1. Quarterly Financial Review
First Quarter 2009
Norfolk Southern Corporation
Finance Department
Three Commercial Place
Norfolk, Virginia 23510.2191
rS
2. Norfolk Southern Railway System
Boston
Ayer
Titusville
NS Lines & Rights
NS Trackage/Haulage Rights
Conrail Shared Assets Areas
3. Contents
Consolidated Statements of Income………………………………………2
Consolidated Balance Sheets…………………………………………… 4
Consolidated Statements of Cash Flows………………………………… 5
Consolidated Financial Information……………………………………… 6
Railway Operating Revenues Yield Analysis…………………………… 8
Monthly Railway Carloadings…………………………………………… 9
Railway Operating Revenues Variance Analysis………………………10
Coal, Coke and Iron Ore Tonnage by Market…………………………10
Railway Operating Expenses Variance Analysis………………………11
Compensation and Benefits Expense Analysis…………………………12
Fuel Expense Analysis……………………….……………………………12
Other Income — Net Analysis……………………………………………13
Productivity Measures…………………………………………………… 14
Financial, Traffic and Operating Statistics:
Consolidated Financial Data……………….……………………16
Traffic and Operating Statistics……………..……………………
18
Financial Inquiries: James A. Squires…………………………(757) 629-2845
Investor Inquiries: Marta R. Stewart………………………… (757) 629-2780
Leanne D. Marilley………………………(757) 629-2861
The accompanying unaudited interim financial statements should be read in conjunction with: (a) the
financial statements and notes included in the Corporation’s latest Annual Report on Form 10-K and in
subsequent Quarterly Reports on Form 10-Q, and (b) any Current Reports on Form 8-K.
Any statements contained in this document which are not related to historical facts are forward-looking
statements as that term is defined in the Private Securities Litigation Reform Act of 1995, and Norfolk
Southern undertakes no obligation to update such statements. Such forward-looking statements are subject to
risks and uncertainties (the most significant of which are described in Norfolk Southern's SEC filings) which
could cause actual results to differ.
1
Quarterly Financial Review /
4. Consolidated Statements of Income
Three Months Ended March 31,
($ millions except per share)
2009 2008 Notes to Consolidated
Financial Statements
Railway operating revenues:
1. Earnings Per Share
Coal $ 602 $ 662 In the first quarter of 2009, NS adopted the
General merchandise 975 1,352 provisions of the Financial Accounting Standards
Intermodal 366 486 Board Staff Position (FSP) EITF No. 03-6-1,
“Determining Whether Instruments Granted in
Total railway operating revenues 1,943 2,500
Share-Based Payment Transactions are
Participating Securities,” which requires the
Railway operating expenses: treatment of unvested stock options receiving
Compensation and benefits 639 705 dividend equivalents as participating securities in
computing earnings per share under the two-class
Purchased services and rents 355 375
method. NS has retrospectively applied the
Fuel 159 404 provisions of this FSP. Accordingly, for basic
Depreciation 207 198 earnings per share, income available to common
Materials and other 200 240 stockholders for both 2009 and 2008 reflects a
$2 million reduction from net income for the effect
Total railway operating expenses 1,560 1,922
of dividend equivalent payments made to holders
of stock options. In addition, for the first quarter
Income from railway operations 383 578 2009, diluted earnings per share was calculated
under the more dilutive two-class method (as
Other income — net 17 7 compared to the treasury stock method) and
income available to common stockholders reflects
Interest expense on debt 117 109
a $2 million reduction from net income for
dividend equivalent payments.
Income before income taxes 283 476
Provision for income taxes: 2. Stock Repurchase Program
Current 90 160 In March 2007, NS' Board of Directors
amended the stock repurchase program that was
Deferred 16 25
authorized in November 2005 so as to increase
Total income taxes 106 185 the number of shares of NS common stock that
may be repurchased from 50 million to 75 million.
Net income $ 177 $ 291 In addition, the term of the program was
shortened from December 31, 2015 to December
Earnings per share (note 1): 31, 2010. During the first three months of 2009,
NS did not repurchase any shares of common
Basic $ 0.48 $ 0.77
stock. Since inception of the stock repurchase
Diluted $ 0.47 $ 0.76
program in 2006, NS has repurchased and retired
64.7 million shares at a total cost of $3.3 billion.
