimal places, if necessary) (i) from the date on
which a Performance Cycle begins and (ii) ending on the last
day of the month that includes your Termination Date, and
assuming that the percentage of shares of the Security
earned out pursuant to each performance criterion (earnings
per share, ROAIC and 3-year average operating ratio) is
equal to the mean of the percentage actually earned out in
each of the three last-completed performance cycles.
Example (Note that this represents the computation for only one set
of PSU awards. At any given time, more than one set of awards will
not have been earned out):
A person is awarded 300 Performance Share Units (100 shares for each
performance criterion) for a performance cycle that begins January 1,
199x; assume that the mean percentage earn out for each of earnings
per share, ROAIC and 3-year average operating ratio over the three
last-completed performance cycles is, respectively 90%, 80% and 95%,
and that your Termination Date is in the 18th month of the 36-month
performance cycle.
<PAGE> PAGE 35
EXHIBIT 10 Page 17
The number of Equivalent Shares to which that person would be entitled
is 133:
Earnings per Share 45
(representing 100 shares, times 18/36, times 90%)
ROAIC 40
(representing 100 shares, times 18/36, times 80%)
3-Year Average Operating Ratio 47.5
(representing 100 shares, times 18/36, times 95%)
TOTAL 132.5
(Rounded 133)
(ii) If, at the time of the Change in Control or during the Change in
Control Period, the Security ceases to be listed on the Exchange
("Cessation Date"),
(a) Fair Market Value shall be computed as provided under (i)(a)
hereof, but substituting Cessation Date for Termination
Date; and
(b) Equivalent Shares shall be computed as provided under (i)(b)
hereof, but substituting Cessation Date for Termination
Date.
(L) Person means any
(i) "person" as that term is used and defined in the attached copy of
Section 14(d)(2) of the Exchange Act as in effect on the
effective date of this Agreement, and
(ii) "affiliate" or "associate" of any person (as defined in
Item (L)(i)) as those terms are used and defined in the attached
copy of Rule 12b-2 of the General Rules and Regulations under the
Exchange Act as in effect on the effective date of this
Agreement.
(M) Termination means:
(i) Your decision to leave the employ of the Corporation if,
following a Change in Control and during the Change in Control
Period, any of the following occurs, provided, however, that your
continued employment after the occurrence of one or more of the
following shall not constitute consent to, or a waiver of rights
with respect to, circumstances that empower you to leave the
employ of the Corporation:
(a) You are not elected or reelected to the office of the
Corporation you held immediately prior to the Change in
Control, or - if you were serving as a director of the
Corporation immediately prior to the Change in Control - you
are removed as a director;
<PAGE> PAGE 36
EXHIBIT 10 Page 18
(b) Your Base Pay is, or when annualized will be, less than the
amount determined in accordance with (C)(i) herein;
(c) Your Incentive Opportunity is less than that provided for
under (I)(i) herein;
(d) Without your prior written consent, the Corporation, except
to meet the requirements of applicable federal or state law,
(i) terminates, or (ii) reduces the value or scope of your
rights to any Benefits to which you are entitled, and the
Corporation does not remedy any such termination or
reduction, as the case may be, within ten (10) calendar days
after its receipt of written notice from you;
(e) You determine in good faith that following a Change in
Control, you have been rendered substantially unable to
carry out or have suffered a substantial reduction in any of
the substantial authorities, powers, functions,
responsibilities or duties attached to the position you held
immediately prior to the Change in Control, which situation
is not remedied within ten (10) calendar days after receipt
by the Corporation of written notice from you that you have
made such a determination;
(f) The liquidation, dissolution, merger, consolidation or
reorganization of the Corporation or the transfer of all or
a significant portion of its business and/or assets, unless
the successor or successors (by liquidation, merger,
consolidation, reorganization or otherwise) to which all or
a significant portion of its business and/or assets have
been transferred (directly or by operation of law) shall
have assumed all the duties and obligations of the
Corporation under this Agreement pursuant to the provisions
under the Agreement caption "Binding on Successors";
(g) The Corporation requires you to relocate your principal
location of work outside a circle having (i) as its center
your principal location of work immediately prior to the
Change in Control and (ii) a radius of thirty-five (35)
miles, or requires you to travel away from your office in
the course of discharging your responsibilities or duties
hereunder significantly more (in terms either of consecutive
days or of aggregate days in any calendar year) than was
required of you immediately prior to the Change in Control,
without (in either case) your prior written consent; or
<PAGE> PAGE 37
EXHIBIT 10 Page 19
(h) Without limiting the generality or the effect of the
foregoing, any material breach of this Agreement by the
Corporation or any successor thereto.
