Norfolk Southern Reports First-Quarter Results

For the first-quarter 2007 vs. first-quarter 2006:

- Railway operating revenues were $2.25 billion compared with $2.30 billion.
- Net income was $285 million compared with $305 million.
- Diluted earnings per share were $0.71 compared with $0.72.
- Railway operating expenses were $1.72 billion compared with $1.75 billion.
- The railway operating ratio was 76.5 percent vs. 76.1 percent in 2006.

- Financial Statements

NORFOLK, VA – For the first quarter of 2007, Norfolk Southern Corporation (NYSE: NSC) reported net income of $285 million, or $0.71 per diluted share, compared with $305 million, or $0.72 per diluted share, for the first quarter of 2006. The decline in net income reflected lower income from railway operations as well as lower non-operating income.

"We are encouraged with our performance in the first quarter, especially in light of the softness in the economy," said Norfolk Southern CEO Wick Moorman. “We will be prepared as the demand for transportation services resumes its growth, and we are continuing to invest in safety, capacity and new technology to drive further improvements in service. We are also continuing to manage our cost structure and drive further efficiencies in our operation.”

First-quarter railway operating revenues were $2.2 billion, down 2 percent compared with the first-quarter of 2006. Continued weakness in the automotive and housing industries contributed to a 4 percent reduction in volumes during the quarter compared with record volumes reported in the year-earlier period.

For the first quarter, general merchandise revenues were $1.2 billion, down 4 percent compared with the same period last year. Coal revenues reached $557 million, about even with first-quarter 2006. Intermodal revenues were $462 million, down 1 percent compared with the same period last year.

Despite costs associated with extreme winter weather conditions that were far more severe than the first quarter of 2006, first- quarter 2007 railway operating expenses declined 2 percent to $1.7 billion. The improvement largely resulted from lower compensation and benefit costs.

For the quarter, the railway operating ratio was 76.5 percent, slightly higher compared with 76.1 percent during first-quarter 2006.
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, 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 metals and automotive products.

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Norfolk Southern contacts:
(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)
($ millions except per share)

	Three Months Ended March 31,
	2007		2006

Railway operating revenues:
Coal	$	557	$	559
General merchandise		1,228		1,278
Intermodal		462		466
Total railway operating revenues		2,247		2,303

Railway operating expenses:
Compensation and benefits		681		721
Materials, services and rents		497		503
Depreciation		192		183
Diesel fuel		219		231
Casualties and other claims		52		53
Other		78		61
Total railway operating expenses		1,719		1,752

Income from railway operations		528		551

Other income – net		7		35
Interest expense on debt		115		120

Income before income taxes		420		466

Provision for income taxes:
Current		138		162
Deferred		(3)		(1)
Total income taxes		135		161

Net income	$	285	$	305

Earnings per share:
Basic	$	0.72	$	0.74
Diluted	$	0.71	$	0.72

Average shares outstanding (millions):
Basic		394.2		412.4
Diluted		402.3		421.8

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

	March 31,		Dec. 31,
	2007		2006
Assets
Current assets:
Cash, cash equivalents and short-term investments	$	844	$	918
Accounts receivable – net		991		992
Materials and supplies		161		151
Deferred income taxes		185		186
Other current assets		106		153
Total current assets		2,287		2,400

Investments		1,827		1,755

Properties less accumulated depreciation		21,128		21,098

Other assets		788		775
Total assets	$	26,030	$	26,028

Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	1,084	$	1,181
Income and other taxes		256		205
Other current liabilities		276		216
Current maturities of long-term debt		533		491
Total current liabilities		2,149		2,093

Long-term debt		6,000		6,109

Other liabilities		1,932		1,767

Deferred income taxes		6,321		6,444
Total liabilities		16,402		16,413

Stockholders' equity:
Common stock $1.00 per share par value		414		418
Additional paid-in capital		1,362		1,303
Accumulated other comprehensive loss		(364)		(369)
Retained income		8,236		8,283
		9,648		9,635

Less treasury stock at cost, 20,739,624 and
20,780,638 shares, respectively		(20)		(20)
Total stockholders' equity		9,628		9,615

Total liabilities and stockholders' equity	$	26,030	$	26,028

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

	Three Months Ended March 31,
	2007		2006

Cash flows from operating activities:
Net income	$	285	$	305
Reconciliation of net income to net cash provided by
operating activities:
Depreciation		194		185
Deferred income taxes		(3)		(1)
Gains on properties and investments		(6)		(19)
Changes in assets and liabilities affecting operations:
Accounts receivable		1		(54)
Materials and supplies		(10)		(11)
Other current assets		31		28
Current liabilities other than debt		49		53
Other – net		45		24
Net cash provided by operating activities		586		510

Cash flows from investing activities:
Property additions		(236)		(256)
Property sales and other transactions		36		52
Investments, including short-term		(289)		(354)
Investment sales and other transactions		233		267
Net cash used for investing activities		(256)		(291)

Cash flows from financing activities:
Dividends		(88)		(66)
Common stock issued – net		41		183
Purchase and retirement of common stock (note 1)		(276)		(67)
Debt repayments		(64)		(32)

Net cash provided by (used for) financing activities		(387)		18

Net increase (decrease) in cash and cash equivalents		(57)		237

Cash and cash equivalents:
At beginning of year		527		289

At end of period		470		526

Short-term investments at end of period		374		1,016

Cash, cash equivalents and short-term investments at end of period	$	844	$	1,542

Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest (net of amounts capitalized)	$	63	$	63
Income taxes (net of refunds)	$	8	$	17

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 to increase the number of shares of NS common stock that may be repurchased from 50 million to 75 million. In addition, the authorization term was shortened from December 31, 2015, to December 31, 2010. During the first quarter of 2007, NS purchased and retired 5.6 million shares of common stock at a cost of $276 million. Since inception, NS has purchased and retired 27.4 million shares at a total cost of $1.2 billion under this program.

Norfolk Southern Reports First-Quarter Results

Assets

Liabilities and stockholders' equity

Total stockholders' equity

Total liabilities and stockholders' equity

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

Supplemental disclosure of cash flow information