Weighted average shares outstanding (millions) (notes 1 & 2):
Basic 366.2 375.7
Diluted 371.1 383.9
2 / Quarterly Financial Review
5. Consolidated Statements of Income
Years Ended Dec. 31,
($ millions except per share)
2009 2008
Railway operating revenues:
Coal (note 1) $ 3,111 $ 2,315
General merchandise (note 2) 5,492 5,196
Intermodal 2,058 1,921
Total railway operating revenues 10,661 9,432
Railway operating expenses:
This page intentionally left blank;
Compensation and benefits (note 3) 2,684 2,552
Purchased services and rents 1,599 1,551
year-to-date statement will appear
Fuel 1,638 1,169
here next quarter
Depreciation 804 775
Materials and other 852 800
Total railway operating expenses 7,577 6,847
Income from railway operations 3,084 2,585
Other income — net 110 93
Interest expense on debt 444 441
Income before income taxes 2,750 2,237
Provision for income taxes:
Current 744 648
Deferred 290 125
Total income taxes 1,034 773
Net income $ 1,716 $ 1,464
Earnings per share:
Basic $ 4.60 $ 3.74
Diluted $ 4.52 $ 3.68
Weighted average shares outstanding (millions) (note 4):
Basic 372.3 389.6
Diluted 380.0 397.8
3
Quarterly Financial Review /
6. Consolidated Balance Sheets
March 31, December 31,
($ millions)
2009 2008
Assets
Current assets:
Cash and cash equivalents $ 884 $ 618
Accounts receivable — net 831 870
Materials and supplies 191 194
Deferred income taxes 161 149
Other current assets 127 168
Total current assets 2,194 1,999
Investments 1,806 1,779
Properties less accumulated depreciation 22,292 22,247
Other assets 254 272
Total assets $ 26,546 $ 26,297
Liabilities and stockholders‘ equity
Current liabilities:
Accounts payable $ 952 $ 1,140
Income and other taxes 311 261
Other current liabilities 287 220
Current maturities of long-term debt 468 484
Total current liabilities 2,018 2,105
Long-term debt 6,467 6,183
Other liabilities 1,945 2,030
Deferred income taxes 6,406 6,372
Total liabilities 16,836 16,690
Stockholders‘ equity:
Common stock $1.00 per share par value, 1,350,000,000 shares
authorized; outstanding 367,037,849 and 366,233,106 shares,
respectively, net of treasury shares 369 368
Additional paid-in capital 1,723 1,680
Accumulated other comprehensive loss (933) (942)
Retained income 8,551 8,501
Total stockholders‘ equity 9,710 9,607
Total liabilities and stockholders‘ equity $ 26,546 $ 26,297
4 / Quarterly Financial Review
7. Consolidated Statements of Cash Flows
Three Months Ended March 31,
($ millions)
2009 2008
Cash flows from operating activities:
Net income $ 177 $ 291
Reconciliation of net income to net cash provided
by operating activities:
Depreciation 209 200
Deferred income taxes 16 25
Gains and losses on properties and investments (2) (5)
Changes in assets and liabilities affecting operations:
Accounts receivable 39 (37)
Materials and supplies 3 (18)
Other current assets 35 30
Current liabilities other than debt (107) 75
Other — net (16) 43
Net cash provided by operating activities 354 604
Cash flows from investing activities:
Property additions (243) (304)
Property sales and other transactions 1 3
Investment sales and other transactions (2) 54
Net cash used in investing activities (244) (247)
Cash flows from financing activities:
Dividends (125) (109)
Common stock issued — net 6 71
Purchase and retirement of common stock (note 2) - (276)
Proceeds from borrowings 500 525
Debt repayments (225) (410)
Net cash provided by (used in) financing activities 156 (199)
Net increase in cash and cash equivalents 266 158
Cash and cash equivalents:
At beginning of year 618 206
At end of period $ 884 $ 364
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest (net of amounts capitalized) $ 49 $ 54
Income taxes (net of refunds) $ 23 $ 7
Quarterly Financial Review / 5
12. Railway Operating Revenues Variance Analysis
First Quarter ($ millions)
2009 vs. 2008
Coal General Merchandise Intermodal Total
Amount Percent Amount Percent Amount Percent Amount Percent
Revenues Variance due to:
Volume $ (72) (11%) $ (394) (29%) $ (88) (18%) $ (509) (20%)
Revenue per unit/mix $ 12 2% $ 17 2% $ (32) (8%) $ (48) (2%)
$ (60) (9%) $ (377) (28%) $ (120) (25%) $ (557) (22%)
Six Months
This area intentionally left blank;
2009 vs. 2008
year-to-date analysis will appear
here next quarter.
