8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________________________

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): 
June 12, 2007 (June 6, 2007)

________________________________

NORFOLK SOUTHERN CORPORATION
(Exact name of registrant as specified in its charter)

________________________________

Virginia	1-8339	52-1188014
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification Number)
Three Commercial Place		(757) 629-2680
Norfolk, Virginia  23510-9241		(Registrant's telephone number, including area code)
(Address of principal executive offices)

No Change
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[ ]    Written communications pursuant to Rule 425 under the Securities Act  (17 CFR   230.425)

[ ]    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ]    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act
        (17 CFR 240.14d-2(b))

[ ]    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act
        (17 CFR 240.13e-4(c))

Item 8.01.  Other Events.

            On June 6, 2007, NS hosted an Investor Day in New York City, during which members of management provided information regarding various aspects of Norfolk Southern's ("NS") business.  The text and accompanying slides of such presentations are included as exhibits to this Form 8-K.  The archived webcast--including questions and answers--and all slides are available on NS' website, www.nscorp.com, under the "Investors" section. 

Statements about future results made in the materials filed with this Form 8-K as exhibits constitute forward-looking statements that 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; changes in securities and capital markets; disruptions to NS' technology infrastructure, including its computer systems; and natural events such as severe weather, hurricanes and floods.   For more discussion about each risk factor, see Part I, Item 1A "Risk Factors" in NS' Dec. 31, 2006, Form 10-K, and any updates contained in 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 forward-looking statements.   NS undertakes no obligation to update or revise forward-looking statements.

The materials filed with this Form 8-K include non-GAAP financial measures, as defined by SEC Regulation G, which are reconciled on NS' website and on Exhibit 99.16 to this Form 8-K.  Specifically, the materials refer to the measures "free cash flow" and "return on invested capital."  See Exhibit 99.16 to this Form 8-K for the reasons NS' management believes they provide useful information to investors regarding NS' financial condition and results of operations.  These measures should be considered in addition to, not as a substitute for, other information provided in accordance with GAAP.

 Item 9.01.  Financial Statements and Exhibits.

Exhibit Number	Description
99.1	Transcript of Introductory Comments
99.2	Transcript of Opening Remarks by Charles W. Moorman
99.3	Presentation by Donald W. Seale
99.4	Presentation by Daniel D. Smith
99.5	Presentation by David T. Lawson
99.6	Presentation by Michael R. McClellan
99.7	Presentation by Mark D. Manion
99.8	Presentation by Tim A. Heilig
99.9	Presentation by Timothy J. Drake
99.10	Presentation by Fredric M. Ehlers
99.11	Presentation by James A. Hixon
99.12	Presentation by John P. Rathbone
99.13	Presentation by Deborah H. Butler
99.14	Presentation by James A. Squires
99.15	Transcript of Closing Remarks by Charles W. Moorman
99.16	Reconciliation of Non-GAAP Measures

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

                                                            SIGNATURES

                                                            NORFOLK SOUTHERN CORPORATION

                                                            (Registrant)

                                                            /s/ Reginald J. Chaney

                                                            _________________________________

                                                            Name:  Reginald J. Chaney
                                                            Title:    Assistant Corporate Secretary

Date:  June 12, 2007

EXHIBIT INDEX

Exhibit Number	Description
99.1	Transcript of Introductory Comments
99.2	Transcript of Opening Remarks by Charles W. Moorman
99.3	Presentation by Donald W. Seale
99.4	Presentation by Daniel D. Smith
99.5	Presentation by David T. Lawson
99.6	Presentation by Michael R. McClellan
99.7	Presentation by Mark D. Manion
99.8	Presentation by Tim A. Heilig
99.9	Presentation by Timothy J. Drake
99.10	Presentation by Fredric M. Ehlers
99.11	Presentation by James A. Hixon
99.12	Presentation by John P. Rathbone
99.13	Presentation by Deborah H. Butler
99.14	Presentation by James A. Squires
99.15	Transcript of Closing Remarks by Charles W. Moorman
99.16	Reconciliation of Non-GAAP Measures

EX-99

Good morning. I am Leanne Marilley, director of Investor Relations, for Norfolk Southern Corporation.  Before we begin today's program, I would like to mention a few housekeeping items.

First, we would like to welcome those who are listening on the Internet.  As a reminder, MP3 downloads of today's meeting will be available on our website for your convenience.  I remind our webcast participants that the slides of the presenters also are available on our web site, www.nscorp.com, under the "Investors" section.  For those viewing the webcast, please be aware that the presentations also are posted on the NS website.  However, due to size and bandwidth limitations, you may experience delays in downloading them, and we ask for your patience.

Additionally, keep in mind that all references to reported results excluding certain adjustments, for example non-GAAP numbers, have been reconciled on our web site.  During the question-and-answer sessions, please identify yourself before you ask a question so that everyone can hear you, including our satellite listeners.

Please be advised that any forward-looking statements made during the course of this presentation represent our best, good faith judgment as to what may occur in the future.  Statements that are forward-looking can be identified by the use of words such as "believe," "expect," "anticipate" and "project."  Our actual results may differ materially from those projected and will be subject to a number of risks and uncertainties, some of which may be outside of our control.  Please refer to our Annual Report filed with the SEC for a discussion of those risks and uncertainties we view as most important.

          Before we begin, I'd like to point out a few changes to today's agenda. David Lawson, vice president Industrial Products, will follow Don Seale, executive vice president and Chief Marketing Officer, and then Danny Smith, senior vice president Energy and Properties, will present.  Additionally, Jim Hixon, executive vice president Law and Corporate Relations, will be presenting following our morning break instead of 2:30 as reflected on the agenda.

Now, it is my pleasure to introduce Norfolk Southern Chairman, President and CEO Wick Moorman.

EX-99

Remarks by:

 Charles W. Moorman

Chairman, President and Chief Executive Officer

Norfolk Southern Corporation

 Investor Day

New York, New York

June 6, 2007

             Thanks Leanne.

            Good morning everyone, and welcome to our investor conference.  As all of you know, it's been a while since we've had such a conference, although not as one person I read has suggested "a dog's life," but with the changes in our company over the past few years and the more recent wave of interest in the rail industry, we thought it appropriate to have a full discussion with you about our company.

            As you can see, we have a full agenda today with presentations from a number of folks from our senior management team.  Our goals are fairly simple, in that by the end of the day we hope that you'll have a much better understanding of

a.   who we are,

b.   how we manage the company,

c.   where we hope to take the company in the future,

d.   why we believe that Norfolk Southern continues to represent a superior investment opportunity, not only in the rail sector, but in the broader market as well.

            Before we get into the presentations, I'd like to take a few minutes to talk about what we see as the three principal elements of Norfolk Southern's current and future success.  You'll be hearing a lot more about all of these as the day progresses, but I think that they provide a useful framework in thinking about the information you're hearing.

            The first key to our success comes as no surprise, and that's the economic and regulatory landscape in which we and the other rail carriers are operating.  I know that you've all heard a lot about the changes in transportation in the past few years - higher energy costs, truck driver shortages, fewer truck drivers, increased highway congestion - and Don Seale and our Marketing team will be talking about them in more detail this morning.  Although our business, like that of the other rails, is down a little year-over-year because of the very real weakness in the automotive and housing sectors, we remain convinced that the underlying fundamentals of U.S. surface transportation have changed, and those changes will be good for our business for a long time to come.

            While the economic landscape looks much better, the regulatory landscape has become more uncertain.  On the positive side, more and more policymakers are becoming convinced of the public benefits of investing in rail infrastructure, and we're convinced that trend will continue.  More problematically, the recent improvements in the profitability of our industry combined with some service issues with a couple of carriers have increased the pressure from some groups to re-regulate our industry.  Jim Hixon will be talking with you at lunch about these issues, but the bottom line is that while we remain confident that no substantial negative changes will occur, we are going to have to be watchful and thoughtful about how we manage our business so as not to give our critics further ammunition.

            The second, critical element of our success is our franchise.  When I talk about franchise, I mean the combination of a number of things.  They include the markets we serve, the customers that we serve in those markets, the physical characteristics of the routes between those markets, and the assets such as terminals that we employ to serve those markets.  Railroading is a business where a superior route and/or superior assets will usually provide a significant competitive advantage. 

            While all railroads share a common technology and many common business practices, they can be, and usually are, very different in terms of their franchises.  For example, our franchise is different from CSX's, and we're both very different from the Western & Canadian carriers. 

            Put very simply, we think that Norfolk Southern has a superior franchise.  First, we're located in the part of the country where most of the people are and where most of the inter-city freight moves.  Second, we have direct routes with good capacity between most of the markets we serve. 

            With these advantages come a few management challenges in that we have a complex matrix of routes with more origin-destination points and shorter average hauls than many of the other carriers.  Fortunately, this is offset by a third advantage, a superior set of assets, such as classification yards and intermodal terminals located at the right places to handle our customers' business efficiently and effectively.  Last, as Tim Drake will be discussing, we have and continue to maintain all of our assets at a level which allows us to provide superior service to our customers with minimal disruption.

            You'll also be hearing about some important initiatives that we have to grow and strengthen our franchise.  Mike McClellan will be describing our Meridian Speedway transaction with the KCS, a deal which ensures our access to the shortest, best intermodal route between the West Coast ports and the Southeastern U.S.  Mike will also be talking about an even bigger opportunity for us which we have dubbed the I-81 Crescent Corridor, an initiative to significantly grow our intermodal business between the Southern and Southwest U.S. and the Northeast.  It's one of the last major freight corridors in this country which has not been penetrated by intermodal rail, and while there's a lot of work still to be done, it's a project which has enormous potential for future growth at Norfolk Southern.

            Finally, along with favorable economic forces and a superior franchise, there is one more element to our success at Norfolk Southern, and that's the way that we all collectively manage the company.  Put simply, I believe that we have the best management team from top to bottom of any company in our industry, and that our results show it.  Our people do an exceptional job of managing a very complex franchise in what is already a fairly complex business.

            In managing the company, we're focused on a few crucial elements of success.  The first of these is service.  When I talk to groups either internally or externally, the first thing that I talk about is the fact that we're a service business, and our goal is always to provide superior customer service.  Our service today is acknowledged to be pretty good, but we know it's got to get even better.  You'll be hearing a lot more this morning about how we think about service delivery, how we measure and manage it, and about the initiatives we have underway to offer even higher levels of service in the future.  With better service comes increased business opportunities and the ability to realize more value for our products, and improving service is the linchpin for all our strategic initiatives.

            Our second area of focus which goes hand in hand with service delivery is technology.  As I've mentioned, we have a complex transportation network, and information technology is a critical component in ensuring that it runs well.  We have great systems with which we manage our transportation network and a lot more technology on the way.  Danny Smith, Tim Heilig, and Fred Ehlers will all be describing technology initiatives which hold enormous promise for improving the efficiency and effectiveness of our operations.

            The final and most important area of our management focus is our workforce.  As I've said, I believe that NS people are second to none, and as John Rathbone will be more fully describing, we face both opportunities and challenges as we think about our workforce for the future.  We have a number of creative programs underway to ensure that we have the right people with the right skill sets to provide the best possible service at the highest levels of efficiency, thereby generating the highest levels of return from our company.

            In closing, I would be remiss if I didn't mention the other critical component of our focus on people, and that is our safety process.  Mark Manion will tell you more about that, but if you want evidence of the strength of our management team and our entire workforce, then I think that you need look no further than the fact that NS has won the Harriman Gold Medal for employee safety for 18 consecutive years, and in doing so we've led the rest of the industry to the point where it's safer to work on the railroad than in a hotel or department store.  It's the result of relentless focus, constant process improvement, the willingness to commit resources, and above all, the commitment of everyone in our company to eliminate accidents in our company.

            These same characteristics are also what we bring to the job of providing the best possible service to our customers and providing the best possible returns to our customers, and they're the reasons why I am so confident in our future.

            Let me now turn the program over to Don Seale to get the presentations started.  As you can see, we'll have time after each set of presentations for some Q&A, and at the end of the session I'll be back with some concluding remarks and I'll be happy to take your questions then.

EX-99

NS Business Overview

Donald W. Seale

Executive Vice President & Chief Marketing Officer

Good morning. It is a pleasure to be with you today and to set the stage for our business review and outlook.

In my remarks, I will open with a discussion of key economic metrics that are shaping the rail industry today. I will follow this with a recap of Norfolk Southern’s performance for the past several years, and take a look at our current volumes and expectations. I will conclude with an update on some of our major industrial development projects and initiatives.

Following my remarks, David Lawson, Danny Smith, and Mike McClellan will provide in-depth reviews of the key market drivers and outlook in our Merchandise, Coal, and Intermodal business segments.

Rail Transportation Environment

Soft manufacturing economy led by
automotive

Weak housing market

Higher energy costs

Excess trucking capacity

Resilient consumer

Solid global economy

You are all aware that the freight transportation industry is weathering a temporary lull in demand. Moderating industrial production, a weak housing market, continued high energy costs, and excess trucking capacity are just some of the issues that are challenging the industry today. But, on the plus side, the U.S. consumer continues to be resilient, and global trade and the global economy are both pluses going forward.

U. S. Railroad Performance
January – May 2007

Source:  AAR – May 24, 2007

% change year ago

It has been said that rail shipments are a good barometer of economic activity, and with total U.S. rail industry carload and Intermodal volume down 3.1% for the year to-date (through May 26), it is no wonder that some believe that the economy is at a watershed mark, somewhere between resumed growth or recession. Rail volumes have fallen 21 of the 22 past weeks, and these declines are across the board, with Automotive, Construction and Paper & Forest shipments experiencing the biggest drops. There has been a bright spot with total Chemicals shipments increasing 2.5% for the year as this industry continues to recover from Hurricane Katrina.

Also, recent economic data ranging from an improving ISM index to stronger housing sales in April seems to point to an improved economic outlook going forward, and we remain cautiously optimistic that the second half of the year will produce better freight performance.

Morgan Stanley Truckload Freight Index
Supply and Demand

2007

2006

2002

2003

2004

2005

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

11.0

12.0

13.0

Along with the manufacturing industry, we are obviously keenly interested in the trucking industry environment since motor carriers are both partners and competitors for Intermodal and a range of carload commodities.

The trucking industry continues to face challenges in the form of mainly higher diesel fuel prices, driver shortages and growing highway congestion, and while abundant trucking capacity that was initially seen beginning in late 2005 continues today, we do not see this as a “long term” trend. The cost of trucking in the U.S. will most likely continue to move upward in a prolonged and substantial manner, which, in our view, will restrict capacity going forward.

With respect to volumes, as with the rail industry, the trucking industry has seen its share of softness. The ATA (American Trucking Association) reports that trucking tonnage has been down for 13 of the past 16 months through April.

Import and Export Growth

% change year ago

Source:  Global Insight – May 2007

Imports

Exports

Actual

Projected

Along with excess trucking capacity, changes in international trade volumes are impacting our current Intermodal volumes as well as certain carload business. Total U.S. import growth has slowed significantly compared to 2006, and our international Intermodal volume through West Coast ports has fallen 9% through the end of April. Indeed, we are now seeing about 50% of our International traffic originating at East Coast ports versus only 22% in 2000, so the shift of trade to all water service to East Coast ports is real and growing.

The outlook for export trade is somewhat positive. Improved economic global growth, plus a declining dollar suggest that exports will be an important source of strength going forward. Export gains are projected to average 9-10% this year. Accordingly, our export Coal volume is up 13% for the year, and we expect that positive trend to continue as the year progresses. We have also seen gains in export commodities such as fertilizer, food oils and machinery.

U.S. Manufacturing

Source: ISM – May 2007

Expansion

Contraction

ISM Index

Turning to the domestic economy, slower manufacturing has contributed to what is being termed as a ‘freight recession’. As you may recall, the last recession occurred in 2001 and fortunately the current ISM readings (Institute of Supply Managers index) have not approached the levels that were seen throughout 2001 and early 2002.

However, capacity utilization hovering around 80%, minimal growth in factory output, and higher inventories remain a cause for concern.

(Millions)

U.S. Housing Market

Source:  Census & Global Insight  – May 2007

The housing market is still the major story. Forecasters are scaling back expectations for a recovery in the near term. Housing starts are currently at a pace of less than 1.5 million units on an annualized basis, and existing home sales are in the range of 6 million. While recent home sales data is somewhat encouraging, it has come on the heels of falling home prices which makes for less than a visible outlook for recovery.

This housing slowdown has impacted our shipments of lumber, wood products, and materials used in residential construction. Related shipments of furniture, appliances, consumer electronics, and home goods have slowed as well.

Units (000)

North American Vehicle Production

Source:  Autocast – April 2007

Passenger Car

Light Truck

Total Production

Projected

Actual

North American auto production is the other major drag on rail volumes. The automotive industry is in transition, with GM and Ford becoming smaller by reducing some 2 million units of capacity through plant closings. Last year, 37% of vehicles assembled in North America had foreign nameplates, up from 34% in 2005, and that share will grow progressively as more production is cut by GM and Ford and the “new domestic” plants add more capacity.

Mike McClellan will provide more details of this shift in his comments.

NS Volume
Jan – May 2007 vs. 2006

Increasing ethanol, grain and
fertilizer volume

Falling steel production & housing
related construction losses

Weakened lumber volume and
conventional paper declines

Improving volumes after hurricane
related plant closures

Continued restructuring of the Big 3

Higher truck capacity and declines
in West Coast port volumes

Stockpiles above target, winter
service disruptions & loss of
metallurgical spot volume

              vs. 2006

Agriculture

719

0%

MetCon

(29,892)

(8%)

Paper

(15,929)

(8%)

Chemicals

(289)

(0%)

Automotive

(29,855)

(12%)

Intermodal

(38,167)

(3%)

Coal

(27,503)

(4%)

  Total

(140,916)

(4%)

January through May, our total volume is down 4%. Agriculture has experienced the only year-over-year gain despite tough comparisons to 2006 which included over 6,300 shipments of hurricane related movements. Growth continues to be driven by ethanol demand which in turn has boosted corn and fertilizer volumes. Volumes for our Chemicals markets are showing signs of improvement after hurricane Katrina related plant closures.

Our remaining markets continue to feel the effects of sluggish manufacturing, shifts in international trade, harsh winter weather conditions that we faced earlier in the year, and very strong comp’s from record volumes handled in the first half of 2006.

NS Volume vs. Other U.S. RR’s,
Low Tech IPI & Motor Carriers

Sources: Global Insight, FTR Associates, AAR

In spite of what we see as temporary softness in volumes, our franchise has progressed well since 2001. Comparing 2006 to the same period of 2001, our volume has increased at more than twice the rate of low tech industrial production growth. Our 19% rate of growth also exceeds the 13% gain of the other U.S. railroads. And perhaps most importantly, our growth trend has exceeded the 8% gain in truck tonnage over this period.

NS Volume 2006 vs 2001

2006

2001

Total Volume – 7,900,934 Units

Total Volume – 6,624,966 Units

Our business has changed since 2001, and growth in Intermodal has played a major role in our success. Intermodal’s share of volume has grown from 32% in 2001, to 41% in 2006. Coal’s shipments dropped from 26% of total volume in 2001, to 22% in 2006. And Automotive and Chemicals both experienced slight declines.

This diverse portfolio of business that cuts across the entire domestic and global economy provides a strong market franchise that balances exposure to downturns in any individual market segment.

Top NS Growth Markets in Volume
2001 - 2006

% Change

Miscellaneous Wood

280.1%

Military

70.2%

International Intermodal

59.6%

Machinery

58.9%

Scrap Metal

50.1%

Sweeteners (Includes Ethanol)

47.6%

Fertilizers

44.9%

Printing Paper

42.5%

Iron & Steel

40.6%

Domestic Intermodal

40.4%

Cement

23.9%

Triple Crown

21.4%

The depth and breadth of our largest volume growth markets reflect this balanced business base.

International, domestic and Triple Crown Intermodal volume growth has certainly been strong during this five year period. Emerging markets which include miscellaneous wood, military, waste materials and ethanol shipments have seen significant gains. And perhaps most reassuring is the inclusion of some of our core business markets, which includes iron & steel, printing paper and fertilizers.

NS Revenue Growth
2001-2006

$9,407

$8,527

$7,312

$6,468

$6,270

$6,170

In $ Millions

Turning to revenue, we recorded gains of $3.2 billion, or 53%, from 2001 to 2006. The majority of the gains occurred between 2004 and 2006 with total growth of $2.1 billion during the 3 year period.

Starting with the second quarter of 2002 through the fourth quarter of 2006 we reported 19 consecutive quarters of year-over-year growth.

Revenue Per Unit Growth
1^st Qtr. 2001 – 4th Qtr. 2006

+40%

+51%

+19%

Much of our success in revenue growth has been the result of improving pricing power and we recorded our 18th consecutive quarter of revenue per unit gains at the Analyst meeting in April. The pricing environment has been favorable for the past few years and we continue to successfully re-price to current market conditions. Approximately 50% of our revenue base is available for renegotiation this year, of which greater re-pricing will be realized in Merchandise and less in Intermodal and Coal due to the timing of contract expirations.

Our focus and commitment is to continue to price upward to reflect the changing transportation market and ongoing improvements in Norfolk Southern service as we continue to deliver scheduled, quality transportation.

As you well know, in addition to rate increases, traffic mix, length of haul and fuel surcharges impact revenue per unit growth as well. We consider all of these components to be part and parcel of the overall market for our services and address them accordingly.

Continued Growth & Pricing
Improvements Ahead

Coal

Utility

Export

Renewed metallurgical opportunities

Industrial Products

Ethanol

Scrubber stone

Military

Waste

Steel

Looking ahead, we see continued opportunities to grow our volumes and to realize even better pricing.

In Coal, after a breather in 2007 with tough comps from the previous year and domestic met coal challenges, we expect ratable growth in our utility and export sectors along with a resumption of domestic met growth.

In Industrial Products, a range of commodities as listed here represent significant new volume potential. New plants and business development initiatives that are scheduled to come on line will contribute to this growth.

Continued Growth & Pricing
Improvements Ahead

Intermodal/Automotive

Completion of Auto industry               
restructuring in 2008

Growth of “new domestics”

Robust international trade

Increased Eastern U.S. truck        
conversions

In Intermodal and Automotive, we expect the effects of the Big Three automotive restructuring to be fully visible by mid-2008 and growth will resume in our vehicle traffic from the new domestic plants in the U.S.

And in Intermodal, we expect excess trucking capacity to diminish later this year and both International and domestic intermodal growth should resume as that happens. We also are focusing clearly on expansion of our intermodal network and services, including new service products within the Eastern U.S. intermodal market which Mike McClellan will fully cover in a moment.

Population Growth (1998-2020)

Annual Pop Growth % (1998 - 2020)

-5.43 - 6.93

6.94 - 17.54

17.55 - 40.42

This Eastern market, which we serve, encompasses the fastest population growth projected in the U.S. which bodes very well for continued expansion of consumer goods and transportation demand. Additionally, because of the concentrated population and manufacturing density in this region, it is estimated that over 80% of intercity freight tonnage in the U.S. resides in this market. We fully expect to capitalize on this trend going forward.

NS Industrial Development

$2 Billion of industrial investment in 2006

70 new facilities

45 expansions

Potential of 95,000 carloads annually

$25 billion of industrial investment the past 10 years

Located/expanded 1,108 facilities

Creation of 63,000 jobs

Now, before transitioning to our individual business discussion, I want to take a few moments to update everyone on our strong focus on industrial development and share several examples of success with you.

