Norfolk Southern Reports Record Results; Net Income Increases 15 Percent

For second-quarter 2008 vs. second-quarter 2007:

NORFOLK, Va., July 22 /PRNewswire-FirstCall/ -- For the second quarter of
2008, Norfolk Southern Corporation (NYSE: NSC) reported record net income of
$453 million, or $1.18 per diluted share, compared with $394 million, or $0.98
per diluted share, for the same period of 2007. Second-quarter railway
operating revenues were a record $2.8 billion, up 16 percent compared with the
second quarter of 2007.
"Norfolk Southern delivered record financial results during the quarter,
reporting continuing strength in our coal, agriculture, and metals markets,"
said Norfolk Southern CEO Wick Moorman. "Looking ahead, our franchise should
continue to benefit from a broad and balanced customer base as well as from
rail's inherent advantages over other transportation modes - safety and
reliability, fuel efficiency, and environmental sustainability."
Although continued weakness in the automotive- and housing-related
industries contributed to a 2 percent reduction in traffic volume compared
with the same quarter last year, higher average revenue per unit more than
offset the effect of reduced volumes.
Compared to the second quarter of 2007, general merchandise revenues
increased 10 percent to a record $1.5 billion, coal revenues climbed 34
percent to a record $775 million, and intermodal revenues increased 11 percent
to a record $532 million in the second quarter of 2008.
Railway operating expenses increased 16 percent to $2 billion for the
second quarter compared with the same period of 2007, primarily due to higher
fuel expense, which rose by $212 million, or 76 percent.
The railway operating ratio for the quarter was 71.1 percent, about even
compared with second-quarter 2007.
Norfolk Southern Corporation is one of the nation's premier transportation
companies. Its Norfolk Southern Railway subsidiary operates approximately
21,000 route miles in 22 states and the District of Columbia, serving every
major container port in the eastern United States and providing superior
connections to western rail carriers. Norfolk Southern operates the most
extensive intermodal network in the East and is North America's largest rail
carrier of metals and automotive products.

Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Income
(Unaudited)
($ millions except per share)

Three Months Ended June 30,
2008 2007

Railway operating revenues:
Coal $ 775 $ 579
General merchandise 1,458 1,320
Intermodal 532 479
Total railway operating revenues 2,765 2,378

Railway operating expenses:
Compensation and benefits 662 629
Purchased services and rents 400 380
Fuel 491 279
Depreciation 199 192
Materials and other 214 208
Total railway operating expenses 1,966 1,688

Income from railway operations 799 690

Other income - net 46 21
Interest expense on debt 112 111

Income before income taxes 733 600

Provision for income taxes:
Current 242 225
Deferred 38 (19)
Total income taxes 280 206

Net income $ 453 $ 394

Earnings per share:
Basic $ 1.20 $ 1.00
Diluted $ 1.18 $ 0.98

Weighted average shares outstanding (millions)
(note 1):
Basic 375.4 393.7
Diluted 383.5 401.7

Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Income
(Unaudited)
($ millions except per share)

Six Months Ended June 30,
2008 2007

Railway operating revenues:
Coal $ 1,437 $ 1,136
General merchandise 2,810 2,548
Intermodal 1,018 941
Total railway operating revenues 5,265 4,625

Railway operating expenses:
Compensation and benefits 1,367 1,310
Purchased services and rents 775 764
Fuel 895 527
Depreciation 397 384
Materials and other 454 422
Total railway operating expenses 3,888 3,407

Income from railway operations 1,377 1,218

Other income - net 53 28
Interest expense on debt 221 226

Income before income taxes 1,209 1,020

Provision for income taxes:
Current 402 363
Deferred 63 (22)
Total income taxes 465 341

Net income $ 744 $ 679

Earnings per share:
Basic $ 1.98 $ 1.72
Diluted $ 1.94 $ 1.69

Weighted average shares outstanding (millions)
(note 1):
Basic 375.6 394.0
Diluted 383.7 402.0

Norfolk Southern Corporation and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
($ millions)

June 30, Dec. 31,
2008 2007
Assets
Current assets:
Cash, cash equivalents and short-term
investments $ 454 $ 206
Accounts receivable - net 1,084 942
Materials and supplies 203 176
Deferred income taxes 169 190
Other current assets 116 161
Total current assets 2,026 1,675

Investments 1,804 1,974

Properties less accumulated depreciation 21,824 21,583

Other assets 760 912
Total assets $ 26,414 $ 26,144

Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 1,114 $ 1,139
Income and other taxes 282 203
Other current liabilities 246 237
Current maturities of long-term debt 486 369
Total current liabilities 2,128 1,948

Long-term debt 6,003 5,999

Other liabilities 1,812 2,039

Deferred income taxes 6,479 6,431
Total liabilities 16,422 16,417

Stockholders' equity:
Common stock $1.00 per share par value,
1,350,000,000 shares authorized; outstanding
375,199,214 and 379,297,891 shares,
respectively, net of treasury shares 376 380
Additional paid-in capital 1,657 1,466
Accumulated other comprehensive loss (392) (399)
Retained income 8,351 8,280
Total stockholders' equity 9,992 9,727

Total liabilities and stockholders' equity $ 26,414 $ 26,144

Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
($ millions)

Six Months Ended June 30,
2008 2007

Cash flows from operating activities:
Net income $ 744 $ 679
Reconciliation of net income to net cash
provided by operating activities:
Depreciation 402 390
Deferred income taxes 63 (22)
Gains on properties and investments (22) (14)
Changes in assets and liabilities affecting
operations:
Accounts receivable 55 (9)
Materials and supplies (27) (24)
Other current assets 34 54
Current liabilities other than debt (245) 25
Other - net 54 58
Net cash provided by operating activities 1,058 1,137

Cash flows from investing activities:
Property additions (676) (575)
Property sales and other transactions 66 69
Investments, including short-term (34) (445)
Investment sales and other transactions 251 566
Net cash used in investing activities (393) (385)

Cash flows from financing activities:
Dividends (218) (174)
Common stock issued - net 177 154
Purchase and retirement of common stock (note 1) (494) (427)
Proceeds from borrowings 1,225 --
Debt repayments (1,107) (433)

Net cash used in financing activities (417) (880)

Net increase (decrease) in cash and
cash equivalents 248 (128)

Cash and cash equivalents:
At beginning of year 206 527

At end of period 454 399

Short-term investments at end of period -- 93

Cash, cash equivalents and short-term investments
at end of period $ 454 $ 492

Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest (net of amounts capitalized) $ 208 $ 235
Income taxes (net of refunds) $ 235 $ 240

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:

1. STOCK REPURCHASE PROGRAM -
In March 2007, NS' Board of Directors amended the stock repurchase
program that was authorized in November 2005 so as to increase the
number of shares of NS common stock that may be repurchased from 50
million to 75 million. In addition, the term of the program was
shortened from December 31, 2015 to December 31, 2010. During the
first six months of 2008, NS purchased and retired 9.0 million shares
of common stock at a cost of $494 million. Since inception of this
program, NS has purchased and retired 54.4 million shares at a total
cost of $2.7 billion.

SOURCE Norfolk Southern Corporation

Media: Frank Brown, +1-757-629-2710, fsbrown@nscorp.com; or Investors: Leanne
Marilley, +1-757-629-2861, leanne.marilley@nscorp.com, both of Norfolk
Southern Corporation