Revenue Variance due to:
Volume $ -$ - $ - $ - $ - $ - $ -$ -
Revenue per unit/mix $ -$ - $ - $ - $ - $ - $ -$ -
$ -$ - $ - $ - $ - $ - $ -$ -
Coal, Coke and Iron Ore Tonnage by Market
First Quarter (tons in thousands)
2007 2008 2009
Change Change Change
Tons vs. 2006 Tons vs. 2007 Tons vs. 2008
Utility 36,216 (2%) 35,604 (2%) 33,371 (6%)
Export 3,526 5% 5,773 64% 4,381 (24%)
Domestic metallurgical 3,630 (24%) 3,517 (3%) 2,610 (26%)
Industrial 2,397 19% 1,909 (20%) 1,849 (3%)
45,769 (3%) 46,803 2% 42,211 (10%)
Six Months
This area intentionally left blank;
year-to-date analysis will appear
Utility 36,216 (2%) 35,604 (2%) 33,371 (6%)
here next quarter.
Export 3,526 5% 5,773 64% 4,381 (24%)
Domestic metallurgical 3,630 (24%) 3,517 (3%) 2,610 (26%)
Industrial 2,397 19% 1,909 (20%) 1,849 (3%)
45,769 (3%) 46,803 2% 42,211 (10%)
10 / Quarterly Financial Review
13. Railway Operating Expenses Variance Analysis
First Quarter ($ millions)
2009 vs. 2008 Amount of change
Compensation Materials Purchased services
$9
and benefits
Fuel and other and rents
Depreciation
$20
$40
$66
Net Decrease
$362 Million
19%
$245
This Months
Six area intentionally($left blank;
millions)
2009 vs. 2008
year-to-date analysis will appear
Amount of change
here next quarter.
Total Increase
$730 Million
$469
11%
$132
$52
$48
$29
Purchased services Materials Compensation
Depreciation Fuel
and rents and other and benefits
11
Quarterly Financial Review /
14. Compensation and Benefits Expense Analysis
First Quarter Six Months
This area intentionally millions) blank;
($ left
($ millions)
2009 vs. 2008 2009 vs. 2008
Amount of change
year-to-date analysis will ofappear
Amount change
here next quarter.
Wage Rates/$13
Medical Benefits/$10
(Active and Retiree)
Pension Benefits/$10
Incentive Compensation/$0
Other Items — Net/$4
Incentive Compensation/$6
Net Decrease Net Increase
$66 Million $0 Million
T&E and Other Volume
9% 0%
Related Payroll/$47
Wage Rates/$0
BLET Agreement/$0
Stock-Based Compensation/$50
Payroll Taxes/$0
Other Items — Net/$0
T&E Volume Related Payroll/$0
Fuel Expense Analysis
First Quarter Six Months
This area intentionally millions) blank;
($ left
($ millions)
2009 vs. 2008 2009 vs. 2008
Amount of change
year-to-date analysis Amount ofappear
will change
here next quarter.
Net Increase
Total
Cost per Gallon/$175
$0 Million
Decrease
Cost per Gallon/$0 0%
$245 Million
61%
Consumption/$70
Consumption/$0
12 / Quarterly Financial Review
15. Other Income — Net Analysis
First Quarter ($ millions)
2009 vs. 2008 Amount of change
Net Increase
$10 Million
143%
Corporate-Owned Life Insurance/$8
Coal Royalties/$6
Other Items — Net/$4
This Months
Six area intentionally($left blank;
millions)
2009 vs. 2008 Amount of change
year-to-date analysis will appear
here next quarter.
/$0
/$0
Net Increase
$0 Million
0%
Interest on Tax Deficiencies/$0
Coal Royalties/$0
Other Items — Net/$0
Equity in Conrail Earnings/$0
Gains/Losses on Property
and Investments/$22
Interest Income/$0
Corporate-Owned Life
Insurance/$38
Quarterly Financial Review / 13