OR
(ii) The termination of your employment by the Corporation, during the
twenty-four months next succeeding a Change in Control, for any
reason except:
(a) Your death;
(b) Your Total Disability, as defined in the Long Term
Disability Plan of Norfolk Southern Corporation and
Participating Subsidiary Companies (or any plan that is
successor or in addition thereto), as then in effect, and
you begin to receive disability benefits pursuant to that
plan;
(c) Your retirement pursuant to any Board-approved policy or
plan, on the terms in effect immediately prior to the Change
in Control, providing for mandatory retirement of certain
personnel; or
(d) Cause.
(N) Termination Date means the date specified in the Notice of Termination
(hereinafter defined), provided, however, that if, prior to the
Termination Date, the party receiving such Notice of Termination
notifies the other party that a dispute exists concerning the
Termination, then the Termination Date shall be the date on which the
dispute finally is determined, either by mutual written agreement of
the parties, by a binding arbitration award or by a final judgment,
order or decree of a court of competent jurisdiction (which is not
appealable or with respect to which the time for appeal therefrom has
expired and no appeal has been perfected); and provided, further, that
the Termination Date shall be extended by a notice of dispute only if
such notice is given in good faith and the party giving such notice
pursues the resolution of such dispute with reasonable diligence.
For these purposes, any purported termination of your employment by
the Corporation or by you shall be communicated by written Notice of
Termination to the other party hereto, delivered in accordance with
the caption concerning "Notice" in the Agreement. The Notice of
Termination shall
(i) indicate the specific Termination provision relied upon;
(ii) set forth in reasonable detail the facts and circumstances
claimed to provide a basis for Termination under the
provision(s) so indicated; and
<PAGE> PAGE 38
EXHIBIT 10 Page 20
(iii) shall specify the Termination Date, which:
(a) if the Termination is for Cause, shall be a date not less
than thirty (30) days from the date the Notice of
Termination is given; and
(b) if the Termination is not for Cause, shall be a date not
less than fifteen (15) nor more than sixty (60) days after
such Notice of Termination is given.
<PAGE> PAGE 39
EXHIBIT 10 Page 21
Section 14(d)(2) of the
Securities Exchange Act of 1934
When two or more persons act as a partnership, limited partnership,
syndicate, or other group for the purpose of acquiring, holding, or
disposing of securities of any issuer, such syndicate or group shall be
deemed a "person" for purposes of this subsection.
Section 12b-2 of the
General Rules and Regulations,
Securities Exchange Act of 1934
An "affiliate" of, or a person "affiliated" with, a specified person, is a
person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, the person
specified.
The term "associate" used to indicate a relationship with any person, means
(1) any corporation or organization (other than the registrant or a
majority-owned subsidiary of the registrant) of which such person is an
officer or partner or is, directly or indirectly, the beneficial owner of
10 percent or more of any class of equity securities, (2) any trust or
other estate in which such person has a substantial beneficial interest or
as to which such person serves as trustee or in a similar fiduciary
capacity, and (3) any relative or spouse of such person, or any relative of
such spouse, who has the same home as such person or who is a director or
officer of the registrant or any of its parents or subsidiaries.
