Norfolk Southern Corporation | Annual Report 2008
N o r f o l k S o u t h e r n
system map
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Description of Business
Norfolk Southern Corporation (NYSE: NSC) is one of the nation’s premier
transportation companies. Its Norfolk Southern Railway subsidiary operates
approximately 21,000 route miles in 22 states and the District of Columbia,
serving every major port in the eastern United States and providing superior
connections to western rail carriers. Norfolk Southern operates the most extensive
intermodal network in the East and is North America’s largest rail carrier of metals
and automotive products.
financial highlights
N o r f o l k S o u t h e r n C o r p o r a t i o n & S u b s i d i a r i e s
(numbers in millions, except per-share amounts)
For the Year
Railway operating revenues
Income from railway operations
Net income
Per share — basic
Per share — diluted
Dividends per share
Dividend pay-out ratio
Cash provided by operating activities
Property additions
Free cash flow1
At Year End
Total assets
Total debt
Stockholders’ equity
Shares outstanding
Stockholders’ equity per share
Financial Ratios (%)
Operating ratio
Debt to total capitalization
2008
$ 10,661
$
3,084
$ 1,716
4.60
$
4.52
$
1.22
$
27%
2,715
1,558
1,157
$
$
$
$ 26,297
6,667
$
9,607
$
366.2
26.23
$
2007
9,432
$
$
2,585
$ 1,464
3.74
$
3.68
$
.96
$
26%
2,333
1,341
992
$
$
$
$ 26,144
6,368
$
9,727
$
379.3
25.64
$
2006
9,407
$
$
2,557
$ 1,481
3.63
$
3.57
$
.68
$
19%
2,206
1,178
1,028
$
$
$
$ 26,028
6,600
$
9,615
$
397.4
24.19
$
71.1%
41.0%
72.6%
39.6%
72.8%
40.7%
(1) Free cash flow as used here is defined as cash provided by operating activities minus
property additions and is a measure of cash available for other investing activities and
financing activities, including repurchases of common stock and dividends.
1
Total Stockholder Returns
(dollars)
Railway Operating Revenue
(in millions)
Income from Railway
Operations (in millions)
Free Cash Flow1
(in millions)
$10,661
$3,084
$9,407 $9,432
$2,557 $2,585
$1,157
$1,028
$992
Dec. 04 Dec. 05 Dec. 06 Dec. 07
Dec. 08
06 07
08
06 07
08
06 07
08
$350
$300
$250
$200
$150
$100
$ 50
$ 0
Norfolk Southern Corp. Common Stock S&P Railroad Stock Price Index
S&P Composite-500 Stock Price Index
* Assumes that the value of the investment in Norfolk Southern Corporation
common stock and each index was $100 on Dec. 31, 2003, and that all
dividends were reinvested. Data furnished by Bloomberg Financial Markets.
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F e l l o w
shareholders
I write this letter to you at a time of extraordinary
turbulence in our nation’s and the world’s economies.
The old curse – “May you live in interesting times” –
has fallen upon us with a vengeance, and the current
economic uncertainty seems likely to continue for some
time into the future.
Your company and the customers we serve are not
immune to this period of turbulence, and our performance
in 2009 will be challenged as a result. However, we remain
very optimistic about our longer-term prospects, and a look
at our 2008 results shows many of the reasons why.
trainee programs for new college
hires, and our operations supervisor
trainee program for people with prior
working experience. Like many other
companies, we face challenges with
the demographics of our work force,
and these programs, which have been
nationally recognized, are ensuring
that we will have a strong and diverse
management team in place for many
years to come.
Quite simply put, 2008 was a terrific year for Norfolk
Our initiatives to drive service
Southern. Even though our traffic volumes declined,
through proper planning and cost controls we set records
for railway operating revenues, income from railway
operations, net income, and diluted earnings per share.
Our operating ratio improved by 1.5 percentage points
to 71.1, our best operating ratio ever. We continued to
provide superior results for our shareholders as well, by
raising our annual dividend 27 percent and buying back
19.4 million shares of stock.
We made important strides with our other key
constituencies as well. First and foremost, in terms of
our people who are Norfolk Southern’s true competitive
advantage, we were awarded our 19th consecutive
E. H. Harriman Gold Medal Award for employee safety
as the safest major U.S. railroad. No single fact better
illustrates the commitment that every NS employee
brings to doing his or her job safely and well. I ran out
of superlatives to describe their performance a long time
ago. 2008 was another strong year for our safety process,
and we remain intent on our ultimate goal of zero
incidents and zero injuries.