Industrial Development success just doesn’t happen; we work closely and confidentially with the communities which we serve and with new and prospective customers to continuously replenish industry along our network. Through these coordinated efforts, over 1,100 new or expanded facilities have been developed along our system over the past 10 years. These projects range from smaller plants to mega-plants that are some of the largest industrial development projects in the U.S.

We are currently engaged with states, customers, and economic development consultants on projects ranging from new ethanol, bio-diesel and coal-fired utility plants, to logistics parks, and major new coke and steel production plants.

David, Danny, and Mike will also provide more detail here but let’s look at some examples.

Gatorade
Wytheville, Virginia

A good example of a smaller community project was Gatorade’s soft drink plant which opened in 2006 at Wytheville, Virginia. It was the first rail customer in Wythe County’s Progress Park and justified the construction of over a mile long lead track to serve the park. We expect to handle over 1,000 carloads of new business annually.

Louis Dreyfus
Claypool, Indiana

In the Agricultural arena, in addition to numerous ethanol plants, Louis Dreyfus’ new soybean processing and biodiesel plant is under construction and will be completed later this year at Claypool, Indiana near Fort Wayne.  We expect to handle over 7,800 carloads of new business on an annual basis.

Automotive Industry Outlook
New Domestics Opportunities

Greer, SC

Lafayette, IN

Vance, AL

Princeton, IN

Lincoln, AL

Georgetown, KY

Normal, IL

And in the automotive market, of the last 23 assembly plants to be built in the U.S. over the past 20 years, 13 have been located on NS lines. These include 2 Mercedes plants at Vance, AL; 2 Toyota plants at Georgetown, KY and Princeton, IN; BMW at Greer, SC; Honda at Lincoln, AL, and a third Toyota production facility at Lafayette, IN.

As the Big 3 rationalize their production capacity, “new domestic” manufacturers continue to build new assembly plants in North America, and we will be positioned to take advantage of finished vehicle growth as this production shift continues.

AK Steel

Rockport, Indiana

And, in the metals market, we worked closely with AK Steel and the state of Indiana to locate AK Steel’s new steel mill at Rockport, Indiana. This mega-facility became operational in 1998, and it represented one of the largest economic development projects in the U.S. during the decade of the nineties. It is also considered to be the most technologically advanced steel finishing facility in the world. Currently, annual production is 1.8 million tons per year, and NS volumes to and from this single plant are in excess of 40,000 carloads per year.

ThyssenKrupp
Mobile (Mount Vernon), Alabama

Early last month, May 11^th to be exact, an even larger new mill was announced by Thyssen Krupp to be constructed at Mt. Vernon, Alabama, near Mobile. A Norfolk Southern cross functional team encompassing Industrial Development, Marketing, Operations, Finance and Engineering and others have been engaged with ThyssenKrupp, the state of Alabama, the Port of Mobile and others for well over two years to locate this plant on and NS served site.

This $3.6 billion project is projected to produce annual volumes of over 5 million tons of steel output. David Lawson will comment further on this significant new project, which is one of the largest economic development initiatives ever announced in the U.S.

In summary, in spite of short term softness in current markets, we believe the prospects for rail transportation in general, and over our Eastern U.S. network in particular, remain very bright.

With 70% of domestic freight in this country moving over the highway, we have a very large target for growth and improved yields ahead. And clearly demographics, manufacturing concentration and related highway congestion in the Eastern half of the U.S. all point to greater demand for high quality rail transportation.

Now, David Lawson, our Vice President Industrial Products will provide more detail on our Merchandise business. David will be followed by Danny Smith, our Senior Vice President of Coal, and Mike McClellan, our Vice President of Intermodal and Automotive.

Thank you.

EX-99

NS Coal Business

Daniel D. Smith

Senior Vice President Energy and Properties

Thank you and I am glad to be with you today. Let’s look into what is going on in the energy markets this year and what we are doing to grow our coal business and enhance our services.

Coal Business Group

2006 record volume year

190.6 million tons

2.1% increase over 2005

$2.3 billon

1^st Q 2007

45.8 million tons

-2.5% YOY

$557.2 million

-0.2% YOY

First, a quick look back. 2006 was a record year in many ways for our coal franchise.

It was a record revenue year with revenues of $2.3 billion, which was a 10.2% increase over 2005.

2006 was also a record volume year with 190.6 million tons, which was a 2.1% increase over 2005 and 7% over 2001.

In the first quarter of this year, volume slowed but revenues held relatively steady. Several contracts have been re-priced this year and the longer haul, higher revenue per car, export volumes have been strong, offsetting declines in domestic metallurgical coal.

Coal Business Group:
2006 Tonnage By Market

With respect to the individual market segments within the Coal Business Group, the utility sector represents our biggest, making up almost 78% by volume. While the other sectors are vital, the steady growth in our business has occurred in the utility segment. We think this makes our coal business more ratable as electricity use in this country has increased in all but three out of the last 50 years.

The Coal Group serves 140 different mine locations and delivers coal to many different markets, including utilities, industrial customers and export terminals. This coal network, unlike the Powder River Basin, adds complexity to the operation but, as I will discuss later, we manage it with scheduling and technology.

NS Coal Markets
1^st Quarter and Beyond

Utility Markets Mixed

Electric generation is
strong

Utility stockpiles are
leveling off

Serious cooling demand
has yet to arrive

NWS predicts hotter
temperatures

Coal burn for electric generation has been high in comparison to historical demand growth in the first quarter; however stockpiles have remained at or slightly above target levels. According to our information, the coal burn by electric generators in the Mid-Atlantic and South Atlantic regions (covering most of the NS utility franchise) is up 5.1% and 4.9% respectively through mid-May. These are significant increases when compared against total historical electric demand growth which usually is in the range of 1.5 to 2.5% per year, which indicates stockpiles are moderating from 2006 levels.

Serious cooling demand has yet to arrive but the National Weather Service is forecasting a hotter and dryer than normal summer for the southeastern United States, which could lead to higher electricity demand.

NS Coal Markets
1^st Qtr and Beyond

Exports Strong

Vessel delays at
Australian ports

Capacity issues in
Canada

Pricing improvements

Looking at exports for first quarter 2007, foreign receivers increased shipments to meet coal supply volume requirements in contracts that expired March 31, 2007. In addition, demand for U.S. coals has been strengthened by long vessel loading delays at Australian and Canadian ports due to capacity issues. Australian coal continues to be impacted by rising energy costs and vessel backups at ports, which is making U. S. metallurgical coals more attractive, especially in a weak dollar environment.

The export contracts are re-priced on April 1 of each year and therefore, we are pricing to the market each year.

NS Coal Markets
1^st Quarter and Beyond

Metallurgical challenges

Raw steel production
down 7.2% thru May 26

Coke furnace outages
reduce inbound coal &
outbound coke

Met. Coal, Coke & Iron ore

Without question, the domestic metallurgical coal, coke and iron ore markets have been our greatest challenge this year even though many contracts have been re-priced to the market. Blast furnace outages and a shift in sourcing have weakened NS volumes. A decline in iron ore movements is primarily due to the consolidation of the steel industry. The automotive industry’s market decline is reflected in the reduction of steel production by 7.2% this year and that has reduced both inbound coal to blast furnaces and also outbound coke movements from coke producers.

NS Coal Markets
1^st Quarter and Beyond

Industrial strong

New business in 2007

Strong pricing

Tied to GDP growth

Our comparatively small industrial coal market includes coal shipments to industries like Eastman Chemical and corn processors like ADM. Volume growth from 2005 to 2007 is a reflection of new business and growth in GDP, which has increased moderately this year.

NS Coal Yields

Pricing

Still strong environment

Tons/Car

New cars accelerate

Mix of business

More short haul

Overall  +3.4%

Effect on

$$ Yield

Year-to-date, we have seen strong pricing and improvements in the tons loaded per car, which have raised yields. At the same time, changes in mix favoring lower than average yields have reduced yields such that we have seen a RPU increase of about 3.4% through the 1^st Quarter.

We continue to re-price expiring contracts to reflect current market conditions and we are finding that the environment remains strong.

Average Lading Weights
All Cars

Tons/Car

Average total lading weights for our coal business have grown by 4.2% since 2001 and almost 9% over the last 10 years.

Raising coal payloads delivers significant efficiencies, which in turn adds capacity to the rail network. Higher payloads can also significantly reduce the number of trains required to move the same amount of coal tonnage.

Customer Service

Argus Survey

Customer service ranked 1st or 2nd place in last eight
quarters

15% improvement 1st qtr 2007 over 1st qtr 2006

Tied closely to shipment performance

Customer service continues to be important to us. Argus Rail Business publishes a quarterly customer service survey of BNSF, UP, CSXT and NS coal customers.  The 1st Qtr 2007 results show NS ratings for customer service continue to compare well to the rest of the industry. For the eighth quarter in a row, NS ranked 1st or 2nd in customer service, with 1 ^st quarter 2007 showing a 15% improvement over 1^st quarter 2006.

Customer Service-
NS Loaded Transit Times

Data through May 31, 2007 vs. same period last year

Utility

South:  24.3%
improvement

North:  14.2% poorer

Industrial

38.8% improvement

Domestic Metallurgical

13.1% improvement

CTMS on accessNS

Using the tools available in our web-based Coal Transportation Management System, we manage all shipments within the coal network. Our customers have the same visibility and access to performance data for the loaded and empty shipments that we utilize on a daily basis.

As an initiative to improve customer service and asset utilization, we monitor the loaded transit times for our largest customers in each of our market segments. As you can see here we have made impressive improvements this year. Loaded transit times for trains have improved with the exception of Utility North, which was negatively impacted by harsh weather in February and March.

Customer Service-
Scheduled Coal Trains

Scheduled coal train service

Five scheduled trains from Central
Appalachia

Various Southeastern customers
began scheduled service

Plans to expand service

Benefits

Improved locomotive and crew
availability

Quicker transit times

More reliable and predictable
service

NS has been implementing scheduled train service for some of our bulk coal shipments.

As you can see, our transportation team has already begun implementing schedules for many coal customers with good results. By scheduling these trains, we can improve locomotive and crew availability, cut transit times and produce a more reliable and predictable product. A benefit to the improvement in transit times will be reduction in car requirements and associated capital purchases.

We are constantly looking for opportunities to expand applications of the scheduled coal trains, improving our profits on existing traffic.

Customer Service-
Coal Handling Terminals

B.R.I.M. Technology

Software + Readers Track
Inventories

Ease of Use/Efficient

Improves Demurrage
Accuracy

Provides Coal Car Visibility

Helps Manage Vessel &
Barge Loading

Standardizes Terminal
Handling

We are also implementing a new Bulk Rail Inventory Management system (BRIM) that will become the main platform for managing coal moving through our coal unloading terminals at Sandusky, Ashtabula, Wheelersburg and Lamberts Point.

BRIM will, among other benefits, help customers manage coal stocks within the terminals, help with blending, and sharpen demurrage applications by simplifying the process and standardizing calculations.

We expect to improve coal car utilization with this new system.

Customer Service-
New Coal Car Technology

118 TPC

We have an aging coal car fleet and have made significant and detailed plans to replace over 27,000 coal cars in an orderly fashion over the next decade. In working with car builders, we have developed replacement coal cars that will significantly increase the carrying capacity therefore reducing the amount of cars needed in replacement. Further operating benefits include a reduction in crews, locomotives, and congestion to handle the same volumes. Currently, our car fleet has an average lading of 102 tons per car. This fleet handles roughly 50% of the volume we move with the other half in private cars. The new replacement gondola car will have a carrying capacity of 118 tons per car.

Customer Service-
Coal Car Fleet Investment

Private cars

Lowers revenue

Drastically reduces car distribution flexibility

Move to specific customer

Haul specific qualities

System cars

High return on investment

Better serve complex coal network

Flexibility to meet customer car demands

We’ve decided to maintain the current ratio of NS owned cars, rather than encourage more private cars. The private cars are all owned by certain utilities, which effectively lower those customers' contract rates to compensate for the cost of the cars. While those contracts have served us well, increasing the amount of private cars in our system would have a negative effect in supplying our customer needs. Many of the mines we serve in Central Appalachia, produce coal that moves in the export, domestic metallurgical, industrial and utility markets, which moves through the same load outs. Having NS owned cars gives the mines and NS flexibility to ship coal of varying qualities to many different customers without delay. Private cars, on the other hand, have to move to a specific customer and haul specific qualities of coal.

As to whether NS owns or leases coal cars, we believe we are best served by investing the capital as it maximizes the return over the long term. Given the profit requirements of the leasing companies, the expected growth of coal over the coming decades which drives the need for these cars well into the future and our current private car mix, we have concluded that we should own the coal car replacements as the fleet is replaced over the next decade.

Energy Markets

COAL: +63%

Looking forward, the energy markets indicate a promising future for coal.

First, in the utility market, we anticipate continued high natural gas prices, mostly at levels that remain uncompetitive with coal on a strictly long-term economic basis. We know that capacity at the current nuclear generation facilities has peaked and that there is very little room for growth there.

The EIA supports our contention that we are in for some longer-term coal fired generation growth. EIA right now is projecting electricity demand to increase each year through 2030, raising coal demand by 63% or 2% per year.

However, we understand that some form of carbon constraints will likely be placed on the coal fired generation industry in future years. We think that technology for capturing and sequestering CO2 can be proven. There are also many opportunities for using coal to make liquid transportation fuels and even hydrogen for an anticipated hydrogen economy. In support of these new technologies, NS is looking at opportunities to rail in and/or out coal and other by- products or supplies.

We are seeing the beginning results of this coal growth, as we work with utilities on plans to build new coal fired power plants.

New Coal-Fired Construction:
35.75 million tons/year

NS/CSX

Rail-CIRR

2011

3.5

GA

Hilton

LS Power

NS

Rail-NS

2012

2.0

VA

St Paul

Dominion Pwr

Seminole Elec

Fla. Mun.Pwr.

Fla. Pwr & L

NRG Energy

PPL

LS Power

NRG Energy

Corona, LLC

WE Energies

WE Energies

Power Producer

Palatka

Perry

Glade Cty

Huntley Unit

Montour 3

W. Deptford

Indian River

Sunbury 5

Elm Road 2

Elm Road 1

Plant

FL

FL

FL

NY

PA

NJ

DE

PA

WI

WI

State

6.5

2.75

6.0

3.0

2.5

1.5

3.0

2.0

1.5

1.5

Tonnage

(Millions)

2012

2012

2012

2013

2012

2012

2012

2011

2009

2008

Target Date

Rail

Rail-NS/CSX

Rail-SCXF

CSX-Lake

Rail-NS

Rail-CR

Rail-NS

Rail-NS

Rail-UP

Rail-UP

Delivery

CSX/NS

NS/CSX

NS/CSX

NS/CSX

NS

NS/CSX

NS

NS

NS/CSX/UP

NS/CSX/UP

Carriers

We anticipate about 36 million tons/year of new coal-consumption facilities over the next 5 or 6 years to come on line in our service territory. On the near term, we will be looking at four major projects.

Coal Opportunities

Sun Coke – Haverhill, OH

1.3 M tons coal & coke

WE Energies – Oak
Creek, WI

3.0 M tons coal

L. S. Power - Hilton, GA

1.5 M tons coal

Florida Municipal Power
Agency - Foley, FL

2.75 M tons coal

We will begin to see the start of this projected tonnage June 2008 at the Haverhill coke plant, which is expected to add 1.3 million tons to the NS coal and coke network. The current plant has already begun construction to double the coke making capacity.

New utility coal plants are planned at Oak Creek, WI, Hilton, GA and Foley, FL. These new facilities, coupled with Haverhill, would give us access to over 8 million tons if completed over the next few years.

Western Coal

2001 = 15.6 M

2006 = 38.5 M

N. App/CenPa/Oh

2001 = 33.4 M

2006 = 43.6 M

Central Appalachia

2001 = 96.6 M

2006 = 78.7 M

Imports

2001 = 134K

2006 = 2.3 M

Coal Sourcing Changes Continue

Illinois/Indiana

2001 =10.6 M

2006 =10.6 M

1/11/07

Coal sourcing has certainly changed over the last several years and will continue to do so as utilities add scrubbers and other technologies, and as mining costs rise in certain areas, particularly Central Appalachia. We maintain contact with producers from all mining regions as well as receivers to determine where future coal sourcing will be. We have seen dramatic shifts from Central Appalachia to PRB and Northern Appalachia. We helped bring on-line an expanded import facility in Charleston, SC to serve customer needs in the southeast, and we continue to talk to producers in the Illinois Basin to see how we might move more of that coal.

In response to expanding markets for coal,
NS will

Implement technology to improve customer
service

Improve reliability and efficiency with coal car
replacement

Study new coal train scheduling to realize
improvements

Summary

We are confident the expanding demand for electricity, coupled with our focus on productivity gains, is a great combination for delivering improved performance. Policies such as CO2 regulations could moderate the growth of coal usage; however, over 50% of the electricity produced in this country comes from coal and it remains a vital domestic resource.

We expect to combine technology, capital investment and coal train schedules to realize improvements in customer service and pricing opportunities.

Thank You

Thank you.

EX-99

Industrial Products

David T. Lawson

Vice President Industrial Products

Good morning. My name is David Lawson. I will share with you an overview of our Industrial Products markets, how they have grown, and how we have positioned Norfolk Southern to take advantage of various market opportunities. Our Thoroughbred Operating Plan, or TOP, provides consistent and reliable service for our customers and is the foundation of our market development strategies.

2006 Industrial Products
Revenue

In 2006, Industrial Products represented 43% of Norfolk Southern’s revenue, with Metals and Construction generating 12% of the revenue, Agriculture and Chemicals each representing 11%, and Paper, Clay and Forest Products, at 9%. Norfolk Southern has a well-balanced portfolio of commodities.

Revenue Growth

Since 2001, Industrial Products revenue has increased by $1.5 billion, or 56%, with the majority of the growth occurring in the last two years.

In 2006, each of the four Industrial Products groups posted record revenue. Additionally, the Agriculture and Metals & Construction groups achieved record volumes as well. 2006 marked the third consecutive year of record carloadings and revenue for Metals & Construction.

Our Thoroughbred Operating Plan has provided the service consistency and reliability that has led to business development opportunities and the ability to reflect the value of our service in our pricing.

Highly truck competitive – backhauls from the Southeast

Improved asset utilization of paper boxcar fleet

Lumber market soft following several record years

MSW/C&D growth market for NS

Paper, Clay & Forest Products

Our paper business is highly truck competitive; motor carriers are able to take advantage of backhaul opportunities from the 40 paper mills we serve in the Southeast. Over the past few months, we’ve experienced increased price pressure from trucks as they seek to fill excess capacity.

NS currently has over 95% of its paper boxcar fleet in non-customer assigned equipment pools. Over the past few years, we shifted the majority of our cars out of customer pools to increase our utilization and asset usage flexibility. This also allowed us to handle increased business without securing more equipment when demand was strong.

NS lumber business has benefited from several record years of new home construction, coupled with our industrial development efforts to successfully locate new distribution centers along our lines. At the end of this quarter, we expect to begin handling shipments to Menards’ new distribution center and truss plant served by NS near Toledo, OH. This site will provide lumber and other wood products to their retail facilities in the region.

Housing Impact

Source: Census, Global Insight – May 2007, new privately owned housing units started

Much of our lumber market is handled in interline-received service from lumber producing markets in eastern and western Canada. It should come as no surprise that Norfolk Southern’s 90,000 carload lumber market is closely correlated to U.S. housing starts. The declines in housing starts also has an adverse impact to our related construction materials businesses.

While lumber shipments are down this year, we are hopeful that the housing market will recover in 2008. And, when it does, NS is well positioned to benefit from increased volumes to the population growth regions in our service area.

Highly truck competitive – backhauls from the Southeast

Improved asset utilization of paper boxcar fleet

Lumber market soft following several record years

MSW/C&D growth market for NS

Paper, Clay & Forest Products

The construction and demolition debris and municipal solid waste markets are providing growth opportunities for NS. Handling waste is not a new concept.  In fact, NS begin handling unit trains of waste shipments in specially designed equipment from Roanoke, Virginia to a landfill in Southwest Virginia in 1993.

MSW/C&D

Growth from New York, New Jersey

to Ohio, West Virginia and

Southeast landfills

Access to 14 origin transfer stations and 13 destination
landfills

33,000 shipments in 2006

Due to a combination of increased tipping fees and tighter capacity at various landfills in the Northeast, these markets are providing new long-haul options for NS to landfills in the Ohio Valley, West Virginia and Southeast areas. New landfills have, or are soon to be, opened in North Apex, OH, Alliance, OH and Capels, WV. Private operators have several transfer facilities in the North Jersey and New York markets to handle both municipal solid waste as well as construction & demolition debris from these areas. We currently handle business between 14 origin transfer stations and 13 destination landfills.

In 2006, we handled over 33,000 shipments of MSW and C&D.

Record revenue in 2006

Industrial Development growth opportunities

Raw materials cost advantages overseas could lead to
imported plastics

Toxic Inhalation (TIH) risk

Chemicals

In 2006, Norfolk Southern’s Chemicals business achieved $1.079 billion, which was an all-time record for this group. This group also posted revenue growth in the first quarter this year, making it the highest first quarter ever for Chemicals. The Chemicals group achieved the highest revenue per unit increase of Norfolk Southern’s business groups last year and in the first quarter of this year. Our consistent service delivery continues to provide stability in the supply chain of our chemical customers, which allows us to appropriately charge for the value of our service.

Norfolk Southern’s Industrial Development initiatives play a vital role in our business development strategies. Several examples of these initiatives are shown on this map and include Starpet’s expansion at their plant in Asheboro, NC, a new asphalt terminal in Chattanooga, TN, and a new plastics facility for Amcor PET at Painesville, OH. Additionally, our current network of bulk transfer terminals expands to 31 this year with the recent opening of the Somerset, KY transload terminal.

Starpet, Asheboro, NC

Plant Expansion

2007 Industrial

Development

Projects

Atlanta Terminal Co.

New Asphalt Terminal

Somerset, KY

Bulk Transfer Terminal

Chemicals Industrial Development

Amcor PET,
Painesville, OH

New Plastics Facility

Record revenue in 2006

Industrial Development growth opportunities

Raw materials cost advantages overseas could lead to
imported plastics

Toxic Inhalation (TIH) risk

Chemicals

Overseas raw materials cost advantages, such as natural gas, may lead to an increase of off-shore production for such products as plastics. NS is working on several opportunities with various plastics producers to potentially handle imported plastics through East Coast ports.

Any discussion about Chemicals is incomplete without mentioning the risk of handling hazardous materials. You will hear later in Jim Hixon’s remarks, the single largest liability risk exposure to NS is the transportation of what are called Toxic Inhalation shipments, or TIH. Last year, NS handled approximately 24,000 shipments of TIH products, which represents 3/10 of 1% of Norfolk Southern’s 7.9 million shipments. This is among the smallest segments of our Chemicals business, but represents the greatest risk. The products primarily include: chlorine; anhydrous ammonia, & ethylene oxide. We continue to work with our customers who make and use these products, as well as the involved governmental agencies, to reduce our risk and limit our liability exposure of transporting these commodities. While our common carrier obligation requires us to haul these chemicals, we also know that transporting them by rail is safer than the alternatives.

Agriculture &
Consumer Products

Fertilizer shipments returning to record levels

Pegasus network – 38,000 carloads

Feed mill network of 30 locations and 56,000 shipments

Ethanol market development

Our Agriculture & Consumer Products Group also achieved record volume in 2006, and an all-time revenue high of $994 million.

