April 27, 2005

Norfolk Southern Reports Record Revenues;
Net Income Increases 23 Percent

Financial Statements • First Quarter Income • Balance Sheets • Cash Flows • .pdf of Statements

For first quarter 2005 vs. first quarter 2004:

• Railway operating revenues improved 16 percent to a record $1.96 billion.
• Income from railway operations rose 16 percent to $403 million and set a first-quarter record.
• Net income climbed 23 percent to $194 million, or $0.47 per share.

NORFOLK , VA. – For the first quarter of 2005, Norfolk Southern Corporation (NYSE: NSC) reported net income of $194 million, or $0.47 per diluted share, up 23 percent compared with $158 million, or $0.40 per diluted share, for first-quarter 2004.

First-quarter results included approximately $35 million for expenses (pretax) related to the Jan. 6 train derailment in Graniteville , S.C.

“Our solid first-quarter results reflect robust volumes and revenues and along with our improving operating ratio demonstrate the focus of Norfolk Southern people on safety and service, ” said David R. Goode, chairman and chief executive officer. “We continue to show strong momentum on volume and revenue growth.”

First-quarter railway operating revenues of $1.96 billion were the highest of any quarter in Norfolk Southern’s history and improved 16 percent compared with $1.7 billion in the first quarter of 2004, while traffic volume was up approximately 106,000 units, or 6 percent.

General merchandise revenues for the first quarter reached a record $1.1 billion, an increase of 12 percent over the same period last year. All marketing groups, except automotive, reported strong revenue gains during the period. Metals and construction revenues led the growth with a 22 percent increase, followed by paper, up 19 percent, and chemicals, up 14 percent.

Intermodal revenues set a first-quarter record of $408 million, up 24 percent, compared with first-quarter 2004. This was the fifth consecutive quarter during which intermodal showed double-digit revenue growth.

Coal revenues increased 17 percent to $467 million in the first quarter compared with the same quarter last year. The export and utility coal markets benefited from increased traffic volumes. Export traffic climbed 19 percent in the first quarter compared with the same period of 2004.

First-quarter railway operating expenses were $1.6 billion, up 16 percent over the same period in 2004. This primarily was due to costs associated with increased traffic volume, higher diesel fuel prices and expenses related to the Graniteville derailment.

For the quarter, the railroad operating ratio improved to 79.4 (even including expenses for Graniteville, which added 1.7 points) compared with 79.6 a year earlier.

Norfolk Southern Corporation is one of the nation's premier transportation companies. Its Norfolk Southern Railway subsidiary operates approximately 21,300 route miles in 22 states, the District of Columbia and Ontario , Canada , serving every major container port in the eastern United States and providing superior connections to western rail carriers. NS operates the most extensive intermodal network in the East and is North America ’s largest rail carrier of automotive parts and finished vehicles.

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For further information contact:
(Media) Bob Fort, 757-629-2710 (rcfort@nscorp.com)
(Investors) Leanne Marilley, 757-629-2861(leanne.marilley@nscorp.com )

Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Income
(Unaudited)
	Three Months Ended March 31,
	2005		2004
	($ millions except per share)
Railway operating revenues:
Coal	$	467	$	398
General merchandise		1,086		967
Intermodal		408		328
Total railway operating revenues		1,961		1,693
Railway operating expenses:
Compensation and benefits		604		545
Materials, services and rents		436		365
Conrail rents and services (note 2)		35		102
Depreciation (note 2)		193		129
Diesel fuel		150		107
Casualties and other claims (note 1)		78		40
Other		62		59
Total railway operating expenses		1,558		1,347
Income from railway operations		403		346
Other income – net		2		10
Interest expense on debt		(128)		(121)
Income before income taxes		277		235
Provision for income taxes:
Current		59		49
Deferred		24		28
Total income taxes		83		77
Net income	$	194	$	158
Earnings per share:
Basic	$	0.48	$	0.40
Diluted	$	0.47	$	0.40
Average shares outstanding (000's)
Basic		401,771		391,231
Diluted		410,107		394,024
See notes to consolidated financial statements.

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Norfolk Southern Corporation and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
	March 31,		December 31,
	2005		2004
	($ millions)
Assets
Current assets:
Cash, cash equivalents and short-term investments	$	1,119	$	669
Accounts receivable – net (note 1)		890		767
Materials and supplies		114		104
Deferred income taxes		216		187
Other current assets		256		240
Total current assets		2,595		1,967
Investments		1,525		1,499
Properties less accumulated depreciation		20,474		20,526
Other assets (note 1)		893		758
Total assets	$	25,487	$	24,750
Liabilities and stockholders' equity
Current liabilities:
Accounts payable (note 1)	$	1,098	$	1,090
Income and other taxes		227		210
Other current liabilities		295		239
Current maturities of long-term debt		557		662
Total current liabilities		2,177		2,201
Long-term debt		7,125		6,863
Other liabilities (note 1)		1,313		1,146
Deferred income taxes		6,618		6,550
Total liabilities		17,233		16,760
Stockholders' equity:
Common stock $1.00 per share par value		425		421
Additional paid-in capital		833		728
Unearned restricted stock		(25)		(8)
Accumulated other comprehensive loss		(2)		(24)
Retained income		7,043		6,893
		8,274		8,010
Less treasury stock at cost, 20,907,125 shares		(20)		(20)
Total stockholders' equity		8,254		7,990
Total liabilities and stockholders' equity	$	25,487	$	24,750
See notes to consolidated financial statements.