We also strengthened our other human resource
initiatives. Among the most important are our programs
to bring new people into our management team. We
continue to enhance and expand our management
improvements for our customers
also saw success in 2008, and we
continue to be recognized as a service
leader in the rail industry. Superior rail
service is the product of a number of
things: solid infrastructure, properly
maintained and reliable locomotives
and rolling stock, a well-designed
operating plan, and a committed,
focused work force with the tools and
technology to support their efforts.
We have them all. Norfolk Southern
is a service company, and we are
acutely aware that we must continue
to improve our transportation
products if we want to capture all
of the opportunities that are available
to us and realize the full value of
those products.
2008 saw us continue as well our
initiatives to support the communities
we serve. We have increased our
emphasis on sustainability by
naming the industry’s first corporate
sustainability officer, creating
innovative programs to reduce the amount of energy
we consume in our operations, and increasing our use
of alternative energy sources. Railroads truly are the
environmentally friendly mode of transportation, and we
believe that actively working to improve our environmental
footprint is not only the responsible thing to do, but it
makes good business sense as well.
In 2009, we’ll continue all of the initiatives that
helped strengthen NS in 2008. We are in extraordinarily
challenging times, but we have built the foundations to
be able to meet those challenges successfully, and we’ll
stay focused on a few key drivers of the business as we
manage through the downturn.
First, we’ll continue to manage our costs aggressively
while still providing a superior level of customer service.
Norfolk Southern has a long history of effective cost
controls, and we have the tools and technology to resize
our operations quickly in response to changing business
conditions. At the same time, we’ll try to mitigate the
impact on our work force to the fullest extent possible.
Guided by our Track 2012 strategic initiatives, we’ll
continue to invest in the company in order to keep the
property strong and continue our improvement programs.
Put simply, we won’t sacrifice longer-term opportunities for
short-term profits. This downturn will be over some day,
and we will be ready to take full advantage of the business
prospects that will be there when it ends.
Finally, we’ll continue to aggressively pursue new
business development initiatives and to ensure that we
realize the appropriate value for our superior transportation
services. Our strategy to create new business corridors
has helped drive our growth in recent years, and we’re
now working hard to develop our biggest project to date,
the Crescent Corridor. It’s an exciting concept to work
with government and our trucking partners in a public-
private partnership to take a million or more trucks off the
highways. We’re seeing a very positive response by public
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officials, and I’m optimistic that we’ll
see considerable progress on the
project in 2009.
In closing, as you’ll see, this is
a new way of presenting our annual
report. The enclosed DVD gives you
the chance to see and hear from
some NS employees about what they
do every day to help our company
succeed. They’re representatives
of the whole NS team – talented,
creative, and driven to make our
company a success. They’re great
people, too, and I’m happy and proud
to be part of the team.
Sincerely,
Wick Moorman
Chairman, President
and Chief Execuitve Officer
Norfolk Southern’s
management team
(left to right):
Jim Hixon,
executive vice
president law and
corporate relations;
Don Seale,
executive vice
president and chief
marketing officer;
John Rathbone,
executive vice president
administration;
Wick Moorman,
chairman, president and
chief executive officer;
Mark Manion,
executive vice
president operations;
Steve Tobias,
vice chairman and
chief operating officer;
Jim Squires,
executive vice
president finance
and chief financial
officer; and
Deb Butler,
executive vice president
planning and chief
information officer.
Pla y v ideo sto ri es onli ne at www.nsvoices.com or on enclosed DVD
voices
John Kraemer, a Roanoke-based
marketing group vice president,
From Roanoke, Alan Shaw’s team
coordinates Norfolk Southern’s coal,
manages a diverse portfolio of
coke, and iron ore network, which
business that includes agriculture,
accounts for more than 25 percent
fertilizer, and consumer products.
of the railroad’s total freight tonnage.
Kraemer works in the Industrial
Surging worldwide demand for U.S.
Products group that also serves
coal made 2008 a record year for
shippers of chemicals, paper, clay,
the company’s coal franchise.
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and forest products as well as metals
and construction material. Norfolk
Southern, the largest rail carrier of
metals in North America, serves
38 major steel processors. The
Neville Wilson in Atlanta helps
ensure that the more than 200
agriculture sector, which accounted
for 28 percent of all industrial product
trains operating each day on the
carloads in 2008, moves tons of
Georgia Division are moving safely
wheat, soybeans, corn, ethanol, and
and efficiently. Wilson, the division’s
assistant superintendent, oversees
operations on 1,800 miles of the
railroad’s 21,000-mile rail network.