Increased acreage plantings for corn have fueled a large demand for use of additional fertilizers. Year-to-date, fertilizer shipments are up on an absolute basis more than any other commodity in our Agriculture group. Shipment levels are returning to the record levels we experienced in prior years.

Pegasus Network

Decatur

Elevators

Processors at Decatur

Norfolk Southern developed a short haul gain gathering network to deliver corn from elevators in the Midwest to processors at Decatur, IL, which is known as the Pegasus network. Last year, these Pegasus trains accounted for over 38,000 carloads, with an average length of haul of 90 miles, evidence that with consistent service and large volumes, profitable short haul opportunities exist for the carload market.

Agriculture &
Consumer Products

Fertilizer shipments returning to record levels

Pegasus network – 38,000 carloads

Feed mill network of 30 locations and 56,000 shipments

Ethanol market development

Since 2000, Norfolk Southern has located 8 of the largest feed mills on our system. We deliver corn shipments to these feed mills primarily for the poultry market in the Southeast. Today, we serve 30 of these feed mills, and the business levels have grown to over 56,000 shipments of grain. This initiative provides a ratable level of volume combined with improved asset utilization and supply chain management for our customers.

NS Feeder Network

35% Improvement

in Equipment

Cycle Time

This map depicts the NS feed mill and gathering network to the 30 southeast feed mills from the Midwest growers.

In April, we made significant changes to our unit grain train network plan to improve service delivery and asset utilization. Already, we are experiencing a 35% improvement in average equipment cycle times, allowing us to free-up additional equipment from our fleet.

Agriculture &
Consumer Products

Fertilizer shipments returning to record levels

Pegasus network – 38,000 carloads

Feed mill network of 30 locations and 56,000 shipments

Ethanol market development

Norfolk Southern’s participation in handling ethanol shipments has kept pace with the significant growth in this market. In 2006, our ethanol business grew by 16,500 carloads, or 74%.

NS Ethanol Market

8 Active Plants

Peoria (2)   

   Decatur

South Bend  

Albion  

Riga  

Clymers  

   Loudon

12 Plants Under Construction

Marion   

   Blufton

   Portland

   Fostoria

Lepsic  

   Lima

Griggsville  

Hennepin  

Camilla  

  Coshocton

  Cadiz

  Alexandria

19 Active Terminals

  Toledo

       (2)

   Doraville

Savannah   

  Columbus (2)

   Spartanburg

   Petersburg

Baltimore   

   Pittsburgh

   Philadelphia

   Sewaren  

Carteret   

  Bridgeport

  Cleveland (2)

  Grand Rapids

Taylor  

  Romulus

NS serves 8 ethanol plants that generate more than 1 billion gallons of ethanol on NS and NS-served short lines. We will serve 12 plants that are currently under construction, that will provide 850 million gallons of additional production capacity.

We have strategically focused on creating the optimal terminal network for receiving this production and blending into the marketplace. NS currently serves 19 terminals, the largest being Sewaren, New Jersey, with train load capacity of 100 cars per day. There are 3 terminals planned for operation later this year, taking our terminal network to 22 by the end of the year.

Later this summer, Louis Dreyfus will ship the first carload of bio-diesel from their new 80 million gallon bio-diesel facility located on Norfolk Southern in Claypool, IN. It is expected that it will be the largest bio-diesel facility east of the Mississippi.

Metals & Construction

Largest rail market share in North America

NS serves 36 steel mills and 38 major steel processors

7 of the last 12 new steel mills located on NS

Growth of import slab shipments

Strategic access to major quarries and cement
terminals

Growth opportunities with scrubber

In 2006, Metals and Construction business generated $1.2 billion in revenue.

NS has the largest metals rail market share in North America. NS is the rail industry leader in the steel industry, serving 19 integrated mills, 17 mini-mills, over 38 major steel processors, and 75 steel distribution facilities. In the last 10 years, Norfolk Southern has located 7 new steel mills on our system, such as AK Steel at Rockport, IN, which Don previously mentioned; Steel Dynamics at Butler, IN; Nucor Steel at Decatur, AL; IPSCO at Mobile, AL and the recent ThyssenKrupp mill at Mt. Vernon, AL.

Import Slabs

Rolling versus Melting

Capacity

Mill Consolidation /
Globalization

Route & Service
Advantage

Access to Facilities

Import Slabs Network

Import slabs continue to be an important market for NS. Over the past decade domestic demand for import slabs has increased, driven by flat-roll mills with greater rolling capacity versus raw melting capacity.

We have developed integrated service to manage import slabs via the Delaware river port facilities with Holt Terminals in Philadelphia and Kinder Morgan in Fairless, PA. These dedicated 75-car unit trains are typically handled in second day service to four primary destinations.

Metals & Construction

Largest rail market share in North America

NS serves 36 steel mills and 38 major steel processors

7 of the last 12 new steel mills located on NS

Growth of import slab shipments

Strategic access to major quarries and cement
terminals

Growth opportunities with scrubber

In the construction materials market, NS has strategic access to major quarries and cement terminals. We serve 26 limestone quarries and 42 granite quarries. We are expanding our capacity to handle increased demand from growing public infrastructure and commercial construction markets.

Construction Market

Aggregates growth from highway construction

Spending Levels in $ Billions

State & Local

Government

Gross Investment

Highways & Streets

Source: BEA, Global Insight

Within Norfolk Southern’s carload franchise, we expect solid volume growth from opportunities in the aggregates market over the next few years. Much of this demand is being fueled by highway construction spending as shown here with spending climbing over 40% over the next six years.

The population growth expected in the our service area, particularly the Southeast, further points to the need for aggregate supply to meet the demand for highway, commercial and residential construction building.

Metals & Construction

Largest rail market share in North America

NS serves 36 steel mills and 38 major steel processors

7 of the last 12 new steel mills located on NS

Growth of import slab shipments

Strategic access to major quarries and cement
terminals

Growth opportunities with scrubber

High calcium limestone shipments to coal fired power plants are expected to grow significantly by 2009.

We have branded NS scrubber service as “envirOstone,” to promote the positive environmental affects of scrubbing, our access to stone reserves, our route structure, and the equipment we have modified for rapid unloading at the utilities. Norfolk Southern helps locate supplies of high calcium limestone from NS-served quarries for utilities utilizing scrubber technology.

The picture in the upper left corner of this slide was our first train set from the Pounding Mill Quarry in St. Clair, Virginia that was unloaded at Duke Energy’s Marshall Steam Plant at Catawba, North Carolina. The stockpile facility is designed to maintain an inventory of 25,000 tons. This year, we have handled 12 trains of limestone to this utility.

There are currently 10 power plants currently scrubbing in NS territory, and another 23 plants planning to scrub.

Our access to high calcium limestone quarries coupled with our coverage in the utility market should provide solid business growth over the next several years.

NS Mainline

Mt. Vernon, AL

ThyssenKrupp

As Don touched on earlier, May 11^th was a significant day for Norfolk Southern. This was the day ThyssenKrupp announced their decision to invest $3.7 billion to build a new state-of-the-art steel and stainless steel processing facility located on Norfolk Southern at Mount Vernon, AL.

The plant is scheduled to begin production April of 2010, and according to ThyssenKrupp, they are expected to gain 5% of the U.S. steel production.

The Mt. Vernon facility will consume import slabs from ThyssenKrupp’s expanded Brazilian slab mill to produce sheet steel for outbound shipments primarily to the automotive and appliance markets.

This represents the culmination of several years of cross-departmental efforts within Norfolk Southern, coupled with the efforts of state and local officials to attract what is expected to be one of the largest private industrial development projects in the U.S.

Industrial Products

Thank You

The Thoroughbred Operating Plan has generated consistent and reliable service for our customers, improved asset utilization and the ability to price for the value offered. As I mentioned throughout, TOP provides the foundation for Norfolk Southern to succeed in today’s transportation marketplace.

EX-99

Intermodal & Automotive

Mike McClellan

Vice President –

Intermodal & Automotive Marketing

Good Morning,

I’m Mike McClellan and I’m pleased today to further review Norfolk Southern’s Intermodal and Automotive Businesses

NS’ Intermodal and Automotive
Business
2006 Net Revenue: $2.92 Billion

Conventional Intermodal

Automotive

Triple Crown

Thoroughbred Direct

Transworks

Modalgistics

The Intermodal and Automotive business at NS is comprised of 6 units representing 31% of NS’ revenue. The conventional Intermodal business--the movement of containers and trailers on railcars--is the largest revenue producer at just over $1.5 billion in 2006.

The Automotive business--consisting of vehicle shipments and parts in boxcars--produced $974 million in 2006.

Triple Crown--NS’ Roadrailer-based trucking company--generated almost $360 million.

Thoroughbred Direct, or TDIS, is NS’ door-to-door logistics service provider and accounted for $70 million.

The last two businesses, Transworks and Modalgistics, produced negligible revenue for NS, but are critical parts of our service offering. Transworks provides the technology that drives Triple Crown, TDIS and outside customers' operating systems. Modalgistics provides logistics modeling, optimization and other technical supply chain services for internal and external NS customers.

Automotive
Volume History and Mix

2001– 2006 Volume

2006 Volume Mix

Vehicle CAGR: 0.32%

Turning to the Automotive business, NS has the largest rail volume of automotive business in North America, and Norfolk Southern’s strong position with the “Big 3”, in particular Ford, has been a challenge over the past 6 years.

Despite this situation, Norfolk Southern’s vehicle business has actually eked out slight growth in this period. The decline in the automotive business has been almost solely driven by declines in automotive parts moving in traditional boxcar services.

Looking at our three business segments within Automotive, the percentage of parts shipments has been declining rapidly. Within the vehicle business, shipments from the international producers have increased versus the “Big 3”. Last year 37% of vehicles assembled in North America had foreign nameplates, up from 34% in 2005, and we believe the share will grow progressively as more production is cut by GM and Ford and the transplants add more capacity. Ford, GM and Chrysler, however, still comprise a large share of NS’ vehicle business.

Automotive Environment and Outlook –

Low point of production in North America in 2007

Financial and share pressures on “Big 3”

Pending “Big 3” plant closings

Ford St Paul, MNMid-2008

Ford Wixom, MIMay-07

Ford Norfolk, VAJun-07

GM Doraville, GAMid-2008

DCX Newark, DEMid-2009

Continued interest in new plant development in
U.S. by foreign manufacturers

U.S. vehicle sales have remained stronger this year than expected, but are still well below 2006. As Don showed earlier, sales are expected to decline for the year into the 16.2 – 16.4 million unit range, down from 16.5 million units last year. North American production is expected to bottom out in 2007 at 15.3 million units.

The good news for the rail industry is that foreign manufacturers continue to prefer assembling vehicles in North America versus importing product. Further, it is important to note that rail remains the preferred mode for efficiently shipping finished vehicles in North America, with 70% of vehicles moving via rail in the U.S.  These two facts bode well for the position of rail vehicle shipments in North America.

AutomotiveBusiness Growth and Improvement Initiatives

“Unilevel” Program Launch

Transportation of Class 5 – 8 vehicles

International parts business growth

New plants/production in NS territory:

Toyota – Lafayette, IN 2007

Honda – Greensburg, IN 2008

BMW – Greer, SC 2009 (second plant)

Toyota – Tupelo, MS 2010

Opportunities for growth and expansion in the automotive business remain for NS. On the vehicles side, NS plans to begin expanding its product offering for the door-to-door shipment of Class 5 though 8 vehicles, such as vans, buses and Class 8 tractors. This business is almost entirely untapped by the U.S. rail carriers. The conveyance for penetrating this market will be the “Unilevel” railcar pictured on the right of this slide.

As parts production moves overseas, NS is accelerating its commercial efforts to secure more auto parts shipments, leveraging its extensive international Intermodal network and logistics capabilities.

And finally, as shown here, some major new assembly plants and plant expansions announced for Norfolk Southern’s service territory will help backfill declines from the “Big 3” and provide opportunities for growth.

These initiatives, plus ongoing service and productivity improvement efforts, cause us to remain optimistic about the strategic position of our parts and vehicle business.

Triple Crown
Volume History and Mix

2001– 2006 Volume

2006 Volume Mix

CAGR: 3.3%

Triple Crown is Norfolk Southern’s Roadrailer-based trucking company. As measured by revenue, Triple Crown is one of the top 50 motor carriers in the United States. Having a top motor carrier in our portfolio that provides door-to-door retail services off of an Intermodal platform provides NS a unique view of the trucking industry and over-the-road market.

Triple Crown serves non-traditional Intermodal lanes of 600 to 1500 miles in the Midwest, Northeast, and Texas.

Despite limited increases to its fleet size, Triple Crown has produced year-over-year volume growth in this highly competitive segment. Over the past several years, Triple Crown’s traditional auto-parts business has declined and been replaced with increasing retail and consumer products shipments, a shift that promotes more stability in our freight volumes throughout the year.

Triple Crown
Outlook and Business Growth Initiatives

Environment and Outlook

Slowdown in automotive shipments

Tempered motor carrier pricing and excess capacity

Demand for high quality “truck-like” IM services

Growth Initiatives

1500 trailers added to fleet in 2007 – 2009

Great Plains market expansion in 2007

Expansion of Ohio Valley services in 2008

Triple Crown is facing the same market environment as all of the motor carriers and domestic Intermodal providers. Shipment volume is down and pricing is volatile. Triple Crown’s position with the “Big 3” in auto parts has also tempered volumes in 2007.

Despite this, the demand for high quality, truck-competitive Intermodal services in the medium length of haul lanes remains strong as shippers look to shave costs from their transportation bills. As such, we believe that the growth prospects for Triple Crown are solid. Beginning in 2007, NS is purchasing 1500 new trailers for Triple Crown - 500 units per year in 2007, 2008 and 2009. While some of these will be used as replacement units, the purchase will result in an at least a 1200 unit increase in Triple Crown’s 7000 trailer fleet.

Coupled with this fleet growth will be expansion of the services in to the Great Plains in 2007 and the Ohio Valley in late 2008. We believe all of these trends and initiatives will drive consistent growth for this segment.

Conventional Intermodal
Volume History and Mix

2001– 2006 Volume

2006 Volume Mix

CAGR: 7.1%

NS has the largest Intermodal network in the East, and the largest portfolio of premium Intermodal services in this territory. We deliver almost 3 million conventional loads through 53 terminals and ports, and directly interchange with 6 major rail partners.

Since 2001, Norfolk Southern’s conventional Intermodal business, including TDIS, has grown by 1 million units, or over 50%.

During this period, while there has been growth in all of our segments, the greatest growth has been in the International segment, which now represents well over 50% of NS’ conventional Intermodal volume.

Conventional IntermodalCurrent Environment

Domestic

Soft domestic shipping

Tempered motor carrier pricing and excess capacity

Demand for high quality “truck-like” Intermodal services in shorter
haul lanes

International

Soft International shipping and imports

Rapid increase in all-water services

Increased drayage capacity impacting       
some shorter lengths of haul

On the Domestic side, like Triple Crown, we are seeing slight declines in the overall volume of shipments driven primarily by the housing and automotive segments, as well as recent weakness in retail sales. However, as we discussed earlier, there is increasing demand for Intermodal shipments in the 600 to 1500 mile length of haul that offers considerable potential for Domestic, and International, shipment growth in the East.

On the International side, the most profound strategic shift underway right now is the increasing share of International shipments to the East Coast through all-water services that move through either the Panama or Suez Canal. Approximately 23.5% of Asian imports now come in through the East Coast, and this number is projected to increase. NS firmly believes that there will be growth in both East Coast and West Coast port shipments into the NS network; we just believe that the East Coast shipments will grow at a much faster rate. Thus, our strategies reflect product development to service both coasts.

Increasing highway congestion

Secular changes in motor carrier business

Driver Shortages

Increased cost structures from fuel, equipment,
insurance and wages

Transition of motor carriers to “bi-modal” providers

Conventional Intermodal
Longer Term Competitive Environment

In the longer term, with regard to the competitive relationship between motor carriers and the rails, we believe that there are secular changes occurring in the cost structure and capacity available in the motor carrier industry.

We have all driven on the highways recently and we have all seen congested roadways with increasing frequency.  I'll talk more about this in a minute.

Truck driver recruiting and other pressures on motor carriers costs, such as increasing fuel and equipment costs, are real and will impact the ability of motor carriers to compete with an improving Intermodal product.

These dynamics in the motor carrier business are not just our opinion; they are recognized by many major motor carriers as real factors that will affect their business. As such, many motor carriers are developing or have developed extensive and expanding Intermodal capabilities as part of their core strategy.

We talked about highway congestion, and this map depict the U.S. Department of Transportation’s estimates of congested highway segments in 1998.

Note on this map that most of the congestion is centered around major metropolitan areas in the U.S.

Now look at the DOT’s 2020 projections. Not only is there more congestion in the major metropolitan areas, but in smaller markets as well. Further, there now appear entire corridors of congested highway segments, particularly in the east.

Look specifically at the highway routes between the Central Southeast and the Northeast along the I-85, I-75 and particularly the I-81 corridors. Traffic on major sections of these highways will exceed planned capacity by 2020. Keep this in mind as we lay out our new corridor strategy later in this discussion.

Increasing demand for higher quality, truck-like
intermodal services

Increasing containerized import and export traffic

Higher growth rates in all-water services to East Coast

Increased demand for shorter-haul gateway
services

Intermodal Business Drivers

Given the growth in International container trade and the dynamics in the motor carrier industry that we just reviewed, NS believes that there are three major trends that will define eastern Intermodal in the next decade. They are:

One – increasing demand for higher quality, truck-like Intermodal services in the 600 to 1500 miles length of haul.

Two – continued increases in International containerized trade with a rising share of all-water services driving more rail services off of the East Coast; and

Three – Increased demand for services between the Mississippi River gateways and markets within 250 miles of those gateways.

Conventional Intermodal: Business Growth and Improvement Initiatives

Continuous productivity
improvement initiatives

New product launches in 2007
and 2008

New terminal capacity on line in
2007 and 2008

Improving service levels

Capitalizing on these three trends will require continued improvements in productivity, new products, new network capacity and improved service levels. At this point I would like to turn my attention to our efforts on these four fronts.

Intermodal Productivity
Improvements

25.2

30.4

35.6

Driver Dwell (minutes/gate cycle)

1.91

2.16

2.47

Destination Dwell (in days)

72%

65%

61%

53’ Chassis Utilization

4.00

3.96

3.91

Car Utilization (platforms days/load)

4,937

4,805

4,749

Average Train Length (in feet)

25.28

26.71

26.53

Revenue Loads/Crew Start

2007 YTD

2006

2005

At the core of any operating environment is continuous process and productivity improvement. In the past two years, NS has achieved significant improvements in Intermodal operating metrics. The green indicates further improvement in 2007. Even in 2007, a year of reduced volume, 4 of our 6 key productivity metrics have improved in the Intermodal business, helping to ensure a competitive cost structure. We believe that the other two metrics will turn green by the end of the year as volumes improve.

Two of the most significant recent improvements in productivity have been driver dwell and destination dwell. Driver dwell, which measures the number of minutes it takes a drayman to move through an NS terminal, has improved by 30%. With over 10 minutes saved per truck move, over $60 million in cost has been removed from NS’ Intermodal service offering, which cost savings have been shared among customers, draymen, Intermodal partners and NS.

Second, the dwell time of equipment at our terminal has improved by 22%. This creates two important benefits. First, lower dwell improves equipment cycle time and reduces cost per load. Second, reduced dwell time frees up parking capacity at terminals, which in turn increases overall capacity to accommodate growth.

New / Second Facility

NS Expansion

Port Expansions

2006–2007 Port & Terminal Improvements

Howland
Hook / NYCT

EMT

Intermodal

To NS
Croxton

Port of NY/NJ

APM/Maersk Terminal in
Portsmouth

Garden
City
Marine
Terminal

Mason
ICTF

While capacity utilization at terminals is improving, we believe that continued increases in capacity are required to keep up with the strategic growth in the business. The map above shows those terminal improvements that we are making in 2006 and 2007. At the same time, there are some significant capacity improvements underway at East Coast ports that will impact NS’ Intermodal business. In New Jersey, expansions at both Elizabeth Marine Terminal and the newly opened New York Container Terminal (NYCT) are well underway, and NS is planning new rail services for NYCT later this year.

In Hampton Roads, Maersk is preparing to open their massive APM Virginia terminal in Portsmouth, VA, one of the largest private port investments ever made in the U.S.  Major improvements at the Virginia Port Authority’s facilities are also underway.

In Savannah, the Georgia Port Authority is expanding their On-Dock Intermodal Container Transfer Facility (ICTF) which is served solely by NS. We believe that all three of these major port developments validate the projection for increased East Coast port share.

Corridor Capacity Projects

Memphis

Charlotte

Atlanta

New Jersey

Philadelphia

Harrisburg

Chicago

Kansas City

Buffalo

Cincinnati

Columbus

Dallas

Boston

Norfolk

While railroads talk a lot about terminal investment and de-bottlenecking of key line segments, NS is taking this a step further by focusing on more strategic developments of entire freight corridors.

The most notable of these developments so far are the Meridian Speedway, Norfolk Southern’s joint venture with the KCS, and the Heartland Corridor between Norfolk and the Midwest. Later this morning we will introduce our next – but not necessarily last – corridor initiative: the I-81 Crescent Corridor. As you can see, it complements our other corridor projects very well.

While all three of these corridors have a decidedly Intermodal bias, it is important to note that all the improvements to these routes will result in a meaningful improvement to all of NS' businesses.

Meridian Speedway Improvements

  40 miles of new track completed

  75 miles of crossties replaced

  150 miles of ballast and surface work completed

  45 miles of formerly non-signaled territory                                                                        
converted to centralized train control

Shreveport

Meridian

To KCS, BNSF, UP

To NS Network

Our first major corridor development was the Meridian Speedway, LLC, NS’ joint venture with the KCS. This $260 million corridor investment is well underway with over $115 million invested to date.

When complete by 2010, the Meridian Speedway will provide track speeds of 60 miles per hour on over 80% of the route, and 50 miles per hour on an additional 10% of the route. The shortest possible rail route from Southern California to the Southeast is over the Meridian Speedway.

The Meridian Speedway will not only provide improved Transcon services with the western carriers, but will provide improved services to and from the Dallas market in conjunction with the KCS.

Meridian SpeedwayAlready Contributing to Service Advances

Comparison of L.A. to Atlanta Running Times

2006 Standard Run Time:100 hours

2006 Premium Run Time:  78 hours

Current MSLLC Premium Run Time:  74 hours

Goal:  68 hours or less

While it's interesting to talk about capacity improvements, it’s always a pleasure to talk about real service and transit time gains.

The investments on the Meridian Speedway have already allowed NS to improve transit times to the Southeast. Recently, UP and NS launched the fastest available service by far between L.A. and Atlanta, and we are confident that with continued planned improvements in the corridor, additional transit time and consistency improvements are available over this new route.

The Heartland Corridor Projects:  

Mainline Clearance Project: $150mm

Heartland Route requiring no improvements

Roanoke, Terminal  $22mm

Prichard, WV Terminal  $19mm

Central Corridor Total $191mm

Government Funding

Federal  $95mm

Ohio    $1mm

Virginia  $22mm

West Virginia  $15mm

Total Government$133mm

Columbus Rickenbacker, Terminal

The Heartland
Corridor

The second major corridor improvement underway at Norfolk Southern is the Heartland Corridor, depicted by the heavy green and yellow lines on this map. Overall, the Heartland Corridor is comprised of over 35 distinct construction projects on the route between Norfolk and Columbus. The core of the project will be improving the vertical clearance to approximately 22’ in 28 tunnels through West Virginia in a line segment depicted in yellow above. By doing this, NS will be able to accommodate double-stack trains moving between Norfolk and the Midwest. The clearances will be open in 2009 with full project completion in 2011.