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Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
($ millions)
	Three Months Ended March 31,
	2005			2004
Cash flows from operating activities:
Net income	$		194	$	158
Reconciliation of net income to net cash provided by
operating activities:
Depreciation			197		132
Deferred income taxes			24		28
Equity in earnings of Conrail			(6)		(15)
Gains on properties and investments			(7)		(1)
Changes in assets and liabilities affecting operations:
Accounts receivable			(52)		(71)
Materials and supplies			(10)		(5)
Other current assets			23		20
Current liabilities other than debt			36		40
Other – net			9		(28)
Net cash provided by operating activities			408		258
Cash flows from investing activities:
Property additions			(144)		(172)
Property sales and other transactions			4		1
Investments, including short-term			(303)		(23)
Investment sales and other transactions			216		1
Net cash used for investing activities			(227)		(193)
Cash flows from financing activities:
Dividends			(44)		(32)
Common stock issued – net			66		5
Proceeds from borrowings (note 3)			332		88
Debt repayments			(138)		(303)
Net cash provided by (used for) financing activities			216		(242)
Net increase (decrease) in cash and cash equivalents			397		(177)
Cash and cash equivalents:
At beginning of year			467		284
At end of period	$		864	$	107
Short-term investments at end of period	$		255	$	3
Cash, cash equivalents and short-term investments
at end of period	$		1,119	$	110
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest (net of amounts capitalized)	$		70	$	71
Income taxes	$		--	$	--
See notes to consolidated financial statements.

NOTES TO FINANCIAL STATEMENTS:

1. GRANITEVILLE DERAILMENT –

In the first quarter of 2005, NS recorded a liability related to the Jan. 6, 2005 , derailment in Graniteville , SC. The liability, which includes a current and long-term portion, represents NS’ best estimate based on current facts and circumstances. The estimate includes amounts related to business property damage and other economic losses, personal injury and individual property damage claims as well as third-party response costs. NS’ commercial insurance policies cover expenses related to this derailment above NS’ self-insured retention, including its own response costs and legal fees. Accordingly, the Consolidated Balance Sheet reflects a current and long-term receivable for estimated recoveries from its insurance carriers.

First-quarter results include approximately $35 million of expenses related to this incident, which represents NS’ retention under its insurance policies and other uninsured costs, and which reduced net income by approximately $21 million, or 5 cents per share (basic and diluted). NS expects $6 million of additional costs for the remainder of the year.

While it is reasonable to expect that the liability for covered losses could differ from the amount recorded, such a change would be offset by a corresponding change in the recovery receivable. As a result, NS does not believe that it is reasonably likely that its total loss (the difference between the liability and future recoveries) will be materially different than the loss recorded in the first quarter of 2005. NS expects at this time that insurance coverage is adequate to cover potential claims and settlements above its self-insurance retention.

2. CONRAIL CORPORATE REORGANIZATION –

On August 27, 2004 , NS, CSX and Conrail completed a corporate reorganization of Conrail that resulted in the direct ownership and control by Norfolk Southern Railway Company (NSR) of routes and assets that had previously been operated by NSR under operating and lease agreements with a Conrail subsidiary. As a part of the reorganization, NSR issued new unsecured debt obligations, which were exchanged for unsecured debt obligations of Consolidated Rail Corporation (CRC), a Conrail subsidiary. In addition, NSR entered into new lease and sublease arrangements with CRC to support CRC’s secured debt and lease obligations, and the long-term note due to Conrail was eliminated. The reorganization did not affect the Shared Assets Areas, which continue to be owned and operated by CRC. After the reorganization, “Conrail rents and services” reflects only the expenses associated with the Shared Assets Areas, and other expenses (primarily the depreciation related to the routes and assets) are reflected in their respective line items.

3. PAYMENTS TO CONRAIL -

Payments made to Conrail in accordance with the operating and lease agreements in place before the Conrail corporate reorganization (see note 2 on page 4) reduced NS’ “Net cash provided by operating activities.” A significant portion of these payments was borrowed back from a Conrail subsidiary. The net borrowings were included in NS’ “Net cash used for financing activities” and totaled $69 million in the first quarter of 2004.