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Annual Meeting of Stockholders

May 10, 2012

Williamsburg Lodge Conference Center
Williamsburg, Va.
May 10, 2012

Wick Moorman
Chairman, President and CEO

Before I begin my remarks, I invite you to view a brief video presentation highlighting the great people of Norfolk Southern and their views about what makes our company strong and successful.

Thank you. I think that the video really highlights the achievements and initiatives of your company in 2011, and it captures how the focused dedication of our people helps Norfolk Southern be the best it can be. As I have said many times, Norfolk Southern is successful because of the diversity, talent, and hard work of the best people in the transportation business.

As we meet here today, we can look back with a lot of satisfaction on our performance in 2011, our best year ever.

At Norfolk Southern, we have a lot of tools for measuring our performance on many levels and across many dimensions. In fact, we measure just about everything. But of all the factors of success we track, one marks our company for who we are and what we value, just as it is positioned as top priority in our corporate vision.

Of course I’m talking about safety, and among all our accomplishments in 2011, our phenomenal employee safety record was unmatched not only in what it meant for our people and their families, along with the communities and customers we serve, but also for how it continued to influence safety improvement for our entire industry.

Our employee injury ratio in 2011 was 18 percent lower than 2010, and far and away our best ever. That kind of accomplishment happens only through personal commitment and a culture that puts safety first, and again I could not be more proud of our people and our company.

I had the privilege to be in Washington two days ago to accept the 23rd consecutive Harriman Gold Medal recognizing Norfolk Southern as the leader in workplace safety. Let me give you a little perspective on how far we have come in the past 23 years. In 1989, the first year of the 23, we achieved an FRA-reportable injury ratio of 4.83 injuries per 200,000 employee-hours worked. In 2011, that number was reduced 84.5 percent to 0.75.

At the same time, as Norfolk Southern took its numbers down, the rest of the industry saw what was possible and followed suit. Over the same 23-year period, the industry saw an 81.4 percent reduction in on-duty employee injuries, from 22,183 injuries in 1989 to 4,133 last year. These are remarkable numbers, and they have transformed the railroad industry into being one of the very safest places to work in the United States.

In addition to setting a new record for employee safety last year, we achieved records for revenues, operating income, net income, and earnings per share. For the first time, we topped $11 billion in revenue. Coal, intermodal, and merchandise revenues all were up significantly.

Improving markets contributed to our performance success, and our own continuing investments in people, infrastructure, equipment, and technology enabled us to capitalize on volume growth of 5 percent overall.

Intermodal was up 10 percent, driven by strong domestic business and continued gains from our corridor initiatives. Coal was up 4 percent on the strength of export shipments. Merchandise volume held about even with 2010, but we saw growth in our automotive and metals and construction sectors.

We managed costs well, even as we added train and engine service employees to handle increased traffic volumes. The combination of growth and cost control resulted in our achieving an operating ratio of 71.2 percent, just shy of our record best.
Importantly, we returned solid value to shareholders, raising the quarterly dividend 19 percent over the year and repurchasing more than $2 billion of our common stock.

Norfolk Southern also remained at the forefront of job creation and economic development, and we took a leadership role in the national dialogue about America’s transportation infrastructure. We pushed forward with our rail corridor improvement projects funded through innovative public-private partnerships. These efforts will culminate in our planned opening this year of three intermodal facilities along the Crescent Corridor in Alabama, Pennsylvania, and Tennessee. Just last week, we broke ground on a fourth new intermodal facility at Charlotte, North Carolina. These projects create jobs and economic development opportunities while helping to relieve congested highways and reduce greenhouse emissions.

We’re underscoring the positive connection between business and the environment through our sustainability initiatives. We launched in 2011 a partnership to plant 6 million trees on 10,000 acres in the Mississippi Delta. Thus far, we have planted some 1.5 million trees on just over 2,500 acres. This program will help offset our CO2 emissions and generate a host of benefits for the lives and businesses that depend on the health of an important region we serve. 

The really good news for us today as we reflect on the accomplishments of the past year is that we have seen in 2012 a carry-forward of the positive momentum of 2011.

As I think all of you know, Norfolk Southern reported another record-breaking first quarter. Revenues, operating income, net income, and earnings per share all were best ever for a first quarter, and we matched the first-quarter record for operating ratio.

The benefits of our steady focus on service and operating efficiency are reflected in our results, and one of the most positive aspects of our performance over the past months is how well the railroad is operating. Our operating metrics are at very high levels in terms of train performance, system velocity, and terminal dwell, and we’re confident that we have the people and assets in place to continue this performance as our business grows.

Looking at our business levels today, we obviously face some challenges in parts of our coal business, due primarily to the extremely mild winter that we experienced, coupled with the current abundance of very cheap natural gas. However, we have a strong, balanced franchise, and we are seeing continued growth on other business segments, most noticeably automobiles, metals, and intermodal. We believe that the U.S. economy remains on a sustained, albeit slow, growth path, and we will continue to position the company for sustained growth through strategic investments and hiring.

In sum, I am confident, optimistic, and enthusiastic about our future business prospects. Our transportation network is functioning well, we have a strong capital budget, and the right projects are under way to enhance our business franchises. We have a talented mix of experienced employees and enthusiastic new faces with ideas for the 21st century.

We’re approaching the 30th anniversary of Norfolk Southern Corporation on June 1. We boast a proud and strong lineage of predecessor companies that helped pave the way for our contemporary success. By the way, we are recognizing our heritage by painting 20 locomotives in the color schemes of some of our most prominent predecessor railroads. I think we have close to a dozen of these units operating now, and judging by the response on Facebook, where we now have more than 20,000 followers, they are immensely popular and are focusing public attention on Norfolk Southern in a positive manner.

Your company has come an incredible distance in a relatively short span of 30 years, but we have remained true to our core beliefs. As I wrote in my letter to stockholders in the 2011 annual report, I was asked not too long ago to describe Norfolk Southern in a single sentence. It was easy: Norfolk Southern is a company that always strives to do the right things.

We will continue doing the right things for our investors, our customers, our communities, and our employees.


Forward-Looking Statements
The material on this site does or may contain “forward-looking statements,” as that term is defined in the Private Securities Litigation Reform Act of 1995 and other applicable law. These statements may be identified by the use of words like “believe,” “expect,” “anticipate” and “project.” Forward-looking statements reflect management’s good-faith evaluation of information currently available. However, such statements are dependent on, and, therefore can be influenced by, a number of external variables over which management has little or no control, including: domestic and international economic conditions; interest rates; the business environment in industries that produce and consume rail freight; competition and consolidation within the transportation industry; fluctuation in prices or availability of key materials, in particular diesel fuel; labor difficulties, including strikes and work stoppages; legislative and regulatory developments; results of synthetic fuel-related investments, as affected by production levels and the price of crude oil; results of litigation; changes in securities and capital markets; disruptions to our technology infrastructure, including our computer systems; and natural events such as severe weather, hurricanes and floods. For more discussion about the risks facing our company, see Part I, Item 1A “Risk Factors” in our annual report on Form 10-K and any updates contained in any subsequent Forms 10-Q. Forward-looking statements are not, and should not be relied upon as, a guarantee of future performance or results, nor will they necessarily prove to be accurate indications of the times at or by which any such performance or results will be achieved. As a result, actual outcomes and results may differ materially from those expressed in such forward-looking statements. We undertake no obligation to update or revise forward-looking statements.