In addition, the core project consists of two new terminals in the Prichard, WV and Roanoke, VA areas. Outside of the Heartland Corridor project are significant other investments in the route, including NS’ new Intermodal facility in Columbus as well as the Maersk terminal in Portsmouth. In fact, the entire planned investment in rail and terminal projects between Hampton Roads and Columbus exceeds $800 million

The Heartland Corridor is a truly unique project in that it is the largest public-private partnership orchestrated on the NS. Of the $191 million in funds being spent on the core projects, almost two-thirds are funded by public sources. This public-private split exemplifies NS' position on public funding: NS will contribute to all projects up to a level that produces a reasonable return on investment if the public is prepared to invest in project segments to which a public benefit accrues.

Global Logistics
Park - Rickenbacker

GLP – Rickenbacker is NS’ first
integrated logistics park

Located 18 miles from Columbus

Over 15,000 acres of existing or
planned development

Anchored by NS’ new 300 acre
intermodal facility and the
Rickenbacker airport

Integrates intermodal, carload
and logistics capabilities

Intermodal shipments begin at
the end of this year

Another major project associated with the Heartland Corridor is the development of the Global Logistics Park in Columbus, OH. This is NS’ first truly integrated logistics park in conjunction with the Columbus Regional Airport Authority and Duke Realty.

Anchored by a new Intermodal terminal on almost 500 acres of land, this Global Logistics Park – Rickenbacker is the largest of 5 key logistics parks either developed or being developed in the U.S. Over 15,000 acres of developable land surrounds the facility, and over 30 million square feet of warehousing and distribution is in close proximity. With this facility, NS will almost double its Intermodal capacity in the critical Columbus market.

Benefits of Heartland Corridor and
GLP - Rickenbacker

Heartland Corridor

220 route mile reduction between Norfolk and Midwest

Productivity gains

Freight diverted from congested NS routes

Improvement in NS’ competitive position with Hampton
Roads ports

GLP – Rickenbacker

Fully integrated logistics center

Concentrated mobility between truck, intermodal, railcar
and air cargo

Reduction in drayage expense for customers

East Coast and Transcon Access

Combined, the Heartland Corridor and the Global Logistics Park – Rickenbacker are core components of our strategy to address the growing all-water trade to the East Coast as well as projected increases in transcon freight to the Ohio Valley.

The Heartland corridor project will allow NS to shave over 220 miles from its double-stack route between Norfolk and the Midwest, allowing NS to eliminate at least 17 million unit miles from its Intermodal network. Not only will this provide meaningful productivity gains, but will significantly improve our capacity and competitive position in serving the growing all-water trade through Hampton Roads.

In addition to the shortest possible rail miles between Norfolk and Columbus, this route is a high-speed, multiple track railroad that has considerable available capacity on it due to changes in coal sourcing. When the clearances are done, NS will be able to offer a rapid, overnight stack service between the ports in Hampton roads and the Midwest.

Rickenbacker will also provide a quantum leap for NS – not only in terms of facility capacity and bi-coastal capabilities, but in the consolidation of Intermodal, distribution and carload services in one integrated location.

Memphis

Charlotte

Atlanta

New Jersey

Philadelphia

Harrisburg

Chicago

Kansas City

Buffalo

Cincinnati

Columbus

Dallas

Boston

Norfolk

Introducing the “I-81 Crescent
Corridor”

NS’ third and most ambitious major corridor initiative so far is the I-81 Crescent Corridor pictured here.

The Crescent Corridor Represents
Significant Freight Potential for NS

Long haul intermodal services along I-20, I-40, I-
75, I-85 and I-81 Corridors are largely undeveloped

Significant highway congestion along portions of
these routes, particularly in Virginia

NS estimates that there are over 1 million divertible
truckloads in this corridor

Existing intermodal and motor carrier interest in
developing services in this corridor

The Crescent Corridor project will link key markets in the Northeast, Mid-Atlantic, and Central Southeast with high quality rail Intermodal services.

This project is intended to make NS more competitive for freight moving primarily on the I-40, I-75 and I-81 interstates. This project will also link in with the Meridian Speedway and ultimately allow the KCS and NS to expand its market along this corridor in and out of Texas via Dallas.

Intermodal services in these corridors are largely underdeveloped, and in some cases non-existent, and highway congestion on the parallel interstates is increasingly severe.

Overall, we believe that there are over 1 million divertible truckloads in this corridor, and many of our service partners are eager to have us launch these services.

Market Assessment of Freight
Volumes

The map above depicts the density of highway freight movement between Texas, the central Southeast and the Northeast. The darker sections show areas of higher freight density.

The objective of this corridor initiative is to link these markets with fast, consistent and economical rail services that are competitive with single driver truckload transit times.

Led by JB Hunt, several major U.S. motor carriers with vast operations in these markets provided an unprecedented level of support in our assessment of the market by providing extensive traffic data, market intelligence, and service requirements. The cooperation from the motor carriers marks a new level of engagement between NS and our service partners and provides a good indication of the level of demand we can expect for services in these markets.

Gaining Highway Freight Will
Require a Better Product

High quality services competitive with single-driver
transit times

28 new trains will be introduced as the network is
developed

Access for all motor carriers, Intermodal marketing
companies and private fleets with rail trailers
and/or containers

Given the length of haul involved, we know that this product will need to have broad market reach, provide exceptional service, and expand capacity overall.

With 28 new planned trains for the network and significant network investment, NS believes that it can meet all of these services objectives.

In terms of channel to market, our intent is to make this service available to all motor carriers, steamship lines, Intermodal marketing companies and private fleets with Intermodal compatible trailers and containers. NS will be providing some equipment to non-asset based companies, and Thoroughbred Direct will offer first-mile and last-mile services to those companies that are less familiar with Intermodal operations.

Transit Times Will be Truck
Competitive

Targeted Schedules

Memphis

Harrisburg – 30 hours

Memphis

Philadelphia – 43.3 hours

Knoxville

New Jersey – 30 hours

The transit times targeted for lanes in the Crescent Corridor are expected to be competitive with single driver motor carrier transit times.

The three lanes above are examples of our targeted transit times, and while these are fast for NS, they are not any faster than some of our current premium schedules. The big difference is that currently these types of speeds are only achieved on high-speed, high-capacity lines such as our Chicago to Harrisburg route. The network improvements envisioned for the Crescent Corridor will provide the same kinds of capacity, track speed and redundancy – relative to the volume of trains on these lines – that we need to operate at speeds comparable to our East-West lines.

I-81 Crescent Corridor
Route Improvements

Memphis

Charlotte

Primary Route

Improvement Areas

Chicago

Columbus

Cincinnati

Harrisburg

North Jersey

Philadelphia

Atlanta

Manassas

Lynchburg

Knoxville

As such, the key to consistently achieving these truck competitive transit times will be core investments along our routes linking the Central Southeast and the Northeast.

As shown earlier, the Crescent Corridor will use the route from Atlanta to Harrisburg via Lynchburg and Manassas, as well as the route from Memphis through Knoxville and up the Shenandoah Valley paralleling I-81.

The majority of our planned investments along this route are on the corridor between Memphis and Roanoke, Meridian and Atlanta, and then between Manassas through North Jersey. These investments will be a combination of improved track speeds, the addition of sidings and second tracks, certain signaling projects, and other de-bottlenecking projects. These route structure investments comprise the largest portion of the total investment required for the Crescent Corridor.

Targeted and Existing I-81
Crescent Corridor Terminals

Memphis

Charlotte

Atlanta

North Jersey

Philadelphia

Harrisburg

Chicago

Kansas City

Buffalo

Cincinnati

Columbus

Dallas

Allentown

The second largest portfolio of investments will be in Intermodal terminals. The areas on the map you see here represent the core terminal investments that NS will be making along its system. Most of the investments will be in expanding existing facilities or markets along the NS network. In addition though, two new terminals are planned for the network: one in Central Maryland and one in Eastern Tennessee.

The remaining investments for the Crescent Corridor will include locomotives, railcars and Intermodal equipment such as containers and chassis. Overall projections for the corridor exceed $2.0 billion, although some of these investments, particularly the railcars and equipment might be acquired through operating leases.

The I-81 Crescent Corridor
The imperative for public investment

Safety

Highway congestion mitigation

Deferred/reduced highway maintenance expense

Deferred/reduced highway expansion requirement

Environmental benefits

Emissions

Land use

Fuel Consumption

Economic Development

Like the Heartland Corridor, where state and Federal funding comprised almost two-thirds of the project cost, public investment for the Crescent Corridor will be imperative as well.

As with the Heartland Corridor, we believe that the public should be prepared to invest for benefits that it receives from public-private partnerships. Further, we believe that the public can derive significant benefits from this initiative, not the least of which are safety as well as considerable potential reductions in green-house gas emissions with the conversion from truck to Intermodal.

A gap exists between the level of investment that NS can justify and the total costs of the project. Public investment will need to fill this gap. To that end, the Commonwealth of Virginia, which has been one of the most progressive states on these public-private partnerships matter, has already stepped up to provide $40 million of investment to help launch the Crescent Corridor.

I-81 Crescent Corridor
Development

Investments to begin in 2008

First new or improved services rolled out in 2009

Network completion by 2013

We still have considerable work to do in launching this network. If our efforts in securing public support progress, we believe that we can begin making investments in this network in 2008 and see traffic benefits beginning in 2009.

Depending on the pace of investment, this network could be up and running as early as 2013.

I-81 Crescent Corridor Summary

NS prepared to develop high quality, truck
competitive services in broad geographic market

I-81 Crescent Corridor offers significant growth
opportunity for Norfolk Southern

Over 1 million divertible loads at 2006 volume levels

Investment will be considerable and will require
public investment to complete

The I-81 Crescent Corridor project represents an entirely new level of commitment to Intermodal services in the eastern United States by NS.

With this investment in a high speed, high consistency network, we believe that there are over 1 million divertible truckloads annually to NS’ Intermodal network. We can begin to capitalize on that potential as early as 2009.

NS has already invested extensive resources on this project, and we will commit more resources to the project in the future. However, bringing this project to fruition is going to require public support, and we look forward to working with all of the public entities along the Crescent Corridor to bring this project to fruition

Norfolk Southern’s Intermodal
and Automotive Business

Strong record of growth

Leverages service, logistics, and technology
capabilities of NS’ Intermodal and Automotive
businesses

Broad portfolio of profitable, high-growth Initiatives
across the lines of business

In closing, despite some current weaknesses, we believe that the opportunity for growth and productivity improvements exists in all 6 of NS’ complementary Intermodal and Automotive businesses.

While the automotive business is weak right now, we believe that the market will bottom out over the next 18 months. Combined with some important automotive initiatives, NS remains bullish on our ability to profitably grow Automotive in the years ahead.

The Intermodal businesses have offered strong increases over the past several years, and NS will be investing even more to capitalize on what we believe is a meaningful opportunity for growth. The Meridian Speedway, the Heartland Corridor, and now the Crescent Corridor, will not only propel our Intermodal businesses as they come on line, but will in fact provide a better network for all customers using Norfolk Southern.

Thank you

EX-99

Safety and Operations Overview

Mark D. Manion

EVP Operations

Thank you.

In Operations we serve the customers.  We also maintain all the assets in this capital intensive business, including repairing locomotives, freight cars and track.  Our customers demand reliable transportation service within the North American network, a complex system where we connect with 5 Class I railroads and scores of short lines.  Serving our customers requires:

Consistent maintenance and construction of track, bridges and tunnels;

The purchase, renewal and maintenance of rail equipment and locomotives; and

A constant 24/7 operating plan that keeps all these elements in continuous and methodic motion.  

It takes significant investment in people, equipment and material, to keep the trains running.   Execution is the name of the game.   Our team pays attention to the details and has a well defined plan that is focused on minimizing assets and producing safe and efficient service.  

Safety and service are the key drives of our success.  Safety is a fundamental value at NS.  Before we go further, let me review our safety process.

Norfolk Southern’s Injury Ratios

We work hard to prevent injuries and accidents on Norfolk Southern, and one way we chart progress is by an industry standard for measuring the number of injuries per 200,000 man hours worked.  The rail industry, then, benchmarks its safety progress through the annual Harriman Award program.   We were pleased to have received our 18th consecutive Harriman Gold Medal Award last month.  The Harriman Gold Medal Award is given to the Class I railroad with the lowest frequency ratio of reportable injuries.

In 2006, our ratio was 1.01, a 15.1% improvement over 2005.

2006 FRA Injury Rates

Our safety record leads the industry, and more importantly, all railroads are making steady progress in reducing injuries.

Injury Rates – U.S. Industries
Injury rates per 200,000 employee hours, 1996 through 2004

    NS

  All  Mining

All Railroads

  Agriculture

   Construction

Manufacturing

Trucking

Transp. by Air

And the rail industry as a whole – and in particular Norfolk Southern – compares favorably with other U.S. industries when it comes to safety.

Class I Train Accident Rate
for 2006*

^* All train accidents (excluding grade crossing accidents)

All types of track (main, yard, industry, siding)

Similarly, we work hard to prevent derailments and other train accidents.  We compare favorably with the major Class I railroads, but we are by no means satisfied and will continue to make progress in reducing accidents.

Class I main track train accident rate for 2006:

UP = 1.28

CSX = 1.22

BNSF = 1.15

NS = 0.87

Class I Human Factor
Train Accident Rate for 2006*

^* Human factor train accidents only (excluding grade crossing accidents)

All types of track (main, yard, industry, siding)

We divide accidents into four different categories.  Here you can see our performance regarding human factor accidents.

Class I Equipment-Related
Train Accident Rate for 2006*

^* Equip-related  train accidents only (excluding grade crossing accidents)

All types of track (main, yard, industry, siding)

Equipment-related accidents.

Class I Track-Related
Train Accident Rate for 2006*

^* Track-related  train accidents only (excluding grade crossing accidents)

All types of track (main, yard, industry, siding)

Track-related accidents.

NS top 3 causes for all train accidents for 2006:

Broken rail/transverse fissure = 0.24

Wide gage/defective-missing ties = 0.23

Switch improperly lined = 0.21

Class I Miscellaneous-Related
Train Accident Rate for 2006*

^* Misc.-related  train accidents only (excluding grade crossing accidents)

All types of track (main, yard, industry, siding)

And a miscellaneous category that includes such things as weather and outside interferences.

We all know there are many good reasons for preventing injuries and accidents.  The most important reason is to ensure our employees return home safely at the end of the work day.  We know safety makes good business sense.  Investment in equipment, track and technology pays dividends in both safety and service. 

Let's now turn to the second driver of our success...service.  There are a lot of people involved in this effort and today we have presentations from three of our operating department leaders.

First, Tim Heilig, Vice-President-Mechanical, will give you an overview of the state of our locomotives and rail equipment.

Next, Tim Drake, Vice-President-Engineering, will present information about our physical infrastructure and along with Tim Heilig will introduce you to some of the things we have in place to reduce costs and improve reliability.

Third, Fred Ehlers, Vice-President-Customer Service, will explain the processes and systems we use to move railcars through our network.  He'll touch on current technology and give you some information about technology yet to come.

EX-99

Locomotive and Freight Car
Programs

Tim Heilig

Vice President Mechanical

Good morning. My name is…

Today’s Agenda

Equipment Snapshot

Equipment Teams – Manage Productivity

Develop “Program” Maintenance

Equipment Teams – Manage Expenditures

Generate Acquisition Plans

Manage Leased Equipment

Balance Our Resource Requirements

Introduce New Equipment Technology

Today we are going to cover four topics pertaining to car and locomotive maintenance programs and then talk a little bit about new technology as it pertains to these important assets. But before we do that, let’s take a quick look at our car and locomotive fleets.

Rail Car Fleet Overview
100,000 Cars

With 100,000 cars, NS has one of the largest and most diverse fleets in the industry. It represents about 13% of the North American rail industry fleet. The composition of our fleet reflects past acquisitions which support our base business and recent investments supporting growth opportunities. Our fleet represents a significant investment with a replacement cost of about $9 billion. Along with price and service, our freight car equipment remains a fundamental component that differentiates Norfolk Southern from the competition.

Locomotive Fleet Composition

The other big component of our rolling stock is locomotives. The Norfolk Southern fleet is 3700 units strong and on the average 16.8 years old. Our fleet is really divided into two segments. First, we have our road fleet with 2350 units pulling freight in intercity service. We also have another 1350 somewhat older locomotives performing switching and local delivery service.

New Evolution Series
Locomotives from GE

Thanks to aggressive acquisitions, the average age of our road fleet is just 10.8 years. Here you see our new Evolutions Series locomotives pulling a coal train in West Virginia. This is the same model locomotive featured in General Electric's national add campaign seen on television. We prefer the 4000 horsepower version using direct current traction motors. Consistent purchases of these 4000 hp DC locomotives has not only conserved capital but has given us a uniform building block for assembling trains in our network where the next train could be a bulk commodity train, an intermodal train or a merchandise train. While we haven’t reached the level of standardization achieved by Southwest Airlines with only Boeing 737 model airplanes in their fleet, we do have one of the most homogeneous locomotive fleets in the industry. We believe this is a strategic advantage.

GP38-2 Locomotives in
Local Service

Just as we have found a 4000 hp hi-adhesion six axle locomotive ideal for road operations we have similarly settled on the Dash 2 series locomotives from Electro Motive Diesel for switching operations and local delivery service. Here you see a pair of the popular GP38-2 models delivering freight. We have over 800 of this type unit and its next of kin, the six axle SD40-2 locomotive, in service. Since 2000, we have removed 12 different locomotive models from our fleet in an effort to achieve standardization and reduce operating expenses. Overall, considering both segments of our fleet, these locomotives represent a replacement cost of about 5 billion dollars.

Today’s Agenda

Equipment Snapshot

Equipment Teams

Having taken a quick look at our fleet, let’s talk for a few minutes about the key role our equipment teams play in managing our car and locomotive fleets.

Locomotive & Freight Car
Equipment Teams

Transportation

Mechanical

Finance

Purchasing.

Labor

Relations

Strategic

Planning

Marketing

Integrated Process

With Linked Goals

To delve a little deeper into how these teams operate, our concept is to integrate multiple railroad functions at the team level to make sure we are considering all the pertinent perspectives. Consequently, these two cross functional teams, one for freight cars and a second for locomotives, have representatives from Transportation, Mechanical, Marketing, Purchasing, Finance, Strategic Planning and Labor Relations. At the team level we encourage discussion around different view points. Over time, we have learned the robust nature of this process gives us confidence in the recommendations of our teams. Each team reports to our senior executive group.

In short , this integrated process provides the catalyst to align department and corporate goals. By linking the institutional knowledge of the cross functional team members, an optimal plan is generated to meet long-term equipment needs.

Today’s Agenda

Equipment Snapshot

Equipment Teams – Manage Productivity

Develop “Program” Maintenance

Our equipment teams play a key role in developing the “program” work we perform each year. By “program” work, we mean deliberately planned maintenance activities of defined scope for cars and locomotives. These programs are funded by a combination of capital and expense dollars.

“Program” Work

Enhances Asset Life

Engine Overhaul

“Program" work, as it is called, serves several purposes. First, it enhances the usefulness of the assets. For locomotives, we rebuild the different diesel engines at prescribed intervals based on our experiences with each type of locomotive.

Here is a picture of one of our 4000 horsepower engines undergoing rebuild. In this photo the engine is out of the locomotive and upside down for crankshaft replacement.

“Program” Work

Enhances Asset Life

Engine Overhaul

Freight Car Life Extensions (40-50 years)

Similarly, for freight cars we have what are called “life enhancement” programs, where we make various improvements to select cars, and extend their useful life from 40 to 50 years.

This program costs between $1500-3000 per car, yet adds ten years to the life of eligible cars for a fraction of the cost of a new car.

Considering about 20% of our existing car fleet will be candidates for life enhancement programs over the next eight years, this program has the potential to save Norfolk Southern hundreds of millions of dollars in capital investment. Here is a picture of a finished car that has received multiple repairs at one of our shops.

“Program” Work

Enhances Asset Life

Engine Overhaul

Freight Car Life Extensions (40-50 years)

Adapts Assets to Changing Needs

Freight Cars Modified to Enhance Profitability

Locomotives Rebuilt for Yard Use

Another aspect of program work is adapting equipment to new roles. Freight cars have been successfully modified to improve their profitability, as well as to adapt to new customers and in some cases different commodities.

Capital Rebuild Program

Before

After

Similarly, old locomotives purchased over 30 years ago for the road fleet are rebuilt at our heavy repair shops for use in yard and local service. As these before and after shots indicate, Juniata Locomotive Shop is capable of almost anything when it comes to locomotives. Not only do our shop forces in Altoona perform remarkable work, they do so at a cost that is significantly lower than having these services performed on the outside.

Juniata Locomotive Shop

Which brings us to our Juniata Locomotive Shop in Altoona Pennsylvania. Certainly this is one of the premier locomotive maintenance facilities in North America. With literally acres under roof we have assembled locomotives here for General Motors and General Electric simultaneously. We have a number of rail customers who take advantage of our rebuild capability not only for locomotives but for locomotive components like traction motors, truck and replacement diesel engines. We also operate a large paint shop and do contract painting for a number of clients.

Juniata Locomotive Shop,
Altoona, PA

Inside the shop you can see locomotives in various stages of heavy repair, from engine overhauls to compete rebuilds, before they are returned to service.

“Program” Work

Enhances Asset Life

Engine Overhaul

Freight Car Life Extensions (40-50 years)

Adapts Assets to Changing Needs

Locomotives Rebuilt for Yard Use

Freight Cars Modified to Enhance Profitability

Reduces Costs Over the Long Haul

The most important point about these programs is they reduce both our operating expense and capital requirements over the long haul, giving us a competitive edge in terms of cost and quality of equipment. For example, our car team initiated processes where freight cars are methodically cleaned and prepared for shippers as a means of reducing the number of cars held out of service pending a mechanical inspection. Similarly, we introduced a “mid-life” tune up between engine overhauls to successfully extend intervals between major engine work.

Today’s Agenda

Equipment Snapshot

Equipment Teams – Manage Productivity

Develop “Program” Maintenance

Equipment Teams – Manage Expenditures

Generate Acquisition Plans

Our equipment teams perform a critical function in generating new equipment acquisition requests.

Equipment Acquisition Process

Plan for Growth

Three Year Marketing Forecast

Simulate Operations in Advance

Develop Replacement Equipment Needs

Each team is charged with developing the capital and expense spending requests for next year. They begin by reviewing a three year marketing (demand) forecast through a system we call “Delphi”. In addition we are currently developing enhanced modeling techniques to simulate our train network as another step in refining our equipment needs. Important factors can be learned through this simulation which impact cycle time, an important piece of the acquisition planning process.

The fleet sizing process also addresses the need for replacement equipment.

Replacement Equipment Needs

Cars and locomotives don’t run forever, so we must weigh the costs of continued operations versus replacement with new equipment. Through careful planning we determine what equipment should be retired or possibly considered for modification to a new role.