“Our job is to provide the level and
quality of service our customers
have come to expect from Norfolk
Southern,” says Wilson, who joined
the company 11 years ago. “Safety
and service are the heart of
everything we do. We measure our
The railroad in 2008 moved about
194 million tons of coal, coke, and
iron ore to steel furnaces, industrial
sites, more than 100 power plants
in the eastern United States, and to
29 countries overseas. Says Shaw,
a Norfolk Southern group vice
president, “Through investments in
performance every day, 365 days
other commodities. “We serve
technology and better scheduling
a year, to make sure we meet and
industries that are vital to the
of our coal train network, we’ve
exceed the needs of our customers.”
economy, both here in the United
been able to reduce transit times
States and around the world,” says
and improve customer service while
Kraemer, who joined the railroad as a
handling record demand.”
management trainee 32 years ago.
As an Indianapolis-based manager
in the Industrial Development
Department, Dayne Tate scours
the state of Indiana for sites where
Under division manager
Jeff Monday’s watch, more than
1,200 freight containers move in and
out of the Rickenbacker Intermodal
companies can build on Norfolk
Terminal every day. The state-of-the-
Southern rail lines. In 2008, 115
art terminal in Columbus, Ohio, which
companies built or expanded
opened in 2008, provides customers
facilities on the system – companies
with access to key markets in the
such as Louis-Dreyfus, which began
Midwest. Norfolk Southern serves
operating a biodiesel and soybean
48 intermodal terminals spread
processing plant in Claypool, Ind.,
across its rail system. “We have the
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Shari Hulin’s job is finding the people
who will become the next generation
that is one of the largest in the
world. The work of the Industrial
Development Department grows
business for the railroad and brings
of Norfolk Southern employees for a
new jobs and economic growth to
company that BusinessWeek ranks
the communities Norfolk Southern
as one of the top 50 places to launch
serves. Notes Tate: “Over the past
a career. Norfolk-based Hulin,
20 years, we’ve helped nearly 2,000
manager of professional recruiting,
industries locate or expand on our
says the company puts a premium
system. That translates into more than
on work-force diversity because
100,000 new jobs and over 2 million
it gives the railroad a competitive
additional carloads of freight.”
advantage by “fostering innovation
and giving us a better understanding
of our customers and the
communities we serve.” Military
veterans, she says, also make
good employees because of their
commitment to safety and strong
work ethic. “We’re dedicated to hiring
and retaining the best people, and
our training and recruiting programs
help us do just that,” Hulin says.
most extensive intermodal network in
the East,” says Monday, who joined
the railroad 13 years ago in his native
Chicago. “We’re investing in facilities
such as Rickenbacker to meet the
future demand for intermodal service.”
Pla y v ideo sto ri es onli ne at www.nsvoices.com or on enclosed DVD
voices
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Bob Billingsley
joined Norfolk
Southern as a
junior engineer
more than 30
years ago.
Today, his
Roanoke-based
job as director of
structural projects
has put him in charge
of the Heartland Corridor, a rail
freight route that, when completed
in 2010, will cut 24 hours off the
transit times between Virginia ports
and the Midwest. NS and federal
and state governments are funding
the project through a public-private
partnership. Once completed, the
Heartland Corridor will help relieve
highway congestion and reduce
carbon emissions. “We’re raising
the clearance through 28 tunnels
so we’ll be able to run double-
stacked trains through them,”
Billingsley explains. “It’s a win
When it comes to green, says
Jerri Parks, Norfolk Southern
is continually looking for ways
to reduce its environmental
footprint. Railroads are
the most environmentally
friendly mode of ground
transportation, able to move
a ton of freight 436 miles
on a gallon of fuel. Parks
notes Norfolk Southern was
the first railroad to appoint a
sustainability officer and in
2008 issued its first corporate
sustainability report. The railroad also has invested heavily in
improving the environmental performance of its locomotives, putting
for the railroads, it’s a win for our
it ahead of all other freight railroads in meeting federal emissions
customers, and it’s a win for the
standards. “We’re committed,” says Parks, Norfolk-based director of
communities we serve.”
intermodal systems, “to protecting the quality of our environment and
to helping our customers reduce their carbon footprints.”
board of directors
Members of the board of directors of Norfolk Southern
are (front row left to right) Michael D. Lockhart,
Karen N. Horn, J. Paul Reason, Gene R. Carter,
(back row left to right) Burton M. Joyce, Steven F. Leer,
Landon Hilliard, Charles W. Moorman, Alston D. Correll,
Gerald L. Baliles, and Daniel A. Carp.
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Gerald L. Baliles, 68, of Charlottesville, Va., has been director of
the Miller Center of Public Affairs at the University of Virginia since
Karen N. Horn, 65, of Lyme, Conn., is partner with
Brock Capital Group. Her board service began in 2008;
April 2006. He is a former governor and attorney general of Virginia.
her current term expires in 2011.