<PAGE> PAGE 40
<TABLE>
EXHIBIT 11 Page 1
NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(In millions except per share amounts)
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1994 1993 1994 1993
------- ------- ------- -------
<S> <C> <C> <C> <C>
Computation for Statements of Income
- ------------------------------------
Income before cumulative effects of
changes in accounting principles $ 168.3 $ 95.2 $ 491.7 $ 389.3
------- ------- ------- -------
Cumulative effects of changes in
accounting principles $ -- $ -- $ -- $ 223.3
------- ------- ------- -------
Weighted average number of shares
outstanding 136.0 139.2 137.1 139.7
------- ------- ------- -------
Primary earnings per share:
Income before accounting changes $ 1.24 $ 0.69 $ 3.59 $ 2.79
Cumulative effects of accounting
changes -- -- -- 1.60
------- ------- ------- -------
Net income $ 1.24 $ 0.69 $ 3.59 $ 4.39
======= ======= ======= =======
Additional Primary Computation
- ------------------------------
Income before cumulative effects of
changes in accounting principles $ 168.3 $ 95.2 $ 491.7 $ 389.3
------- ------- ------- -------
Cumulative effects of changes in
accounting principles $ -- $ -- $ -- $ 223.3
------- ------- ------- -------
Adjustment to weighted average
number of shares outstanding:
Weighted average number of
shares outstanding per
primary computation above 136.0 139.2 137.1 139.7
Dilutive effect of outstanding
options, stock appreciation
rights (SARs) and performance
share units (PSUs) (as
determined by the application
of the treasury stock
method) (1) 1.1 1.2 1.2 1.2
------- ------- ------- -------
Weighted average number of
shares outstanding,
as adjusted 137.1 140.4 138.3 140.9
======= ======= ======= =======
(1) See Note 13 of Notes to Consolidated Financial Statements in Norfolk
Southern's 1993 Annual Report on Form 10-K for a description of the
Long-Term Incentive Plan.
</TABLE>
<PAGE> PAGE 41
<TABLE>
EXHIBIT 11 Page 2
NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(In millions except per share amounts)
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1994 1993 1994 1993
------- ------- ------- -------
<S> <C> <C> <C> <C>
Primary earnings per share,
as adjusted (2):
Income before accounting changes $ 1.23 $ 0.68 $ 3.56 $ 2.76
Cumulative effects of accounting
changes -- -- -- 1.59
------- ------- ------- -------
Net income $ 1.23 $ 0.68 $ 3.56 $ 4.35
======= ======= ======= =======
(2) These calculations are submitted in accordance with Regulation S-K
item 601(b)(11) although not required by footnote 2 to paragraph 14 of
APB Opinion No. 15 because they result in dilution of less than
3 percent.
</TABLE>
<PAGE> PAGE 42
<TABLE>
EXHIBIT 11 Page 3
NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(In millions except per share amounts)
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1994 1993 1994 1993
------- ------- ------- -------
<S> <C> <C> <C> <C>
Fully Diluted Computation
- -------------------------
Income before cumulative effects
of changes in accounting
principles, per primary
computation $ 168.3 $ 95.2 $ 491.7 $ 389.3
Adjustment to increase earnings
to requisite level to earn
maximum PSUs, net of tax effect 24.2 40.3 70.7 121.1
------- ------- ------- -------
Income before cumulative effects,
as adjusted 192.5 135.5 562.4 510.4
Cumulative effects of changes in
accounting principles -- -- -- 223.3
------- ------- ------- -------
Net income, as adjusted $ 192.5 $ 135.5 $ 562.4 $ 733.7
======= ======= ======= =======
Adjustment to weighted average
number of shares outstanding,
as adjusted for additional
primary calculation:
Weighted average number of
shares outstanding, as
adjusted per additional
primary computation on page 1 137.1 140.4 138.3 140.9
Additional dilutive effect of
outstanding options and SARs
(as determined by the
application of the treasury
stock method using period
end market price) -- -- -- --
Additional shares issuable at
maximum level for PSUs 0.1 0.2 0.1 0.2
------- ------- ------- -------
Weighted average number of
shares, as adjusted 137.2 140.6 138.4 141.1
======= ======= ======= =======
</TABLE>
<PAGE> PAGE 43
<TABLE>
EXHIBIT 11 Page 4
NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(In millions except per share amounts)
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1994 1993 1994 1993
------- ------- ------- -------
<S> <C> <C> <C> <C>
Fully diluted earnings
per share (3):
Income before accounting changes $ 1.40 $ 0.96 $ 4.06 $ 3.62
Cumulative effects of
accounting changes -- -- -- 1.58
------- ------- ------- -------
Net income $ 1.40 $ 0.96 $ 4.06 $ 5.20
======= ======= ======= =======
(3) These calculations are submitted in accordance with Regulation S-K
item 601(b)(11) although they are contrary to paragraph 40 of
APB Opinion No. 15 because they produce an anti-dilutive result.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> $ 137
<SECURITIES> 321
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0
0
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