Equipment Acquisition Process

Plan for Growth

Three Year Marketing Forecast

Simulate Operations in Advance

Develop Replacement Equipment Needs

Incorporate Facility Requirements

In some cases, managing the equipment successfully means considering where and how we perform maintenance. Recently, our car team proposed, and justified, re-opening our long dormant car shop in Portsmouth, OH to meet our growing needs for car repair programs.

Portsmouth Car Shop

Here is a view of the Portsmouth Car Shop. I am pleased to report, we were successful in obtaining grants from the State of Ohio to assist with reopening this facility.

Equipment Acquisition Process

Plan for Growth

Three Year Marketing Forecast

Simulate Operations in Advance

Develop Replacement Equipment Needs

Incorporate Facility Requirements

Proposals Are Subject to Rigorous Review

Process Includes Multi-Year Planning

All of our equipment proposals are subjected to a thorough review by our financial department. Internally, our finance division has the reputation for being hard-nosed, but we all realize this rigor has been a key ingredient in seeing Norfolk Southern emerge as a leader in earning its cost of capital and generating profits.

The work our teams do in developing equipment requests is not just about next year. We charge the teams with taking the long view as well. Beyond a one and three year perspective, we develop 5 and 10 year projections for our equipment needs.

Today’s Agenda

Equipment Snapshot

Equipment Teams – Managing Productivity

Develop “Program” Maintenance

Equipment Teams – Managing Expenditures

Generate Acquisition Plans

Evaluate Short and Long Term Leases

Our teams play a third role by evaluating our leased, rolling stock.

Short and Long Term Leases

Review & Evaluate Lease Agreements

Long Term  - Seek Lower Operating Costs

Short Term - Utilize Leasing for…

Higher Risk Opportunities

Temporary Demands

Railroads typically operate a mixture of both owned and leased equipment. At Norfolk Southern, we are keenly aware of how this can influence profitability. With this in mind, our equipment teams keep a constant eye on what type of equipment is leased, as well as the lease expiration dates. In general, we leverage our financial position to keep the amount of leased equipment to a minimum to maintain lower operating costs. We do, however, recognize the advantages of leasing locomotives, and especially cars. This occurs most often when a business opportunity arises where the purchase of equipment presents high risk or is for what we believe is temporary demand.

Today’s Agenda

Equipment Snapshot

Equipment Teams – Managing Productivity

Develop “Program” Maintenance

Equipment Teams – Manage Expenditures

Generate Acquisition Plans

Manage Leased Equipment

Balance Our Resource Requirements

We know there are limits to the amount of capital we can spend in any one year, so we call on our equipment teams to perform what might be called a “balancing act”.

Balancing Resources…

Total Capital Spending for New Equipment

Expense Funds for “Programs”

Contracting Out Peak Requirements

Selectively Soliciting Maintenance Work

For example, part of the assessment completed by our teams over the past 12-18 months reveals our capital needs for new locomotives over the next five years will actually moderate, while our requirements for cars (in particular, coal cars) will be escalating. Not only do we seek to balance overall spending, we also have a special team evaluating whether funds spent on additional locomotives can be a more efficient use of capital than replacing coal cars in kind.

The teams help us to balance the expenses associated with our “program” work. Ramping up the engine overhaul program one year, only to scale it back a year or two later, is not good business. Part of this balancing act involves considering the use of outside contractors for periods of peak demand. Similarly, we insource locomotive maintenance activity to fill periods of low demand, so long as it is profitable. This activity is handled through our Thoroughbred Mechanical Services subsidiary insourcing company.

Insourcing – JuniataLocomotive Shop

This photograph shows another example of the capabilities of our Juniata Facility. This GP38-2 locomotive was rebuilt as part of our insourcing program for shortline operator RJ Corman. Similarly, we have done work for Amtrak, New Jersey Transit and other commuter agencies.

Balancing Resources…

Total Capital Spending for New Equipment

Expense Funds for “Programs”

Contracting Out Peak Requirements

Selectively Soliciting Maintenance Work

Employee Hiring Requirements

Retirement of Equipment

Smoothing Out the Multi-Year Needs

All of this helps smooth out our employee hiring requirements. We believe stable employment leads to satisfied, healthy and productive employees. If accomplishing all of this means selectively accelerating some maintenance activity while slowing down another program, then that is what we do. Further, in some cases we can influence the retirement of equipment to help accommodate unforeseen changes in business. To conclude our discussion of balancing resources, I must say this. Over the years, we have learned that a key to managing equipment maintenance might be best described by what quality guru, W. Edwards Deming, called “constancy of purpose”. We work hard discerning what needs to be done. We develop our plans in an open environment of knowledgeable middle managers who bring considerable expertise to the table. We subject their plans to a continuous review. However, once we adopt a plan, we like to stick with it.

Balancing Resources

Keys to Low Cost Equipment Management

Continuously Evaluate Short & Long Term Needs

Strive for Steady State Spending

Develop Strategies for Short Intervals of Peak
Demand

While we cannot always ignore the impact of variable demand cycles, we strive to manage the acquisition and maintenance of equipment in such a way as to avoid peaks and valleys in expenditures. Over any period of three or more years, we believe the keys to low cost equipment management are threefold: 1) continuously evaluate our short term and long term needs, 2) manage for as close to steady state as practical and 3) have strategies in place to meet short interval peaks and troughs in demand.

Today’s Agenda

Equipment Snapshot

Equipment Teams – Managing Productivity

Develop “Program” Maintenance

Equipment Teams – Manage Expenditures

Generate Acquisition Plans

Manage Leased Equipment

Balance Our Resource Requirements

Introduce New Technology for Equipment

Lastly, I’d like to discuss the steps we’re taking to introduce technology into the mix.

New Technology Opportunities

Princeton University Optimization Model

Routes Empty Cars

Optimizes Network Assignment of Locomotives

One cutting-edge project currently under way is to use equipment optimization models developed in conjunction with Princeton University to improve both car and locomotive utilization. This technology is already actively routing empty freight cars to the next location for loading. Early next year it will also be assisting with the management of our locomotive fleet.

New Technology Opportunities

Princeton University Optimization Model

Routes Empty Cars

Optimizes Network Assignment of Locomotives

Wayside Detection of Equipment Problems

Wayside detection of equipment problems is an initiative shared by major carriers, where we are proactively identifying cars and locomotives with possible running gear problems and routing them to the shops.

Wayside Detection Site

With the installation of technology like this, we expect to not only enhance safety of operations, but to ultimately reduce operating costs.

New Technology Opportunities

Princeton University Optimization Model

Routes Empty Cars

Optimizes Network Assignment of Locomotives

Wayside Detection of Equipment Problems

Distributed Locomotive  Power

We are introducing what the industry calls “distributed” power.

The Distributed Power Concept

Remote Control by Radio

Known Benefits

Longer Trains

Reduced Transit Times

Reduced In-Train Forces

Possible Benefits

Reduced Fuel Consumption

The distributed power concept is one where locomotives are placed in the middle or rear of a train and controlled remotely by radio in addition to the head end power found on a conventional train. The benefits of this can take several forms. Longer trains are possible, as well as reduced transit times and lower in train forces. Further, we are testing to see if we can validate theoretical fuel savings from distributed power.

New Technology Opportunities

Princeton University Optimization Model

Routes Empty Cars

Optimizes Network Assignment of Locomotives

Wayside Detection of Equipment Problems

Distributive Power Reduces In-Train Forces

New “Eastern” Coal Car Design

At the end of last year we introduced our newly designed “Eastern” coal car. Traditionally, most coal cars were constructed of carbon steel.

Eastern Coal Car Design

Insulated Joints
for dissimilar
metals

3 CR12
Stainless
Steel

Aluminum

Carbon Steel

Because rain fall on loaded coal cars tends to accelerate the corrosion of ferrous metals, our new Eastern coal car design uses aluminum and stainless steel to stop corrosion and lower car weight. As Danny Smith pointed out, with a lighter car, this new design allows us to carry more coal, lessening our replacement car needs and making the cars more productive

New Technology Opportunities

Princeton University Optimization Model

Routes Empty Cars

Optimizes Network Assignment of Locomotives

Wayside Detection of Equipment Problems

Distributive Power Reduces In-Train Forces

New “Eastern” Coal Car Design

ECP (Electronically Controlled Pneumatic)
Brakes

Also new to our coal car fleet are Electronically Controlled Pneumatic, or ECP, brakes. These electronically controlled brakes offer instantaneous applications and releases, enhancing safety.

Norfolk Southern is one of two railroads that have petitioned and received authority from FRA to operate ECP equipped trains. This gives us the ability to begin collecting data with respect to ECP operations compared to the conventional braking system. In short Norfolk Southern is on the cutting edge with respect to developing this technology.

ECP Equipped Coal Hopper

This is one of 400 coal cars to be equipped with ECP brakes. We are also in the process of acquiring 30 locomotives equipped to operate with this advanced braking system. The locomotives actually represent the long pole in the tent with respect to beginning the testing of this technology. We expect to receive the first of the ECP equipped locomotives near the end of this month.

New Technology Opportunities

Princeton University Optimization Model

Routes Empty Cars

Optimizes Network Assignment of Locomotives

Wayside Detection of Equipment Problems

Distributive Power Reduces In-Train Forces

New “Eastern” Coal Car Design

ECP (Electronically Controlled Pneumatic) Brakes

Low Emissions Genset Switcher Locomotives

Finally, we are introducing our low emissions “Genset” Road/Switcher locomotive this summer. In some ways this is a “green” initiative for switcher locomotives comparable to General Electric’s recent announcement about a hybrid road locomotive for intercity freight trains. However, in this genset concept, we utilize oversized truck engines of about 650 hp, each diesel engine powers its own generator, hence the term “Genset”. However, by taking advantage of the millions of dollars already spent on low emissions technology for trucks, we hope to reap the benefits of lower emissions and more fuel efficient engine technology.

Genset Switcher Technology

Genset 1

Genset 2

Genset 3

This is a picture of a genset locomotive under construction where you can see the individual gensets with their diesel engines, companion alternators and overhead radiator units. These genset modules are very similar to the power generation units seen at medical buildings or office parks where they are used for standby or emergency power. Three of these gensets combined provide the electrical power comparable to a conventional railroad diesel.

Genset Road Switcher

And here you see the finished product, again assembled at our Juniata Facility. A four traction motor, 2000 horsepower road switcher locomotive will be used primarily in yard and local delivery service. We believe this to be the first genset unit equipped with dynamic brake as well, a feature we prefer for over the road operation.

Six Axle Genset Locomotive

And we are not stopping there. Working in conjunction with others, we are developing a six traction motor genset locomotive. This technology may even be applicable to road locomotives and we are pursuing that concept presently with several builders for 2008.

New Technology Opportunities

Using “Lean Manufacturing” Techniques &
Kaizen Events

Maintenance Operations

Portsmouth Car Shop

Scheduled Locomotive Maintenance

Car Requirements for Bulk Commodity Trains

And for my final point about new technology, I would like to report we are applying “Lean Manufacturing” techniques to mechanical maintenance operations here at Norfolk Southern. We are in the process of rolling this out for scheduled locomotive maintenance at one of our major shops and we plan to implement this across our system. Similarly, we will use lean techniques from the beginning as we lay out our Portsmouth, Ohio car shop. Some of the early Kaizen events have already produced significant results. Time spent in the scheduled maintenance process at our Shaffers Crossing locomotive shop is now being reduced while a recent Kaizen event at Altoona shops reduced out of service time for engine overhaul from 9 days to 5.5.

In other applications, we have recently used Kaizen Events and Lean techniques to assess our car requirements for grain and coal unit trains. We believe we have an opportunity to utilize these assets more efficiently in the future based on our work so far.

Moving on the Right Track

Thank you for your attention. This concludes my remarks….

EX-99

NS Engineering Department

Tim J. Drake

Vice President Engineering

Welcome, my name is Tim Drake; Vice President of Engineering.

It is definitely my pleasure to present the NS Engineering Department and their role in Thoroughbred transportation.

Safety is of the first importance

in the discharge of duty.

The safety of all employees using our

tracks, bridges and signal systems is

our responsibility.

As Mr. Manion has previously stated, the safety of all employees using our tracks, bridges and signal systems is the responsibility of the Engineering Department.  Safety comes first in everything we do.

3 Principles of Railroad
Engineering

Construct it Right

Maintain it Right

Inspect it Right

There are three basic principles that guide the Engineering Department.  Construct it right, maintain it right and inspect it right.

Construction

I.

New Construction

II.

Expansion and Improvement
Projects

III.

Infrastructure Projects

IV.

Freight Passenger Initiatives

V.

Public Private Partnerships

VI.

Roadway Reconstruction

The Norfolk Southern Design and Construction group handles all new construction from initial design to final product.  This group is extremely busy with the large number of projects they are working on.  The NS infrastructure team has the responsibility for a major budget aimed at improving network capacity and Debbie Butler will talk more about this in her remarks.

Clearing & Site Prep
& Installation of Erosion & Sediment Control

The following pictures provide a quick overview of the steps in a typical new track construction project.

These photos are from the recently completed five and a quarter mile Keystone Loadout project in western Pennsylvania.  Keep in mind that the actual construction is often easier than the permitting, land acquisition and red tape that have to be handled before any earth is moved.

The first step is clearing of the site and installation of erosion and sediment control...

Mass Excavation
& Installation of Drainage Structures

...then comes the rough grading, the mass excavation and the installation of drainage structures...

Roadbed Fine Grading
& Sub-ballast Placement

...once the roadbed and ditches are established and the sub grade is finished and the sub-ballast layer placed and compacted...

Finished Roadbed

...the prepared road bed is ready for track laying...

Track Construction

...and track construction gets underway...

Skeleton Track
Ready for
Ballast

Unloading
Ballast

...with skeleton track assembled, ballasts can be unloaded...

Complete – Ready for Service

...once the ballast is tamped and regulated and the rail is adjusted, the new track is ready for service...

Design and Construction is responsible for intermodal facility expansion and improvement projects, ….

…, coal marketing projects, automotive projects, as well as other freight-passenger initiatives.

Freight Initiatives

The Chicago Region
Environmental And
Transportation EfficiencyProject

(C.R.E.A.T.E.)

The C.R.E.A.T.E. project - The Chicago Region Environmental and Transportation Efficiency Project.

This $1.5 billion public/private partnership project will construct over 80 congestion reduction projects in the next decade.  Norfolk Southern's portion of this initiative is approximately $33 million.  Included are 6 major flyovers, 25 highway grade separations, and numerous interlocking reconfigurations and signal improvements.

NS began work in 2006 on the first of one of these improvement projects.  The $8.2 million reconfiguration of Brighton Park interlocking will increase train speeds through one of the nation's busiest rail interlockings for NS, CSXT, CN, METRA, and Amtrak.

HEARTLAND

As referenced previously by Mike McClellan, one of the largest and most exciting public/private partnership projects on NS at this time is the Heartland Project.  The Bridge and Building group is handling the work of improving clearances in 28 separate tunnels with 5.4 miles of excavation required.  Additional work will be performed at 11 bridges and 9 slide fences.

In addition to new construction, we also perform large reconstruction maintenance projects, such as replacing crossing diamonds (where 2 railroads cross).  For example this work in Birmingham, AL is a reconstruction activity where the existing track structure is completely removed and rebuilt from the subgrade up.  Line Maintenance handles this work.  Each crossing costs approximately $100,000.  Four were replaced at this location.  These new crossings have been in for three years, and because the job was done right they are still in excellent condition.

Master Retarder Installation

Another reconstruction job handled jointly by Communications and Signals (known as C&S) and Line Maintenance is the replacement of retarders (equipment used to regulate the speed of free rolling cars being classified into our classification yard).  A new master retarder costs in excess of $640,000.  All 5 prepared sections are welded together and carried into place.  The new master retarder is now set in place.

Master Retarder Installation

With the new master retarder in place, the first train will be run over it on the same day.  Note that this was an all day project that went into the night.  Quitting time for Engineering Department employees is when the track is back in service.

Turnout
Replacement

(483 Turnouts)

Maintenance of Way and Structures Department (MW&S) will install 483 new turnouts in conjunction with new construction and maintenance programs.  This reconstruction work normally takes about 4 to 6 hours of track time before restoring the track back to service.

Setting boxes

A part of the MW&S group, the Bridge and Building Department handles the reconstruction of bridges.  We are replacing timber bridges with new concrete bridges.  These new bridges are stronger and will not deteriorate as quickly as timber bridges.  There are approximately 850 timber bridges on Norfolk Southern.

EAST APPROACH MT. CARMEL, IL - BEFORE

A large timber to concrete project was performed at Mt. Carmel, IL., where the east approach trestle to the thru span was transformed...

MT. CARMEL FINISHED

into a modern concrete structure that will last for many years to come.

MCLEAN CONTRACTING SETTING SHELLPOT

SWING SPAN – WILMINGTON, DE

The B&B Department also handles some major projects such as the replacement of the Shellpot Swing span Bridge over the Christina River, Wilmington, DE.

Maintenance

I.

Signal and Communication
Systems

II.

Program Maintenance

III.

Line and Bridge Maintenance

IV.

Charlotte Roadway Facility

V.

Roadway Material Yard

Maintenance is never ending process for Communications and Signals, Program and Line Maintenance, along with the Charlotte Roadway Facility.

Signal System maintenance

Interlockings

Power Switches

Signal Structures

Crossing Signals

2,000

5,019

13,320

12,200

Communications and Signals is responsible for the design, construction and maintenance of all the signal and communications facilities on NS.  They must keep 2,000 interlockings functioning properly at all times, along with 5,019 power switches, 13,320 signal structures, and 12,200 road crossing signals.

Classification Yard Maintenance

Retarders

Process Control
Systems

109

They are also responsible for 2,256 equipment detectors, 109 retarders in 13 Classification Yards, as well as the complex process control systems that operate these yards.

Microwave & Data - Communication Engineering

Add to that all the communication systems on the railroad.  A failure in any of the signal or communication systems can lead to huge problems.

Install 318 miles of rail in 2007

Install 2.35 million ties in 2007

Surface 4,953 miles in 2007

Build 483 turnouts in 2007

Operates a material reclamation facility
at Roanoke, VA

Program Maintenance is responsible for laying 318 miles of rail, installing 2.35 million crossties and surfacing 4,953 miles of track along with many other responsibilities.

Dual Rail Gang

2.5 Miles per day

202.2 Miles in 07

Single Side Gang

0.5 Mile per day

116 Miles in 07

Rail is laid in two difference processes, either by a dual gang that lays both rails at the same time or by single side gangs that replace worn rail in curves.

2,902.7 T&S Miles
(includes Tie Replacement and
Surfacing)

2,345,237 Cross Ties

66,000 Switch Ties

13 Timber and Surfacing gangs replace deteriorated crossties and switch ties across the Norfolk Southern system.  The materials group based in Atlanta ensures that ties, spikes, and ballast arrive ahead of these gangs.

4 Surfacing Gangs

Surfacing work is performed behind the T&S gangs along with 4 Surfacing gangs.  This work brings the track into proper surface and alignment to eliminate any geometric defects and to provide a smooth, safe ride for trains.

T&S Gangs will surface 2,903 miles of track in 2007

Surfacing Gangs will surface 2,050 additional miles of track in 2007

The T&S gangs will surface approximately 2,900 miles of track this year, and the Surfacing gangs will surface 2,050 additional miles of track.

5,782 Crossings to rebuild in
2007 in conjunction with
Program work

In conjunction with our T&S and Surfacing programs, line maintenance will rebuild 5,782 crossings at grade this year.  We also work with local state DOTs to install premium crossings with assistance from the state in funding.

Experienced engineering employees know that the three highest priorities in track maintenance are drainage, drainage, and drainage.  We work every day with various types of equipment to keep water flowing freely away from our track and structures.

3 trucks

Rail is welded together using our 3 flash butt welding trucks designed and built at our Charlotte facility.  These trucks work with the dual rail gang and in maintenance service to produce a weld comparable to that made in the Atlanta Rail Welding plant.

We also use thermite welds to replace joints created by rail replacement.

Annually we make approximately 50,000 thermite welds at a cost of $318 per weld.

There are 62 NS thermite welding gangs and 20 contractor-supplied welding gangs.

Norfolk Southern will spend $12 million in rail grinding in 2007.  This process is used to enhance the life of the rail and provide a smooth running surface for trains.  We will grind approximately 13,200 pass miles this year.

We also clean our ballast to maintain proper drainage of the track structure.

We use our equipment and contractors to clean approximately 1,900 miles of railroad each year at a net cost of $2.2 million.

Undercutting track is necessary when the ballast is too muddy for correction by the ballast cleaner.  In this process, all ballast is removed and replaced with clean ballast.

4 Yard Cleaners

We also clean our yard tracks with four specially-designed yard cleaners to provide safe walking conditions and sound work environments.

Replace outdated lubricators with state of the art solar powered systems

Norfolk Southern will spend $2 million in 2007 to improve our right of way rail lubricators.  Rail lubrication enhances the life of the rail and helps trains traverse curves with less stress and less wheel wear.

Provide unobstructed view of signals and signs at Highway crossings

$18 million will be spent on keeping the right of way and crossings clear of excessive vegetation which is a very important job.  We are currently transitioning from manual brush cutting to chemical control of vegetation.

Cub Creek, WV

The Bridge and Building group has the responsibility of maintaining the bridges and other drainage structures on the system.

21,485 Bridge

Ties in 2007

When working on bridges, safety must be first along with "no fear of heights."  We will replace 21,485 bridge ties in 2007.

OTHER WORK

Working on Pier 6 C Belt Walkway

Engineering also has the responsibility for maintaining the Norfolk Coal Docks and other facilities such as the Wheelersburg Coal Terminal.

To support our program maintenance, we have a rail welding facility where 80' rail lengths are received in Atlanta and welded into strands 1,440 feet long.

12 Rail Trains

This rail is placed on 12 specially-designed rail trains for shipping and unloading in the field.  Once this rail is unloaded, empty trains are used to load up released rail which is shipped back to Atlanta, graded re-welded, and reused on lighter tonnage lines or in yards.

Rebuild and Repair

Charlotte Roadway Facility

Before

After

At the Charlotte Roadway Facility new machines and parts are designed and built far superior to anything else on the market.  Other machines are purchased in scrap condition and rebuilt and upgraded to better than new condition to realize savings over the cost of a new machine.

Field Support

Charlotte Roadway Shop

Road mechanics are placed across the system and assigned to each major maintenance gang to ensure all 3,000 pieces of roadway equipment on our system operate at peak efficiency.

The Roadway Material Yard constructs and ships turnouts, track panels, switch point derails and other track components to the field along with reclaiming that track material which is returned.

Inspection

I.

Normal -Track, Bridge and
Structure Inspection

II.

Emergency Inspection

One of the most important responsibilities of the Engineering Department is proper inspection.  There are normal planned inspections and there are special inspections required when it is too hot or too cold, raining, snowing, a fire, a train uncoupling, a train in emergency, security threats, vandalism, crossing accidents, or just about anything else you can think of.

With 30,500 miles of railroad to look at, what you see here looks like a hy-rail pickup truck, but in fact is the office of a front line Engineering supervisor.  The supervisors will put about 50,000 miles a year on a vehicle while covering a territory about 120 miles long.  Because we maintain a good railroad, most inspections we make do not find anything wrong...

But sometimes we find a few problems, such as this washout near Ft. Valley, GA.

And, it is far better for us to find the problem than for a train to find it.

14,000

There are 14,000 switches in our system that are high maintenance and require walking inspection monthly.

BRIDGE INSPECTION

All of our bridge structures are inspected annually to determine future bridge repair or replacement programs.