His board service began in 1990; his current term expires in 2011.
Committees: Finance, Governance and Nominating
Committees: Executive, Finance (chairman), Governance and Nominating
Daniel A. Carp, 60, of Naples, Fla., is nonexecutive chairman
of Delta Air Lines, Inc., and formerly served as chairman and chief
Burton M. Joyce, 67, of South Pasadena, Fla., is former
chairman of IPSCO Inc., a leading steel producer. His board service
began in November 2003; his current term expires in 2010.
executive officer of Eastman Kodak Company. His board service
Committees: Audit, Compensation
began in January 2006; his current term expires in 2009.
Committees: Audit, Compensation
Gene R. Carter, 69, of Spotsylvania, Va., is executive director
and chief executive officer of the Association for Supervision and
Steven F. Leer, 56, of St. Louis, Mo., is chairman and chief
executive officer of Arch Coal, Inc., one of the nation’s largest
coal producers. His board service began in 1999; his current
term expires in 2009.
Curriculum Development, one of the world’s largest international
Committees: Finance, Governance and Nominating
education associations. His board service began in 1992; his current
term expires in 2011.
Committees: Audit (chairman), Compensation, Executive
Alston D. Correll, 67, of Atlanta, Ga., became chairman of
Atlanta Equity Investors, LLC, a private equity firm, in September
2007, and is chairman emeritus of Georgia-Pacific Corporation. His
board service began in 2000; his current term expires in 2010.
Committees: Compensation (chairman), Executive,
Governance and Nominating
Landon Hilliard, 69, of Oyster Bay Cove, N.Y., is a partner of
Brown Brothers Harriman & Co., a private bank in New York City.
His board service began in 1992; his current term expires in 2010.
Committees: Executive, Finance, Governance and Nominating (chairman)
Michael D. Lockhart, 59, of Lancaster, Pa., is chairman,
president, and chief executive officer of Armstrong World Industries,
Inc. His board service began in 2008; his current term expires in 2009.
Committees: Audit, Finance
Charles W. Moorman, 57, of Virginia Beach, Va., is chairman,
president and chief executive officer of Norfolk Southern Corporation.
His board service began in 2005; his current term expires in 2009.
Committee: Executive (chairman)
J. Paul Reason, 67, Admiral, USN, retired, of Washington, D.C.,
is a member of the Naval Studies Board at the National Academy of
Sciences. His board service began in 2002; his current term
expires in 2011.
Committees: Audit, Compensation
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officers
Equal
Employment
Opportunity
Policy
Norfolk Southern
Corporation’s policy
is to comply with all
applicable laws,
regulations, and
executive orders
concerning equal
employment
opportunity and
nondiscrimination
and to offer
employment on
the basis of
qualification and
performance,
regardless of race,
religion, color,
national origin,
gender, age, sexual
orientation, veteran
status, the presence of
a disability, or any other
legally protected status.
Charles W. Moorman
Chairman, President
and Chief Executive Officer
Stephen C. Tobias
Vice Chairman and
Chief Operating Officer
Deborah H. Butler
Executive Vice President Planning
and Chief Information Officer
James A. Hixon
Executive Vice President Law
and Corporate Relations
Mark D. Manion
Executive Vice President Operations
John P. Rathbone
Executive Vice President Administration
Donald W. Seale
Executive Vice President
and Chief Marketing Officer
James A. Squires
Executive Vice President Finance
and Chief Financial Officer
Daniel D. Smith
Senior Vice President Energy
and Properties
Joseph C. Dimino
Vice President Audit and Compliance
Timothy J. Drake
Vice President Engineering
Cindy C. Earhart
Vice President Human Resources
Fredric M. Ehlers
Vice President Customer Service
Terry N. Evans
Vice President Operations
Planning and Budget
John H. Friedmann
Vice President Strategic Planning
William A. Galanko
Vice President Law
Tim A. Heilig
Vice President Mechanical
Robert E. Huffman
Vice President Intermodal Operations
Robert M. Kesler, Jr.
Vice President Taxation
David T. Lawson
Vice President Industrial Products
H. Craig Lewis
Vice President Corporate Affairs
Bruno Maestri
Vice President Government Relations
Robert E. Martínez
Vice President Business Development
Michael R. McClellan
Vice President Intermodal
and Automotive Marketing
Harold R. Mobley
Vice President Labor Relations
William J. Romig
Vice President and Treasurer
Marta R. Stewart
Vice President and Controller
Gerhard A. Thelen
Vice President Operations
Planning and Support
Charles J. Wehrmeister
Vice President Safety and Environmental
Thomas G. Werner
Vice President Information Technology
F. Blair Wimbush
Vice President Real Estate
and Corporate Sustainability Officer
Howard D. McFadden
Corporate Secretary
stockholder
I n f o r m a t i o n
Common Stock
Ticker symbol: NSC
Common stock of Norfolk Southern
Corporation is listed and traded on
the New York Stock Exchange.