INSPECTING PORTAGE, NY BRIDGE

Not all bridge inspections can be made using equipment but sometimes these inspections must be made on foot.

In addition to structural problems, drift accumulation can create enough pressure to knock down a bridge pier, or dam enough water to create flooding.

13 Test Vehicles

Norfolk Southern spends nearly $6 million dollars a year testing approximately 38,000 miles of track in conjunction with corporate and federal guidelines to prevent premature failures in our rail.

Last year, these 13 rail test vehicles found 10,245 defective rails.  In addition, we had another 2,057 service failures (rails that broke under traffic).  Every defective rail has the potential for causing a derailment.

NS has two state of the art Geometry cars, operated by the Research and Test Department, that check the track for geometry defects and rail wear under load.  These measurements are used to assist in scheduling future maintenance and rail replacement.

No matter how good we are, there are still things that go wrong and we have to be able to handle anything that comes at us.

Floods are a major event of mother nature that are difficult to guard against; however, we have to be ready to recover quickly when the track is washed out.

Sometimes the damage from flood waters doesn’t look as bad until the water recedes.

Sometimes the water doesn't cause a flood, but it triggers mudslides such as this one near Pittsburgh, PA where about 300,000 cubic yards of a million cubic yard fill covered all 3 mainlines.

And sometimes rock that appears to be solid without warning suddenly lets go and buries the track.

Snow is not a real popular form of precipitation among the Engineering Department...

It causes the same type of problem as a slide, except it is cold, wet and sometimes the wind keeps burying the track as fast as you can clear it.

HURRICANES

Hurricanes can be one of the most devastating natural events we have to deal with.  They can be extremely powerful, cover wide areas and cause tremendous damage.

And sometimes, as in the case of Hurricane Katrina, you have to bring in the heavy equipment for an all out effort to retrieve the track from the bottom of the lake to restore it back to service.

Recent
Innovations

We are constantly looking for ways to improve and here are a few things we are doing.

First Steel Reinforced Plastic Bridge Tie Deck.

This is a picture of the first steel reinforced plastic bridges ties installed in American railroading on a bridge near Leeds, Alabama.  These ties were installed in 2005 and an additional 1000 ties will be installed in 2007.  The life of wood ties in the southeast are 12-15 years, where the expected life of these ties is over 50 years.

New Procedure

Borate treated ties for Southern part of
Railroad to reduce rot in hardwoods.

One of the reasons for using plastic bridge ties in the South is that ties rot from the inside long before they wear out.  We are combating tie rot by treating ties with Borate.  Borate will easily defuse throughout hardwood ties while creosote will barely penetrate the surface.  Borate will add up to 10 years of life to the ties.  We will used 350,000 Borate-treated ties in 2007.  This treatments costs an extra $5.37 per tie.

Concrete

Plastic

Steel

Test New Materials

Concrete, Steel, and Plastic

We try everyday to find ways to improve our work processes.  Different types of track material and track fasteners along with concrete, steel or plastic crossties are being testing in the track at various locations throughout the system.

Video

Valuation Maps

Track Charts

Aerial Photos

DMI - Digital Mapping Index - The Gateway

DIGITAL MAPPING is now being provided by the Design and Construction group.  This system provides easy access to valuation maps, track charts, track video (from the Geometry cars), and aerial photos via a user-friendly, geographically correct map of the NS system.  We are also adding electronic recordkeeping to many of our inspection processes.

The Norfolk Southern Engineering Department takes great pride in being the best Engineering Department in the industry.  We have the record, the track and the people to prove it, and we clearly understand we have to re-qualify everyday.

EX-99

Operating Systems

Fred Ehlers

Vice President Customer Service

Agenda

Systems used to support a Scheduled
Railroad

Advanced Transportation Systems currently
under Development

I will be covering two topics this afternoon related to operating systems at Norfolk Southern –

The systems we use to support a scheduled railroad and other advanced transportation systems currently under development.

The Network

Before we get into a discussion about the technology, let’s first talk about the Norfolk Southern network.

While some trains move directly from origin to destination, more often than not, railcars get switched from one train to another, normally multiple times, as they move through the NS network and the larger North American rail network.

Similar to the UPS package network, our rail network operates off a series of hub and spokes – with our large classification yards being equivalent to the UPS sorting facilities and our trains being analogous to the trailer transportation system between those facilities.

On average, cars moving in our General Merchandise network will normally get switched at 2 or 3 classification yards during their journey from origin to destination.

Major Classification Yards

The Norfolk Southern system employs 13 large, high production, gravity flow, classification yards across the network. Supporting these yards are a larger group of regional and industrial yards where groups of cars are further broken down and assembled as part of the process of moving freight through the network.

Eastern roads, in comparison to Western roads, generally operate shorter distances in more heavily populated and industrialized areas of the country. Despite its size, our network is extremely complex due to the fact that we handle shipments between 40,000 origin-destination point pairs.

Thoroughbred Operating Plan

Two Parts

The Plan

Execution

The Plan

Tools to develop and manage the plan –
Operating Plan Developer (OPD)

A highly detailed, digitized plan

Communication pathways, highly integrated
systems

Underlying systems to easily support changes to
the plan (train schedules & car routing)

Now that I have reviewed the network basics, let me turn to the Thoroughbred Operating Plan and in particular how we employ systems to help us run to plan.

Of course, the Thoroughbred Operating Plan, or TOP, is composed of two parts – the plan and, the execution of the plan.

Let's start with the plan.

From a system perspective, the list of important components start with the tool we use to develop and manage the plan – at Norfolk Southern it is an internally developed application called Operating Plan Developer or OPD. OPD is a great system that allows us to develop, test, and analyze a complete operating plan in an off-line, planning environment. It is an extremely powerful tool and unique in the rail industry.

The plan is highly detailed, and of course, digital

For a plan to be effective, it has to be communicated. At NS the plan is communicated through highly integrated systems, that in turn, present the plan to a variety of users through an easily understood user interface.

And finally, supporting the plan, are powerful production systems that facilitate changes in a easy and efficient manner.

Thoroughbred Operating Plan

Execution

Communication Platform (TYES)

Early Warning – Service Failure Alerts

Documentation of Failures

Focused Metrics

Timely Performance Feedback

Equally important, is the execution of the operating plan, and we employ a series of systems to support that aspect as well.

TYES, or Thoroughbred Yard Enterprise System, serves as our main communication platform to users of transportation data.

Within TYES, we provide early warnings to notify employees of impending service failures.

TYES also documents service failures to aid in root cause analysis and remediation.

Employing our data warehouse, we provide a battery of metrics on all aspects of the transportation cycle.

And just as important, we provide those metrics on a very timely basis.

CYO

DTSR

ABC

ITMS

Shipment Details - Waybills
(EDI, Internet BOL, etc)

Customer
Requests

Routing Instructions, Trip Plans, ETAs,
Inventory Mgmt Codes, Releases

Train Reporting,
Shipment Reporting

NS Waybill

System

Trip Plan Creation

ABC – Algorithmic Blocking & Classification

DTSR – Dynamic Train Service Register

ITMS – Integrated Transportation Management System

TYES – Thoroughbred Yard Enterprise System

ETAs, Shipment
Tracking, and
Notification

TYES

For the rest of this section we are going to focus on plan execution, but before I get into that, let me very quickly walk you through the backbone of the process - the trip plan.

The trip plan starts with the tendering of a bill of lading by the customer, which triggers the creation of a waybill. From the waybill, we dynamically create a trip plan based on the current car routing instructions provided by ABC, or Algorithmic Blocking and Classification, and current set of train schedules from DTSR, or Dynamic Train Service Register. The trip plan is then passed to TYES to be utilized by our field forces, employees in our Central Yard Office in Atlanta, and customers.

The Trip Plan

And, this is the outcome of the process. In its raw form - this is the trip plan that we use route the car, supply ETAs to our customers and partners, and to measure the overall shipment performance and the constituent transportation components.

This is the second page of a three page plan to move a car between Morrisville, PA an Detroit, Michigan.

Within this plan, we specifically identify:

The Trip Plan

arrival and departure events;

The Trip Plan

event locations;

The Trip Plan

trains; and

The Trip Plan

event date and times.

Two Measurement Levels

Shipment performance and consistency are the high
level, customer view of transportation performance.

Shipment performance must be decomposed into
actionable measures aligned with transportation
operations

Train Performance

Connection Performance

Transportation Metrics

Of course, the most important measurement aspect is overall shipment performance, which is the high level, customer view of our transportation performance.

But to support shipment performance, we must decompose the transportation process into the base components – train performance and connection performance.

Train Performance

For train performance, we monitor schedule adherence with a variety of metrics. This graph shows time-of-day on the vertical access and days on the horizontal axis. The heavy horizontal line indicates the scheduled time, the dashed lines above and below indicate the upper and lower “on-time” limits, while the plotted points indicate actual performance.

This is the performance of train 152, which runs from Valdosta to Macon, GA, into Macon for the month of May.

Train Performance

Here is another train performance metric, but with more information on schedule deviation and delay factors.

The train under review is train 198, which runs from New Orleans to Macon. On the bottom half of the screen, you see the performance data of train 198 for the last 14 days.

Train Performance

On this report, departure performance from origin (New Orleans) is displayed in the column outlined in blue, over the road transit performance is outlined in green, and performance at destination (Macon) is outlined in red. Delay information is outlined in yellow.

As you may or may not be able to see, this train is getting out of New Orleans on-time 100% of the time, but it is only making it over the road on-time 86% of the time, for an average on-time arrival into Macon of 93%. This clearly points to line-of-road delays as the problem. If you look in the yellow box, you can see the different delay categories and the impact on each day. Crew delay on line-of-road is the culprit here.

Where do cars spend their time?

As important as train performance is – more important, from the perspective of overall shipment performance, is connection performance. In fact, connection performance is highly correlated to shipment performance.

This pie chart breaks down the entire loaded car cycle into 3 components –

Customer time, including origin and destination terminal time, in blue,

Intermediate terminal time in green, and

Line Haul Transit Time in red - the time it is moving on a train.

As you can see, a car spends 250% more time at intermediate yards awaiting connection than it does on a road train – that it why it is so important to get the connection right.

Connection Performance

There are currently 284 yards monitored
and measured for connection performance

Because of this, there are currently 284 yards that are monitored and measured for connection performance on Norfolk Southern.

Connection Planning Tools

Allows Yardmasters to scan trains or yards for
cars that are scheduled to make a specific
outbound train.

Cars are color coded by connection status:

RED - Cars that have already missed their scheduled
connection

GREEN - Cars that are scheduled to the train in
question

ORANGE- Cars that are in jeopardy of missing their  
scheduled connection due to a late inbound train

BLUE - Cars that will advance ahead of schedule if
they are moved on the train in question

Within TYES, we provide yard personnel a variety of views to allow yard personnel to scan trains and yards for cars that are scheduled to make a specific outbound connection.

We are about to get into some example of this, but before we move on to the next slides, let’s first review the color coding scheme.

Red – Cars that have already missed their scheduled connection and have been rescheduled – these are the hot cars.

Green – Cars that are scheduled to the train in question. We just need to keep these on-plan.

Orange – Cars that are in jeopardy of missing their scheduled connection due to a late inbound train. These may require special action.

Blue – Cars that will advance ahead of schedule if they are moved on the train in question.

Connection Planning

This is the inbound train consist for train 336 from Sheffield, AL to Macon, GA at Macon. There are 146 cars on this train and we are looking at lines 46 through 66.

Note the:

Connection Planning

car initial and number,

Connection Planning

next scheduled train, and

Connection Planning

exception column.

Connection Planning

This train is arriving late into Macon and the system has determined that this car may be in jeopardy of missing its outbound connection on train 192 if special action isn’t taken.

It is important to remember that this view is available prior to the train’s arrival into Macon, thus giving the yardmaster ample to take the appropriate action.

Connection Planning

As opposed to the inbound train consist we just saw, this tool is used to plan outbound trains. In this example, we are planning the cars that will make up train 118 from Macon, GA to Linwood, NC.

The same color scheme applies.

Connection Planning

Each section represents a different classification track in the Macon yard.

Based on the color coding, the yardmaster would prioritize the cars on train starting with the red cars, followed by the green, and then the blue.

Connection Performance

This is an after-the-fact, connection performance metric for Macon.

Before we get into this – I’ll tell you this isn’t a particularly good day at Macon, but it makes for a more interesting example.

Connection Performance

What this table is telling us, is that on May 30^th we out-bounded 1099 cars from Macon.

Connection Performance

717 of the 1099 cars were entitled to make connections at Macon. The others were moving on bulk commodity, unit trains or trains that were not handled in the yard.

Connection Performance

Of the 717 cars that were entitled to be switched at Macon, 80 cars failed.

26 cars in the red category that failed to make connection for a second time.

17 cars in the green category that failed to make their original connection.

And 37 cars in the orange category that failed to make their original connection, but were on a late inbound train. That distinction isn’t an excuse – it’s still a failure, but it just helps us to better understand the cause.

If we drill down to a specific train – train 118 highlighted in blue.

Connection Performance

We can see that the three failures were due to one car that needed to be repaired and two delayed by forwarding yard tracks full (or said another way, heavy outbound volume).

If we see this on a consistent basis, it may indicate that we may need to add on another train or tweak the network routing algorithm.

Here is Macon’s connection performance for the last 15 months. Same color scheme - the yellow line indicates the number of cars handled.

Actually, the biggest ongoing issue at Macon is that we are advancing too many cars ahead of schedule.

Just to give you a flavor for the rest of the system – here is the performance for the week ending May 25 ^th for our 13 large production yards.

Agenda

Systems used to support a Scheduled
Railroad

Advanced Transportation Systems currently
under Development

OK, let’s move on to the next topic of discussion – advanced transportation systems currently under development at Norfolk Southern.

Advanced Transportation
Systems

Train Management

Unified Train Control System (UTCS)

Optimized Train Control (OTC)

Locomotive Engineer Assist & Data
Recorder (LEADER)

Shipment Routing & Planning

ABC Next Generation (ABC NG)

I’d like to tell you about four systems that represent large, cutting-edge development initiatives that also have a large capacity utilization and efficiency component to them.

Under Train Management we have Unified Train Control System or UTCS, Optimized Train Control or OTC, and Locomotive Engineer Assist & Data Recorder or LEADER.

Under the Shipment Routing & Planning area we have ABC Next Generation.

Unified Train Control System

UTCS Coordinates

Train Movement

Track Maintenance

Analogous to Air Traffic Control

Installed on the Georgia & Piedmont Divisions

To be installed on the Alabama, Central, and Virginia
Divisions in 2007

Features

Exceptional Disaster Recovery

Dispatching System/Function Integration

Advanced Movement Planning

The Unified Train Control System, or UTCS, is our new dispatching system that we are working with General Electric in development and implementation.

UTCS coordinates train movement and track maintenance in real-time over the network. It is analogous to air traffic control. We have already installed UTCS on the Georgia and Piedmont Divisions and in 2007 we will install it on three more of our 11 divisions. UTCS features exceptional disaster recovery, dispatching system/function integration, and advanced movement planning.

Let me talk a bit more about the movement planner.

Movement Planner

Today

Train Sequencing developed by dispatcher

Future

System computes optimal moves based on network level
information

Lengthened Planning Horizon

Decision Factors

Infrastructure & Resource Constraints

Track Topology and “Laws of Physics”

Train Priority

Train Performance against Schedule

Signaling and Routing executed automatically

Unified Train Control System

Today, while we have dispatching systems currently in place, each dispatcher must mentally develop a movement plan over his territory with less than full visibility to the territories adjacent to him.

Quite simply, while we believe we have world class dispatchers, we also believe that we need to move beyond human capability in coordinating train movements across the network. We need a movement planner that coordinates train movements on a network level with a planning horizon many hours into the future.

While this is a daunting development project, in the last several years we have made huge strides in system integration and data quality in order to make this project successful.

As you would expect, the decision factors used in planning are -

Infrastructure & resource constraints, which include tracks, sidings, switches, and yard capacity,

Track topology & laws of physics, such as speed restrictions and train acceleration and braking capability,

Train priority, and

Train performance against schedule, which means trains running behind schedule get priority over trains running ahead of schedule.

Service, Operations, and Capacity Enhanced

Shipment Consistency

Utilization of Existing Infrastructure

More Consistent Train Speeds

More Consistent Crew On-Duty Times

Maintenance Scheduling

Exception Handling & Recovery

Coordination of Yard and Mainline Activity

Unified Train Control System

Service, operations, and capacity are all enhanced with regard to shipment consistency

Utilization of existing infrastructure

More consistent train speeds

More consistent crew on-duty times

Maintenance scheduling

Exception handling & recovery

And, coordination of yard and mainline activity.

Optimized Train Control

OTC Enforces

Movement Authority Limits

Speed Limits

Features

Virtual Signaling System

Satellite Tracking

Improves

Accident & Collision Avoidance

Train & Switch Position Visibility

Throughput and Capacity of Existing Infrastructure

Efficiency of Personnel

The next system – Optimized Train Control, or OTC, is Norfolk Southern's development of positive train control. OTC will work in conjunction with UTCS to facilitate the safe and efficient movement of trains across the network.

OTC enforces train movement authority limits (in other words – the section of track a train has permission to occupy) and speed limits.

OTC features a virtual signaling system, where movement authorities are electronically delivered to the locomotive cab and satellites are utilized for precise locomotive tracking.

The system improves -

Accident & collision avoidance,

Train & switch position visibility,

Throughput and capacity of existing infrastructure, and

The efficiency of personnel.

Optimized Train Control

Development Location

Columbia to Charleston, SC

Non-Signaled, 114 miles

52 switches

18 trains per day

Phase 1 – Completed

Train Tracking

Switch Awareness

Phase 2 – In Process

Electronic delivery of
Movement Authorities

Crew Alerts

Automated Braking

OTC is being developed on the corridor between Columbia and Charleston, SC on 114 miles of non-signaled territory. We have 52 switches and run 18 trains per day over all or parts of the line.

Phase 1 was completed in early 2007 and included train tracking and switch position awareness.

Phase 2 is scheduled to be completed and ready to install in mid to late 2009 and include:

electronic delivery of movement authorities

crew alerts, and

automated braking.

Locomotive Engineer Assist &
Data Event Recorder

Monitors train state in real-time

Location

Track Topology

Speed and Acceleration

In Train Forces

Recommends Optimal
Operations

Throttling

Braking

Minimum and Maximum Speeds

Next, Locomotive Engineer Assist & Event Data Recorder, or LEADER, shares the locomotive cab with OTC and further enhances safety and efficiency.

It has a long name, but it is really a simple concept… LEADER monitors the trains location, track topology (is it going up a grade, descending a grade, about to go into a curve), speed and acceleration, and in train forces and recommends optimal operations for throttling, braking, and minimum and maximum speeds.

Locomotive Engineer Assist &
Data Event Recorder

Benefits

Shortened learning curve
for new engineers

Engineer feedback via
wireless downloads

Reduced Fuel
Consumption

Improved Train Handling

Train separations

Derailments

Implementation starting in
2007

The benefits include –

A shortened learning curve for new engineers due to the fact they have essentially an expert on-board. In addition, the data event recorder part of the system allows for after the fact review and feedback of train handling.

Reduced fuel consumption through more prudent acceleration and braking.

Improved train handling with resulting reductions in train separations and derailments.

Implementation starts in 2007.

Algorithmic Blocking and Classification

Unique system that routes shipments efficiently through
the network

Mileage

Handlings

Facilitates easy changes to the operating plan

Allows for quick, temporary “in and out” alterations in
traffic flows with simple logic adjustments

Derailments

Disasters

Major Events

ABC Next Generation

Before I tell you about ABC Next Generation, let me tell you a little more about ABC. If you recall from earlier in the session, ABC or Algorithmic Blocking and Classification is our car routing algorithm.

It is a sophisticated system, unique within the rail industry, that routes cars efficiently through the network minimizing car mileage and handling.

It allows for easy changes to the operating plan as well as quick, temporary, “in and out” alternations in traffic flows that are needed during derailments, natural disasters, and major public events.

ABC Next Generation

Next Generation Enhancements

Time Dimension

Train and Yard Capacity – Reservation System

Allows

Better use of capacity on trains and at terminals – avoiding
congestion and providing more consistent service

Better utilization of locomotives and cars

Control of cars flowing into and through the network

Smoothing of demand at yards

Consistency of arrivals at destination

Implementation in 2008 and 2009

Under ABC Next Generation, we will add the time dimension to the algorithm followed by a train and yard capacity component which is essentially a train reservation system. ABC NG will then route around oversubscribed trains and yards – dynamically changing traffic flows to avoid potential bottlenecks in the network.

This will allow us to make better use of capacity on trains and at yards, avoiding congestion and providing more consistent service.

As a result, we will get better utilization of out locomotives and cars and better control of cars flowing into and through the network due to the smoothing of demand at yards and consistency of arrivals at destination.

Implementation for the time dimension phase is scheduled for 2008 and 2009 for the train and yard capacity phase.

Thank you for your time and attention.

EX-99

Public Policy and Regulatory
Update

Jim Hixon

Executive Vice President Law
and Corporate Relations

Good afternoon.

You have heard about our public/private partnerships and the need for government assistance; I will now review the landscape in Washington as it impacts the industry and Norfolk Southern.

Mike McClellan has discussed some of our successes in obtaining government funding for Heartland and the I-81 Crescent projects. I believe this is an indication that policy makers in Washington and in the states are beginning to recognize the benefits that freight rail can bring to increasing the nation’s infrastructure capacity. However, the landscape in Washington has changed since early November when the Democrats took both Houses of Congress, and we will have to wait and see if it impacts our ability to expand our capacity.

For railroads, the change in Washington is very important, because Labor has a more receptive venue of support when expressing their concerns and will use it to their advantage. While we have supporters in both parties, we will have a much tougher time pushing for business-friendly legislation.

Rail Labor, trial lawyers and others who have not been “in vogue” for years, will have far more influence in shaping the agenda in the current Congress.

Five Critical Legislative Issues

Capacity

Liability

Safety & Security

Reregulation

Energy & Environment

I want to briefly touch on what we see as the 5 critical legislative areas that will occupy our time this Congress.

Rail Labor flows through each of these areas because of “their new found influence.” National agreements will play out against both a political and public relations backdrop that will often bring both angst and conflict, as bargaining table issues move into the legislative/political arena. We have already witnessed this firsthand with rail reregulation and the rail unions’ position on Amtrak appropriations.

Capacity

Freight Rail Infrastructure Capacity Expansion
Act  [Investment Tax Credit]

Provides a 25% tax credit for new rail capacity

Bills referred to jurisdictional committees;
industry is soliciting cosponsors

Opposition from rail labor and certain shipper
groups

Let’s start with an opportunity we are pursuing. We have talked about public/private partnerships and government funding to increase our infrastructure. I want to talk about another way of increasing funding for our infrastructure.

Last year, we introduced the Investment Tax Credit legislation that will provide a 25 percent tax credit for new rail capacity. This is important legislation that will help enhance and accelerate capacity expansion.

Senators Lott and Conrad are again sponsoring on the Senate side and Meek and Cantor on the House side. Notwithstanding the opposition from Rail Labor and certain shippers groups, we have continued to expand the number of co-sponsors.

Now let’s get into a little more detail as to why this legislation is of such vital importance to our nation at this juncture in time.

The Fundamental
Infrastructure Financing Issue

Issue is not whether capital exists – capital
markets have effectively unlimited capital

Issue is the number of infrastructure projects
where expected risk-adjusted investment returns
meet or exceed capital costs

Much of infrastructure “need” being discussed
are projects that have high returns to customers
and for the country, but low returns to the
railroad, at least at current pricing

The issue in dealing with infrastructure projects is not the amount of capital available; it is selecting the projects with a sufficient return for Norfolk Southern. We select projects when the return to Norfolk Southern exceeds our cost of capital. As we will discuss shortly, there is a substantial public benefit that results from rail infrastructure projects--we help take trucks off the highway. The challenge is finding the way to create a public/private partnership where the rail industry pays for the private benefit and the public contributes to the public benefit.

Historical Rail Investment

Revenue

Volume

Productivity

Price

Staggers Act Passed Oct. 1980

Index 1981=100

Capital
Expenditures

Constant dollars

Many of you have seen this slide before showing the dramatic improvement in productivity for the industry since The Staggers Act of 1980. The blue line shows the industry’s capital expenditures since Staggers and is up slightly overall, with a peak in the late 90’s when the industry was making substantial capital improvements as a result of merger activity. It is hard to tell from the gold price line, but there has been an increase in pricing starting in 2004/2005. After 25 years of lower rates, some of our customers have reacted to our new pricing power with proposals to re-regulate the industry in an attempt to reduce rates further.

Freight Rail Investment Challenge

AASHTO (American Association of State Highway and
Transportation Officials)

issued a study in 2003 analyzing the state of freight
rail capacity

concluded that freight railroad investment must grow
sharply over next 20 years to maintain railroads’
share of growing freight traffic

also found that freight railroads may not be able to
attract necessary investment to handle their share
of growing freight demand

AASHTO, the association of state Departments of Transportation, has realized you can’t solve the transportation crisis solely with expanded highways. The railroad industry needs to maintain our current market share and even increase it. To do that, freight railroad investment must grow sharply over the next 20 years. The tax credit legislation is supported by AASHTO, which is calling for a “new National Rail Transportation Policy” and states that “federal incentives, such as tax credits, should be provided to make it feasible for rail companies to invest in capital improvements for the future.”

Support for AASHTO Findings

Subsequently, CBO, Transportation Research
Board and Hudson Institute expressed similar
concerns about ability of the industry to attract
necessary investment

Dramatic recent increases in rail capital
investment have failed to close AASHTO-
projected gap

Other studies have confirmed the critical need for the freight railroad industry to sharply increase their investments. Notwithstanding the recent increases in rail capital investment, it has failed to close the AASHTO funding gap.

Increasing Investment Still
Insufficient to Meet Growing Demand

Based on averages of AASHTO estimates adjusted for inflation
Actual investment levels from STB R-1 filings (Class I railroads cash capital)

Investment needed to…

This chart shows that the industry is not investing enough to maintain its current market share. In order to help with the growing highway congestion, AASHTO has recommended that freight rail increase its investment to increase the share of freight carried by rail. (This is the top green line.) Without public/private partnerships or investment tax credits that reduce our cost of capital and improve the return on our investments, the industry may not be able to justify higher levels of investments. (This is the bottom blue line.)

Public Benefits From Expanded
Rail Capacity

Projections based on costs of congestion, accidents, air pollution derived from FHWA, Texas Transportation Institute, EPA and other sources

Social Cost Differential Between AASHTO Reduced
Share and Increased Share Scenarios:
Totals $200 Billion Over 20 Years

This chart shows the social cost differential between AASHTO’s preferred level of rail infrastructure investments and the projected lower level of rail investments. As you can see, the social cost differential totals $200 billion over 20 years.

Public Benefits From Expanded
Rail Capacity

Projections based on costs of congestion, accidents, air pollution derived from FHWA, Texas Transportation Institute, EPA and other sources

Toxic air pollution does not include the costs of carbon dioxide emissions

I talked earlier about the public benefits that result from expanded rail capacity. This chart shows the social costs of rail vs. truck, with rail resulting in social costs that are approximately 80% less than trucks. It should be noted that in addition to the toxic air pollution, accidents and congestion, freight rail provides substantial benefits with regard to CO₂ emissions.

Liability Limitation for Hazardous
Shipments

“Hazardous Materials Risk Insurance and
Recovery Act”  developed by rail industry

Creates new “Price-Anderson” type mechanism
for handling risk exposure, insurance, and liability
in connection with the shipment of ultra
hazardous materials

Industry seeking support from Members of the
respective jurisdictional committees

You’ve already heard from David Lawson about our concerns in handling ultra hazardous materials (the TIH/PIH chemicals). While we are the safest form of transportation for these chemicals, and we are constantly focused on improving our safety efforts, we believe legislation is needed. We have developed legislation, along the lines of that currently in place for the transport of spent nuclear material, to address our exposures to the movement of ultra hazardous materials, such as chlorine.

Wick and I have met with numerous Senators and Congressmen to discuss the tremendous potential liability we face every time we carry TIH/PIH chemicals. While almost all members understand and appreciate the impossible situation we are in, they are quick to point out that any cap on liability will be met with opposition by the trial lawyers and any attempt for “inherently safer technology” will be opposed by the chemical companies.

We continue to actively make our case on the Hill and will seek to have this bill introduced in both Houses this year.

Challenges for the Rail Industry

Rail Safety Bill

Numerous unfunded mandates

Passed out of T&I Rail Subcommittee; railroads
vigorously oppose

Rail Security Bill

House-passed version has four major flaws

Also passed in Senate; conference negotiation
ongoing

Now, switching gears, let’s address a series of challenges we are facing. As I said earlier, given the new found sway that Rail Labor and the trial bar have, this is not unexpected.

In the area of rail safety, a seriously flawed bill has been introduced that imposes a series of unnecessary burdens on our industry, adds a variety of unfunded mandates, and increases our legal exposure to lawsuits. Much of the bill does nothing to address increasing safety, but instead caters to the trial bar and Labor agenda. The bill is out of subcommittee, and the industry will seek to improve the bill in the full committee. However, we hold out little hope that the final bill passing the House will be acceptable to our industry.

We will seek major changes when the Senate takes up this debate later in the year. By the way, all this takes place with an industry that is already one of the safest in the world, after a year where just about all the safety measures set new record lows.

A similar pattern to safety has been seen with the area of rail security.

The House-passed bill has four major flaws: elimination of federal preemption; mandatory hazmat rerouting; intrusion into railroad hiring practices; and liberalized whistleblower protection provisions. The Administration has threatened a veto over preemption and the whistleblower provisions, and we are working to seek changes in the hazmat rerouting and hiring provisions during the Conference session with the Senate.

The federal preemption issue has been seen in other legislation and is one that the trial bar is pushing extremely hard so that it can broaden its ability to bring suit against railroads in more friendly state and local venues.

Challenges for the Rail Industry

Reregulation

Congressional agenda influenced by certain
shipper groups and some rail unions

Introduced in the House and in the Senate

Bills attack basic economic framework of rail
industry and are being vigorously opposed by
railroads

Despite the resounding legislative and regulatory success story represented by the Staggers Act, certain shipper constituencies, and now at least one rail union, are pushing for the roll back of core aspects of Staggers in the name of “increased competition”. There have been groups since Staggers was enacted that have wanted to reregulate the industry. These groups have grown in recent years as the rail industry has begun to earn its cost of capital. But let’s call it for what it is – reregulation, not increased competition! The bills have been introduced in both Chambers, and in particular on the House side, the industry will face its most significant threat in more than a decade.

A case we are making to members of Congress and their staffs is that should this bill become law, the result could be devastating to our industry and result in reduced investment, lower revenue, and a return to “shrinking of the physical plant”.

The industry is using a full range of tools to counter this reregulation initiative, but once again, our hopes will likely reside in the Senate where we have better support from at least the leadership and the respective committees of jurisdiction. We are still optimistic that at the end of the day, it will not happen, but we are taking this threat very seriously.

One of our strongest arguments against this legislation is the fact that as the rail industry has increased its earnings over the years, it has also increased its capital expenditures.

Challenges for the Rail Industry

Energy

“Program for Real Energy Security Act” introduced with 110 co-
sponsors

includes mandate giving local commuter rail preference over freight
rail lines

directs STB to establish “reliability standards” for freight as it relates
to passengers, energy products, and other items

Unclear on movement of bills within the legislative calendar, but
NS and rail industry oppose inroads on rail property rights and
unnecessary regulatory limitations

Environment

Numerous House and Senate Committees examining issue of
climate change

Another troubling bill is the recently introduced energy bill, “Program for Real Energy Security Act”, which contains a lengthy and complex section that would provide local commuter authorities Amtrak-like access to our rail lines. Rather than rely on the current “arms length” negotiation of contracts, this bill would essentially allow commuter railroads access on our lines, thus further straining an already stressed freight rail capacity. We believe this legislation represents a threat to our customers and the improved service we are providing.

Other energy initiatives are ongoing and we need to be on constant guard that our opponents don’t try to use sections of these bills to add unnecessary regulatory burdens on our industry in the name of energy.

Finally, a last area where we face potential challenges is the area of environment. The entire climate change debate ongoing in Congress poses a variety of risks, both to our customers and in some cases directly on the industry. While we believe rail transportation is environmentally beneficial and is a net positive in the climate debate, certain legislative mandates and controls could in effect hinder rail transportation.

A range of environmental issues and areas will be addressed, probably more so in 2008. But the debate has begun and we will be at the table to make our case as to the environmental benefits that rail bring to the country. Due to our low carbon emissions, this may provide an opportunity from a rail transportation standpoint.

…the Regulatory Arena…

The industry has active 78 different dockets, studies, cases, and/or
rule makings ongoing with 15 different federal Departments,
Commissions, and Administrations that have jurisdiction over rail.

In safety and security, we deal with: FRA, PHMSA, USDOT, DHS,
TSA, FMCSA, DOJ, NTSB, FDA, BoC, GAO, and others.

In energy/environment and economics, we deal with: STB, USEPA,
DOE, FERC, GAO, and others.

The most critical regulatory initiatives are:

STB’s review of rail rate issues, including methods, small shippers, and
other related matters

FRA’s review of operating issues human factors areas

USEPA’s locomotive emission standards for the next decade

If the legislative arena doesn’t hold enough interest for you, let me remind you that the regulators in Washington also occupy some of our time. We have at least 78 different matters on the table in a literal alphabet soup of agencies, departments, and commissions that have some level of jurisdiction over freight rail. Without delving into the weeds too much, there are three areas where I think we have some serious issues that concern us. The first deals with a series of dockets ongoing at the Surface Transportation Board where the issue of freight rail rates is being addressed. While the STB is charged with providing a regulatory framework that allows the industry an opportunity to earn its cost of capital, political pressure is being asserted to prevent that from happening. Second, the FRA is addressing a series of issues in the human factors area, and we want to make sure that productivity gains are not unnecessarily reversed without sufficient justification. Finally, we have concerns about components of rules EPA is promulgating that we believe will impose a burdensome fuel penalty on our industry in the next decade.

Just as in the legislative process, NS and the industry are using substantial resources to assure a fair hearing of our side of the story on each of these matters.

Conclusions

New Congress poses a variety of challenges to
several key aspects of our business

Freight rail offers a new opportunity to expand
transportation infrastructure capacity

Ongoing and active lobbying by NS and the
industry to promote favorable legislation and seek
to defeat legislation harmful to the industry

Freight rail is a critical part of the transportation
solution

We do face a number of legislative and regulatory challenges in Washington and in some of the states. We are committed to pursuing those initiatives that help increase our capacity and countering those initiatives that would reverse the tremendous success story that freight rail represents.

We believe the facts are on our side. And although we will likely face some legislative and regulatory set-backs, we think at the end of the day, our compelling story will not only be heard, but understood and supported by decision-makers.

It is important to remember that freight rail is a critical part of the transportation solution. Any efforts to artificially reduce our earnings or reduce our chances of earning our cost of capital will only cause reduced investments in our infrastructure.

EX-99

Investing in Our People,
Investing in the Future

John Rathbone

Executive Vice President
Administration

Outline

Demographics

Planning Models

Recruiting

Employee Development

I’ll cover several topics today about our people. The cost of the workforce is our single largest expense.  

Investing in our people is a key focus area at NS. We have a large challenge ahead of us in the next 10 years as demographic shifts change the make-up of our workforce.

I’ll talk to you about the planning models we use to stay ahead of our hiring needs, and then I’ll give you a flavor of how we recruit, train and develop our people.

Age Demographics
Agreement Employee

On a companywide basis, close to 40% of our agreement (or union) employees will be eligible to retire over the next 10 years. While some areas in the company look better than others, some departments face serious attrition. Reflected on this slide are the age distributions of our agreement workforce. This group makes up some 85% of our workforce. As you can see, we have a disproportionate number of employees who will be leaving us as they reach normal retirement age of 60.

This demographic is not unique to NS. This is a problem the whole nation is facing as the “baby boomer” generation begins to retire.  

Age Demographics
Non-agreement Employee

In terms of our non-agreement (or management) workforce, the overall number of employees who are eligible to retire in the next 10 years is closer to 45%.

As you can see both the union and management segments of our workforce are similar. We will face a wave of retirement in both groups.  

Why is this important? Because we are losing highly experienced trainmen, track workers, and mechanics. We are also losing highly seasoned managers who are the backbone of rail operations. These groups have made us the safest and most efficient railroad in the USA. So we must build a replacement workforce that is equally dedicated to the success of NS.

Over the last 25 years, as consolidation and technology have brought more efficiencies to the rail industry, we have been shrinking our workforce. However, since 2004, our business has shifted into high gear and we have increased employment. Coupling this growth with our demographic challenges has caused us to revamp our recruiting and training programs. I’ll share with you how we are attacking this issue.

Crew Forecasting Model

First, to help ensure that we have the people to effectively staff our operations and manage our company, we have developed two new modeling tools; our Crew Forecasting Model and our HR Workforce Planning model.

For the 13,000 people we employ in our train service, we use the Crew Forecasting Model, it is a complex tool which helps determine future staffing needs.

This tool is the best in our industry.  It divides the workforce into 112 geographic units and looks at forecasted traffic levels, demographics, training schedules, historic attrition, vacation planning, promotions and other factors to calculate staffing levels.

Because of the long lead time to train a qualified engineer, the crew forecasting model is invaluable. We must recruit today for a locomotive engineer that is needed two and a half years in the future, because it takes that long to fully train our engineers.

This new tool helps us effectively staff our train crews.

HR Workforce Planning Model

We also use a forecasting model to staff our management positions we, call it the HR Workforce Planning Model.

Using this tool we carefully look at the age and service levels of our management workforce.

The goal is to ensure that we have an appropriate staffing pipeline to provide for future leadership.

In using this tool, we consider historical attrition and incorporate certain assumptions about our workforce in order to plan for future needs.

McDonough, Georgia

NS Technical Training Center

After we recruit talent they are sent to our own training academy.  It is the NS Technical Training Center, located at McDonough, Georgia (Atlanta).  It has capability of providing training 24/7.  This facility is state-of-the-art and is the envy of our industry.

NS Technical Training Center

At McDonough we are able to provide hands-on and classroom training for all of our railroad union positions.

We are able to take people who were working in factories or on construction sites a few weeks before, and train them to safely serve our customers.

Despite the tightness of the job market, we continue to be very pleased with the quality of new hires that we are able to attract. We have a diverse workforce; our typical new hire brings industrial work experience, has been carefully screened, is drug free and averages about 32 years age.  About 6% of our new union employees have associates and/or bachelor degrees.

NS Technical Training Center

The training experiences at the center range from basic orientations to electrical training, locomotive engineer training and a full range of welding skills. Our locomotive engineers train on state-of-the-art simulators. And our welding lab is an American Welding Society designated facility. It allows us to certify a wide variety of welding specialists.

Four Tracks Initiative

Mgmt trainees from colleges

Promotion from union positions

Experienced industrial leaders

Internal management transfers

O
S
T

M T

One area where we have a large demand is for Operations managers.

Based on our planning forecast, our traditional sources of managerial talent-- recruiting from colleges and promoting union employees--would not fill all of our needs.

In 2006 we implemented a new strategy by recruiting experienced supervisors from other industries and we began a program to cross-train current non-operating managers as operations managers. 

We call this our Four Tracks initiative.

We have two new training programs for these Four Tracks, a 15-month management trainee program for recent college graduates and a 6-month operations supervisor training program for those with work experience. We call this latter program OST, for Operations Supervisor Trainees.

Operations Supervisor Trainees

Six month program

Prepares trainees for supervisory positions
in operations

Combination of technical training, field
experiences, and management skills
training

Provides exposure to transportation,
mechanical, and engineering for all trainees

During 2006 we hired almost 150 of these folks and will likely hire more than 200 this year.

These positions have been very attractive to former soldiers; in fact during 2006 we were recognized by GI Jobs Magazine as a top military employer.

The training program provides technical and managerial training to prepare first-line supervisors.

We have been pleased with our shift from strictly “home-grown” managers to a blend of experienced supervisors.

Management Trainee Program

College Hire Programs

Civil Engineers

Mechanical Engineers

Electrical Engineers

Computer Science

Marketing

Operations Management

To compete in a full employment economy we have also increased our college recruiting efforts.

To fill our management trainee positions we recruit from a number of schools in the East.

The preponderance of our college graduates are in the technical areas, particularly engineering.

This year we will hire about 150 new management trainees.

Management Trainee Program

Give trainees a deeper understanding of our
business

Provides a broader view of the organization

Meaningful cross-functional, hands-on
experiences

Trainees as “corporate resources”

Comprehensive, enterprise-wide program

This year we beefed up our management trainee programs.

We have increased the number of trainees, and increased the length of the program to 15 months, from an average of 9 months.  

The goal of the program is to give trainees an enterprise-view of the organization with cross-functional, hands-on experiences.  

The program provides the trainees with meaningful exposure to a variety of areas in the company.  

The program provides 3-4 month rotations in all of our major departments including marketing, engineering, mechanical, and transportation.

Our College Partners

William & Mary

West Virginia University

Virginia Tech

Virginia Military Institute

University of Virginia

University of Tennessee

University of Southern Mississippi

University of Pittsburgh

University of North Carolina

University of Missouri

University of Michigan

University of Maryland

University of Kentucky

University of Illinois

University of Georgia

University of Delaware

University of Buffalo

University of Alabama

The Citadel

Tennessee Technical University

Southern University

Southern Illinois University

South Carolina State University

Rensselaer Polytechnic Institute

Purdue University

Penn State - Erie

Penn State

Old Dominion University

Notre Dame

North Carolina Central University

North Carolina A&T University

NC State University

Mississippi Valley State
College

Michigan State University

Jackson State University

Hampton University

Georgia Tech

Georgia State University

Georgia Southern

Florida State University

Florida A&M University

Duke University

Cornell University

College of Charleston

Clemson University

Auburn University

Atlanta University Center

Alabama A&M University

Having an effective college recruitment program is key to having a first rate management training program. We are fortunate to have a number of college partners who help us access the best students. This is a list of schools where we recruit. We are very proud of our relationships with these schools. We are also quite proud of being recently recognized by U.S. Black Engineer and Information Technology magazine as one of the companies most supportive of historically black engineering schools.

Thoroughbred School

Ongoing development initiative for all
nonagreement employees

New training facility in Norfolk, First class
February 2007

Creating diverse classes

Divisions, bands, locations, years of service,
etc.

Over 30 sessions scheduled 2007

70 people per week

In addition to our training initiatives for new hires, we have also begun a development initiative for all of our non-union work force. This is our corporate university, which we call T-School. T-School provides continuing education focused on the issues facing our industry, and is a place to reinforce the values of our company and provides a forum for knowledge transfer between generations of railroaders.

We have designed our corporate university so that every nonagreement employee, regardless of their level in the company, can participate.

We hold weekly classes of approximately 70 employees from throughout the company.

Investing in Our People,
Investing in the Future

As our business grows, we have a challenge to ensure our workforce is ready for the future. After years of downsizing, we have adapted to the needs of a growth industry. We have developed tools to better plan for our staffing needs. We have developed new technical and leadership training programs to give our employees the tools that they need to be successful. We expect our investment in our people will continue to propel future financial success by having the right people with the right skills running the railroad.

Let me say we currently have a hiring slow down in place because of traffic volumes but the fundamental need for high caliber employees remains. As the economy picks up, we will adjust our hiring levels.

EX-99

Infrastructure Planning &      
Long Term Capital Investment

Deborah Butler

Executive Vice President

Planning & CIO

Good afternoon. My name is Deb Butler, Executive Vice President Planning, and my role today is to provide an overview of Norfolk Southern’s infrastructure and capital planning process.

Sustainability of Growth

Economic Outlook

Price of Fuel

Highway Capacity

Driver Shortages

Public Funding of Rail Infrastructure

Service Levels

Because our capital investments are long-term, we have to consider them in the context of our estimates of the opportunities for future business growth.

You have heard from our Marketing group that we remain optimistic about the sustainability of rail traffic growth. The drivers of the fundamental change in the competitive relationship between rail and truck continue to create a positive environment for long term rail volume growth.

Public investment in rail capacity, like the Heartland Corridor Project, will also result in volume growth on Norfolk Southern.

And Norfolk Southern’s superior service quality and performance will remain key drivers of growth.

Capital Spending Historically

Historically, Norfolk Southern’s capital expenditures have closely tracked its business environment. Capital investments increased as we prepared for new traffic flows prior to the Conrail transaction, and continued at higher levels as we addressed potential bottlenecks in our expanded network in 1999 and 2000.

When the economy worsened in 2001, we responded to traffic downturns by reducing capital expenditures accordingly. As it became evident in the latter part of 2003 that the stars were aligning in favor of rail traffic growth, we increased our investments in our physical plant and rolling stock to insure that we would have the capacity to accommodate higher levels of business.

Major Capital Drivers

Maintenance of our Track Network

Locomotive Fleet

Freight Cars

Intermodal Terminals

Infrastructure Capacity

Maintenance of our track network has been and will remain the largest component of our capital plan.

As Tim Heilig noted, aggressive investment in our locomotive fleet over the past several years should allow us to reduce investment in this area for the next few years. However by 2013, we anticipate that we will need to ramp up spending on locomotives again.

Investment in freight cars will increase over the next 10 years, primarily due to the need to replace a large percentage of our coal car fleet.

Investment in Intermodal terminals will also increase as we build new terminals and expand others to capture volume growth .

And in order to avoid capacity constraints, we expect to continue to sustain increased levels of capital spending for additional infrastructure capacity.

I will discuss each of these major components of our capital plan in more detail in the next few slides.

Maintenance of Way

Continue to maintain track network to
operate trains safely and efficiently to meet
customer service standards

Normalized annual rail replacement should
be about 325 to 350 miles   

Tie & Surfacing should be about 16% of
track miles annually

2.6 million Crossties

2.9 million Tons of Ballast

As I mentioned, and as was demonstrated in Tim Drake’s presentation, maintenance of our track network is the largest component of our capital plan. Our Engineering Department develops an annual maintenance budget through a process that involves rigorous analysis and the best science available. Our goal is to optimize the level of investment required to meet two major objectives: to operate trains over our track infrastructure safely and efficiently, and to meet our customer’s standards for speed and reliability.

On a normalized basis, rail replacement should be between 325 and 350 miles annually, although I should note that we have not yet reached normalized levels. In addition, our plan is to tie & surface about 3,000 track miles per year, surface another 2,000 track miles per year, and install about 2.5 million crossties per year.