Publications
Upon written request, the corporation’s
annual and quarterly reports on
Forms 10-K and 10-Q will be furnished
free to stockholders. Write to: Corporate
Communications Department, Norfolk
Southern Corporation, Three Commercial
Place, Norfolk, Va. 23510-9227.
A notice and proxy statement for the
annual meeting of stockholders are
furnished to stockholders in advance
of the meeting.
Upon request, a stockholder may
receive a printed copy of the Corporate
Governance Guidelines, board
committee charters, Code of Ethics,
and Code of Ethical Conduct for Senior
Financial Officers. Contact the Corporate
Secretary, Norfolk Southern Corporation,
Three Commercial Place, Norfolk, Va.
23510-9219. This information also is
available on the NS Web site.
Ethics & Compliance Hotline
High ethical standards always have
been key to Norfolk Southern’s
success. Anyone who may be aware
of a violation of the corporation’s ethical
standards or a conflict of interest,
or has a concern or complaint regarding
the corporation’s financial reporting,
accounting, internal controls or
auditing matters is encouraged to
report such information to the Ethics
& Compliance Hotline, 800.732.9279.
Reports can be made anonymously and
without fear of retaliation.
Dividends
At its January 2009 meeting, the
corporation’s board of directors declared
a quarterly dividend of 34 cents per
share on its common stock, payable on
March 10, 2009, to stockholders of
record on Feb. 6, 2009.
Norfolk Southern Corporation usually
pays quarterly dividends on its common
stock on or about March 10, June 10,
Sept. 10 and Dec. 10, when and if
declared by the board of directors to
stockholders of record. The corporation
has paid 106 consecutive quarterly
dividends since its inception in 1982.
Account Assistance
For assistance with lost stock certificates,
transfer requirements and the Dividend
Reinvestment Plan, contact:
Registrar and Transfer Agent
BNY Mellon Shareowner Services
480 Washington, Blvd., 29th Floor
Jersey City, N.J. 07310
866.272.9472
For assistance with address changes,
dividend checks and direct deposit of
dividends, contact:
Assistant Corporate Secretary
Stockholder Records
Norfolk Southern Corporation
Three Commercial Place
Norfolk, Va. 23510-9219
800.531.6757
Annual Meeting
May 14, 2009
10 a.m. EDT
The Kimball Theatre
428 W. Duke of Gloucester St.
Williamsburg, Va.
Dividend Reinvestment Plan
Stockholders whose names appear on
their stock certificates (not a street or
broker name) are eligible to participate
in the Dividend Reinvestment Plan.
The plan provides a convenient,
economical and systematic method
of acquiring additional shares of
the corporation’s common stock
by permitting eligible stockholders
of record to reinvest dividends.
The plan’s administrator is BNY Mellon
Shareowner Services.
For additional information,
dial 866.272.9472.
Financial Inquiries
James A. Squires
Executive Vice President
Finance and
Chief Financial Officer
Norfolk Southern Corp.
Three Commercial Place
Norfolk, Va. 23510-9215
757.629.2845
Investor Inquiries
Leanne D. Marilley
Director Investor Relations
Norfolk Southern Corp.
Three Commercial Place
Norfolk, Va. 23510-9215
757.629.2861
Corporate Offices
Executive Offices
Norfolk Southern Corp.
Three Commercial Place
Norfolk, Va. 23510-9227
757.629.2600
Regional Offices
1200 Peachtree St. N.E.
Atlanta, Ga. 30309
110 Franklin Road S.E.
Roanoke, Va. 24042
Annual Report
Requests & Information
800.531.6757
values
Safety: We put safety first by taking care of the people around us
and following the rules.
Performance: We are performance driven and committed to providing
quality customer service. We act on facts and are accountable for results.
Integrity: We do the right thing. We are open, fair, honest, and straightforward.
Respect: We believe in the importance of all of our stakeholders.
We value the ideas and beliefs of our co-workers.
Innovation: We constantly seek new ideas and creative solutions to business challenges.
Teamwork: We believe that working together always produces the best results.
our vision
Be the safest, most customer-focused, and successful
transportation company in the world.
S
Norfolk Southern Corporation
Three Commercial Place
Norfolk, VA 23510-9217
www.nscorp.com
29.0109.x426.200K