Infrastructure

Increased Infrastructure spending

Short term:  Focused investment in the
Southeast

Long term: Investment on core network
east of Chicago

Infrastructure projects typically include

Second and Third Mainlines

Sidings

Crossovers

To support volume growth, we plan to increase spending on track infrastructure.

Over the next three years, this investment will be focused on the high growth corridors in the southeast portion of our network.

Tim Heilig mentioned the important role that Norfolk Southern’s inter-departmental teams play in analyzing investments in locomotives and freight cars. The same approach serves us well in analyzing investments in track infrastructure. Norfolk Southern’s Infrastructure Team uses a number of simulation models, extensive field transportation review, and other analytical tools to develop the best bang for our capital buck. Let me give you a closer look at the process.

Infrastructure Planning
Process

Build Additional
Infrastructure

Traffic
Forecast

Delphi

Rail Traffic
Controller

Network
Simulation

Identify
System
Constraints

Operating
Plan
Developer

Train Plan

Recommend
Improvements

This is a simple schematic of our Infrastructure planning process.

-We start with a traffic forecast from Delphi, our marketing forecasting system.

-With that information, we assemble projected car movements into an operating plan (trains, terminals, and schedules) using the Operating Plan Developer that Fred Ehlers described.

-Once the operating plan is designed, we use the Rail Traffic Controller model to identify potential bottlenecks and delays in the network.

-And from that information, we determine where infrastructure investment may be required.

Simulation Results:  Savannah District

The RTC model has proven to be a valuable tool, and one that occasionally surprises us with its findings. I’ll give you a couple of examples.

This is our line from Macon, Georgia, to Savannah, Georgia, where we anticipate volume growth. Conventional wisdom, and the collective experience of our field operations workforce, tells us that sidings should be equally spaced for optimal train operations. But in this particular case, the RTC simulation results proved that an 11,000-foot siding at McIntyre, Georgia, which is only about 4 ½ miles from the longest siding on the district, gave us the best train delay reduction under the operating conditions on that line.

Simulation Results:  Meridian to Birmingham

This is our line from Birmingham, Alabama to Meridian, Mississippi. Additional traffic is forecasted on this line as a result of the Meridian Speedway project, so we initiated an RTC study because we believed that significant infrastructure expansion would be needed. But the RTC analysis showed us that due to evenly spaced sidings that were already on the line, we could handle the increased volumes with only a few minor operational changes. No infrastructure improvements were necessary.

The proposed projects that result from our use of RTC and other analytical tools are evaluated and prioritized by the Infrastructure Team to ensure that our infrastructure investments are targeted toward the best projects to support future growth.

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$277.4m

Columbus
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Ft. Wayne
to Decatur:
$11.1M

Memphis to
Chattanooga
$24.4M

North
Georgia:
$79.2M

Norfolk Southern’s infrastructure investments have been extensive and ongoing over the last decade. During that period we have invested a total of $277.4 million in new construction.

Although we know that certain areas of our network are still challenged, it is also important to recognize that some previously congested segments of the network are no longer experiencing capacity constraints. These segments are benefiting from past investments in infrastructure.

Previous projects have included new and expanded terminals; more sidings, longer sidings, double track and even a few clearances.

2007 -2010 Infrastructure Focus

  Support traffic
growth in the
Southeast

Cleveland

Intermodal
growth
to/from
Chicago

Infrastructure investment over the next 3 years will be focused on the corridor between Chattanooga, TN and Jacksonville, FL, including significant investment in track capacity through the Atlanta Terminal area.

We also plan to invest in the corridor between Meridian, MS and Atlanta, GA to support traffic growth from the Meridian Speedway.

Investment will be needed on the line between Atlanta and Savannah, GA to support traffic growth.

And on the northern portion of our network, we will continue to monitor the volume growth on the Penn Route between Chicago and Cleveland, because we may ultimately need to add capacity there as volumes grow.

I should add that as we further refine our plans for the I-81 Crescent Corridor, we will be using the process I have just described to determine where infrastructure investment will be needed.

Locomotives

Road

Annual purchases of 20–35 new Road units are
required to meet growth needs

Locomotive purchases should be lower for the next
5 years due to recent acquisitions

Yard & Local

With an average age of 27.4 years, the yard and
local fleet will require sustained annual investment

Environmental Impact

Planning for new locomotive purchases will be
impacted as emission requirements tighten in 2012

In the next 5 years, we anticipate reducing the level of investment in our locomotive fleet as compared with the past few years. This is due to aggressive investment in the fleet during the past 5 years, when we purchased an average of 110 units/year.

Our locomotive team calculates that we will need between 20 and 35 new locomotives per year just to support volume growth on the network. To that, we have to add additional locomotives each year to replace units that have reached the end of their economic lives. Factors such as higher-than-expected volume growth, or alternatively, greater than anticipated productivity improvements, also impact our plans for future locomotive acquisitions. For example, our plans today do not yet include any additional locomotive requirements for significant new initiatives such as the I-81 Crescent Corridor.

Starting in 2013, we anticipate returning to something closer to prior levels of expenditures on locomotives, although again, business conditions, productivity improvements, and a new wrinkle – more stringent emissions requirements expected in 2012 – will determine exactly what those numbers will be.

An expected increase in investment in our 1350-unit yard and local fleet is due mainly to the high average age of the fleet. As Tim Heilig mentioned, part of this investment will be directed to more fuel efficient and environmentally friendly GenSet locomotives.

Freight Cars - Coal

Next 10 years will require significant
investment in coal cars to replace aging fleet

New cars will carry 112 tons vs. our current
102-ton capacity per car

Higher carrying capacity reduces car
replacement purchases by almost 10%

Other productivity initiatives may further
reduce investment

Danny Smith has already mentioned that over the next 10 years, we will need to replace over 33,000 coal hoppers and gons as these cars reach the end of their economic lives. But as Danny and Tim Heilig both mentioned, that does not mean that we will have to purchase 33,000 new coal cars.

Because they have a higher carrying capacity, we will be able to handle the same volume of coal with about 3,000 fewer of the new composite cars than with our existing fleet. And of course we will be able to move the traffic with fewer train starts, crews, and locomotives.

Danny mentioned some of the productivity initiatives we have underway for our coal traffic. We anticipate that successful implementation of the scheduled coal network may further reduce our car requirements.

Freight Cars - Merchandise

Maintain current investment levels

Primarily upgrades or shop rebuilds

Some money will be spent on critical lease
buyouts

Our near-term investments in freight cars other than coal are expected to be primarily in the form of upgrades or rebuilds of the existing fleet, with minimal purchases of new cars over the next few years. We do plan to buy out the leases of certain key car types that are in high demand.

New & Expanded Intermodal Terminals

Memphis

Cincinnati

Chicago

Atlanta

Charlotte

Harrisburg

New Jersey

Intermodal continues to be a high growth market on our network. As a result, and as Mike McClellan described, we anticipate continued investment in new and expanded terminal capacity over the next several years.

Other Spending

Computers and Technology

Spending will increase as automation increases

Train Control Systems

Communications Enhancements

All Else

NS Contribution to Heartland Corridor Project

Development projects for revenue growth and future
industrial development

Projects excluded from the plan

Alliance and Partnership Agreements

Large Public Private Partnerships

I-81 Crescent Corridor

As you have heard in several of the presentations today, technology is a key driver of improved service and efficiency. We have a heavy pipeline of technology applications that will require funding. Increased investments are anticipated in future years to support positive train control, new dispatching systems, new transportation and on-board locomotive systems, and other technology to improve customer service.

Capital for the "All Else or Other" category is expected to increase, primarily due to Norfolk Southern’s contribution to the Heartland Corridor Project.

There will also be expenditures for development projects tied to specific revenue growth opportunities and industrial development.

Expenditures for high profile alliance and partnership agreements are not included in the capital plan due to uncertainty as to the timing and magnitude of those projects.

For the same reasons, we also exclude large public/private partnership projects like the I-81 Crescent Corridor.

Summary

Invest capital necessary to handle traffic growth

Continue high quality track maintenance

Locomotive acquisitions

Investment in freight cars

New Intermodal terminals and expansions

Additional infrastructure capacity

Technology investment to improve efficiency and
quality of service

As Wick stated at our April earnings meeting, Norfolk Southern’s capital expenditures over a long period of time have averaged around 15 percent of our total revenue, excluding fuel surcharges. Our goal is to maintain that trend going forward, although year-to-year variations are likely as a result of some of the issues I’ve already discussed.

My message today is that Norfolk Southern’s capital investment decisions reflect the careful study and analysis of many cross-functional teams and subject-matter experts throughout the company. Each has the same set of objectives – to maintain and improve safety, service, and efficiency, and to position Norfolk Southern to capture future business growth.

EX-99

Finance Overview

James A. Squires

Executive Vice President
Finance

Good afternoon. I’m Jim Squires, and I will be giving you a Finance overview. Norfolk Southern has a strong track-record of delivering returns to its owners. Our financial strategy is based on reinvestment and distribution of surplus capital. To support that strategy, our capital structure should be flexible and adaptive. That way we’ll be able to seize the many opportunities you’ve heard about today.

Fundamental Financial Focus

Free Cash Flow Generation

Return on Invested Capital

Total Return to Shareholders

Capital Structure Supportive of Business and Strategy

I’ll set the stage by describing a few fundamentals. First, our overarching goal is to maximize the present value of future free cash flows. We define free cash flow as cash from operations less capital expenditures. After setting aside enough cash for liquidity, our policy is to pay out what is left or invest it. We may also use free cash to pay down debt, or conversely, add debt to supplement free cash.

Second, we seek to provide a return on invested capital that exceeds our cost of capital, recognizing that this is how economic value is created.

If we generate free cash flow, invest in projects with high returns, and distribute surplus capital, solid returns to shareholders should follow, and that is our third goal. Indeed, a significant portion of management’s compensation is tied to return on invested capital and our stock’s comparative total shareholder return.

Lastly, we seek to manage Norfolk Southern’s capital structure to support our strategy. That means neither too little debt, which could shortchange funds currently available for distribution, nor too much debt, which could reduce or even curtail long-term free cash flow.

Free Cash Flow^* (FCF)
Norfolk Southern ($ Millions)

* Free Cash Flow : cash flow from operations less capital expenditures – see reconciliation posted on website

The growth in free cash flow you see here reflects the outstanding business environment of the last few years. It also demonstrates the potential of Norfolk Southern, the most efficient U.S. railroad, to make the most of a rising tide of freight and strong demand for rail services.

FCF Yield^*
Norfolk Southern

* FCF Yield: FCF per share divided by average of beginning and year-end stock prices

This free cash flow yield chart shows NS’ free cash flow per share as a percentage of our stock’s average beginning-of-year and end-of-year stock prices over the last five years.

Comparative FCF Yield
Norfolk Southern versus Industry Average^*

* Industry Average:  market capitalization-weighted FCF yields of BNSF, CSX and UP

Our free cash flow yield compares very favorably to the U.S. rail industry’s average FCF yield, underscoring NS’ superior free cash flow and the attractiveness of our stock in comparison to our peers.

Return on Invested Capital
Norfolk Southern

Return on Invested Capital: (net income plus after tax interest expense) / (average long-term debt plus stockholders’ equity);

                                             adjusted for operating leases

Earning a return on invested capital that exceeds the cost of capital is obviously critical. When ROIC exceeds cost of capital, value is created for shareholders. Again, NS’ ROIC trend is positive over the last several years.

Return on Invested Capital
Norfolk Southern versus Industry Composite^*

* Industry Composite: combined ROIC of BNSF, CSX and UP

Here’s how NS’ ROIC compares to a U.S. rail industry composite. Once again, we’ve done well.

Total Shareholder Return^*Norfolk Southern

* Assumes gross dividends are reinvested in the stock.

Total shareholder return is the annual change in stock price, plus dividends paid and reinvested during the year, divided by beginning stock price.

We’ve been steadily increasing our dividend over the last few years, recognizing that this aspect of total shareholder return is in our hands. Stock price appreciation may be harder to influence in the short run. But over time – and this has certainly been the case in the last five years – the market should reward sound investment decisions, superior returns and strong free cash flow generation.

Total Shareholder Return^*U.S. Class 1 Railroads and S&P 500
December 31, 2001-May 31, 2007

* Assumes gross dividends are reinvested in the respective stocks or index

This chart shows cumulative total shareholder returns from 2002 through May for the major U.S. railroads and the S&P 500. We are not at the head of the pack, but NS has posted very respectable total shareholder returns during this five-year period.

Capital Structure
Philosophy

Support Business Strategy

Grow and protect profitable rail franchise

Increase return on invested capital

Improve total return to shareholders

Our philosophy is to conform capital structure to strategy, in other words to seek a capital structure that is driven by, and consistent with, our business strategy.

That strategy, first and foremost, requires investing in our company, and today you’ve seen many examples of the exciting investment possibilities in the railroad business. To the extent we have surplus capital, we intend to distribute it, and we will augment free cash flow with incremental debt for this purpose when appropriate. That too is part of our strategy.

All aspects of our structure and strategy are intended to maximize returns to our shareholders.

Capital Structure
Process

Project Future Cash Flows

Stress-test cash flow projections under varying
business and credit conditions

Ensure reinvestment capital will be available for
maintenance and growth

Assess remaining capital in view of debt
maturities and capacity for additional borrowing

Formulate plans for distributing surplus capital
through dividends and share repurchases

We evaluate capital structure using detailed, multi-year business plans that include cash flow forecasts. We test these plans and forecasts under varying business and credit conditions, to ensure we will have reinvestment capital in a variety of scenarios.

We then assess how much capital will be left over after taking into account future debt maturities and the capacity for additional borrowing.

Lastly, we formulate plans for distributing surplus capital over time using dividends and share repurchases, in a manner that seeks to maximize shareholder value.

Capital Structure
Capital Spending - 2007

Maintenance (~78%)

Right-of-way

Equipment

Safety and regulatory

Growth (~22%)

Capacity-enhancing infrastructure and terminals

Strategic opportunities

Technology and efficiency projects

As should be obvious by now, we must devote very substantial resources to maintaining our franchise. Today you’ve heard a lot about the investments in maintenance of way, locomotives, freight cars, and other assets that are essential to keep our system safe and efficient. In total about 78% of our 2007 capital expenditures will go toward maintenance.

Then there are the investments that drive growth. You’ve heard a lot about these today as well, about opportunities like ThyssenKrupp, Heartland, Rickenbacker, the Meridian Speedway and the I-81 Crescent Corridor. You’ve also heard about technology aimed at increasing efficiency and productivity, like LEADER and optimized train control. We estimate these types of projects account for 22% of our planned 2007 capital spending.

From all of these investments we think we can deliver the outstanding returns you expect, so long as we commit the capital.

Capital Structure
Debt

Plan to Refinance Maturing Debt (~$1.18 Billion over Next
Three Years)

Will Increase Debt to Enhance Shareholder Returns while
Retaining Solid Investment Grade Credit Ratings

Overall Goal to Maintain Appropriate Leverage to Support
Business Strategy and Provide Flexibility through
Business Cycles

Since Conrail, we have generally been paying off maturing debt with internally generated cash. For the next few years at least, we plan to refinance debt as it comes due, and this will amount to about $1.2 billion.

We expect to use the proceeds from re-financings and new debt to enhance shareholder returns. We think we can do this while maintaining our current solid investment grade credit ratings. This approach should permit meaningful additional leverage. It should also protect our ability to adjust strategy through changing business cycles.

Capital Structure
Shareholder Distributions

Dividends

23% compound annual growth rate in dividends per share from 2001-2006

Targeting a one-third payout ratio

Share Repurchases

75 million share authority

Repurchased 28.2 million shares through May 2007 at a cost of $1.28
billion since program inception; 46.9 million authorized shares remaining

Average repurchase price from program inception to date is $45.41 per
share

Future repurchases will be based on market conditions

May seek additional repurchase authority if 75 million share authority is
exhausted prior to 2010

Over the last several years, we have increased our annual dividends at a 23% compound annual growth rate. As we have said before, our goal is about a one-third payout ratio, which would entail significant additional dividend increases.

Our current authority for share repurchases is 75 million shares. Through May we have bought about 28 million shares at a cost of $1.28 billion and an average price of around $45 per share since we began the program. Since the beginning of this year, repurchases have been partially offset by share issuances due to option exercises this quarter. Future repurchases will be based on market conditions. If we exhaust the 75 million share authority prior to 2010, our board of directors may elect to furnish additional authority.

Capital Structure
Flexible Structure Is Optimal

Flexibility One Hallmark of Sound Capital Structure for
Railroads

Mitigate Risks from Capital Intensity, High Fixed Operating
Costs, and Cyclicality

Modulate Capital Structure over Time

Preserve Ability to Seize Secular Growth Opportunities

One of the hallmarks of a sound capital structure is flexibility. A flexible capital structure is prudent in our case because railroading is inherently capital-intensive, has high fixed operating costs, and remains subject to cyclicality. Modulating capital structure over time, if it proves appropriate to do so, will help mitigate the risks from these industry characteristics, and will preserve our ability to seize secular growth opportunities.

In conclusion, as I started out by saying, Norfolk Southern has a strong track-record of making money for its owners and a financial strategy based on reinvestment and distribution of surplus capital. Our goal is to ensure that strategy maximizes the present value of future free cash flows and delivers solid returns on invested capital and total shareholder returns for you, the owners of Norfolk Southern.

EX-99

Concluding remarks by:

Charles W. Moorman

Chairman, President and Chief Executive Officer

Norfolk Southern Corporation

 Investor Day

New York, New York

June 6, 2007

 Thanks, Jim.  Before we open it up for questions one more time, let me make a couple of concluding remarks.

 I spoke this morning about what I believe are the three drivers of our current and future success -    the economic forces in the transportation marketplace and the regulatory environment, our franchise, and our management team.  You have heard a good deal more about all of these in our presentations, and you have also learned a lot about our plans for the business going forward.  Let me recap them at a high level if I can:

1.  First, we are focused on service and service improvement.  We very clearly understand that how successful we are is directly dependent on how successful we are in improving customer service.

2.  Second, we are committed to growing our business, and by that I mean primarily our rail business.  As you heard, we already have a trucking company, Triple Crown, and we already do logistics with TDIS and Modalgistics.  If we see profitable opportunities in these areas, we won't shy away, but our management time and attention will remain devoted to our core business.

            How will we grow the business? 

First, as I said, by providing superior service which has the virtues of attracting more business, offering better pricing and at the same time reducing costly inefficiencies.

Second, we will continue our strong industrial development activities which continue to bring significant new business to our network. 

Third, we will continue to invest, and invest significantly if warranted by the returns, in new business initiatives such as the Crescent Corridor. 

Finally, we will continue to look for creative opportunities to grow and strength our franchise in the way that we did with the Meridian Speedway.

3.  The next important message you heard today is our focus on people.  As I said at the outset of our meeting, Norfolk Southern people are the drivers of our success.  You saw the demographics of our workforce and the challenges as well as the opportunities that they present.  In fact, I often say that managing through this upcoming transition may be the single biggest management challenge that our current management team will face in our tenure.  It is going to require commitment and resources, but I am confident that we are up to the task.

4.  The final message of today has to do with how we manage the financial resources of the company.  Let me take a minute to put the way we think about this in the context of recent history.  For 2000 - 2001 Norfolk Southern was coming out of the Conrail transaction.  Our railroad was not running very well, and we had a more leveraged capital structure.  At the same time, we saw a real economic and manufacturing slowdown, and a substantial decline in our business.  The result was a couple of years where our profitability and cash flow was greatly reduced.  In response, we cut capex and maintenance expense with virtually no money spent on growth, and I will tell you quite frankly that we have been playing catch-up for the past few years.

            With all of this in mind, we obviously have two main drivers, as Jim has outlined, for the use of our financial resources.

            The first is continued investment and re-investment in the company.  As you have heard repeatedly today, we are committed to growing our business, and while we will not invest unless the returns are there, we think that there are a lot of great investment opportunities out there.  At the same time, it takes a lot of money to keep the railroad in a proper state of repair, and we will continue to make those investments.

            The second driver is returning cash to our shareholders.  As Jim outlined, we plan to do that through a balance of dividend increases and our share repurchase program.

            I will close by reminding you again of what we hoped to do with this meeting - that is - tell you a little more about who we are, how we manage the company, where we hope to take the company in the future, and most importantly, why we believe that Norfolk Southern continues to represent a superior investment opportunity, not only in the rail sector, but in broader markets as well.

            Hopefully, we have done all of these.  I want to thank you all again for coming, and at this time, if you're not all questioned out, I will be happy to take your questions.

EX-99

Reconciliation of Non-GAAP Performance Measures

Information presented at NS' Investor Day in New York on June 6, 2007, (posted elsewhere on our web site) included non-GAAP financial measures, as defined by SEC Regulation G.  Specifically, two non-GAAP performance measures were presented: free cash flow and return on invested capital.  Free cash flow, which is defined by NS as cash provided by operating activities less capital expenditures, is a measure of cash flow available for distribution to shareholders or for other investing or financing activities.  Return on invested capital (ROIC) is defined by NS as net income plus interest expense (net of tax benefit) divided by average long-term debt, including current maturities, plus average stockholders' equity.  As shown below, these amounts have been adjusted for operating leases, which allows comparisons between companies that have divergent proportions of leased versus owned assets.  NS believes that ROIC is useful in evaluating whether its capital investments are generating shareholder value.  Non-GAAP performance measures should be considered in addition to, not as a substitute for, the financial performance reported in accordance with U.S. generally accepted accounting principles.

	2002	2003	2004	2005	2006
			($ in millions)
Free Cash Flow	$     803	$  1,054	$  1,661	$  2,105	$  2,206
Net cash provided by operating activities	212	203	118
Net cash flow from PRR borrowings (see Note)	1,015	1,257	1,779	2,105	2,206
Subtotal	(689)	(720)	(1,041)	(1,025)	(1,178)
Capital expenditures	$     326	$     537	$     738	$  1,080	$  1,028
Free Cash Flow	$     803	$  1,054	$  1,661	$  2,105	$  2,206
Return on Invested Capital
Net income	$     460	$     535	$     910	$  1,281	$  1,481
Interest expense on debt	518	497	489	494	476
Tax benefit related to interest expense on debt	(197)	(189)	(186)	(188)	(181)
Operating lease adjustment, net of taxes	117	113	126	155	162
Total return	$     898	$     956	$  1,339	$  1,742	$  1,938
Average long-term debt, including current maturities plus average stockholders' equity	$13,793	$14,000	$14,819	$15,854	$16,211
Operating lease adjustment	1,200	1,158	1,296	1,590	1,656
Total invested capital	$14,993	$15,158	$16,115	$17,444	$17,867
Return on Invested Capital - Adjusted for Operating Leases	6.0%	6.3%	8.3%	10.0%	10.8%

Note - - Prior to the Conrail Corporate Reorganization (which was completed on August 27, 2004), NS operated the routes and assets of a Conrail Inc. subsidiary, Pennsylvania Lines LLC (PRR), and made substantial payments to PRR under the terms of operating and lease agreements.  These payments were included in the expense line item "Conrail rents and services" and, therefore, were a use of cash in "Cash provided by operating activities."  A significant portion of these payments was borrowed back from a PRR subsidiary under a long-term note and, therefore, was a source of cash in "Proceeds from borrowings."  This note was effectively extinguished by the Reorganization.  Subsequent to the Reorganization, payments under "Conrail rents and services" declined, depreciation charges increased, and the net borrowings terminated. Accordingly, NS cash provided by operating activities after the Reorganization increased.