Norfolk Southern Annual Report 2009

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Norfolk SoutherN 2009 aNNual report

engine
of thefuture

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For the Year

2009

2008

2007

(numbers in millions, except per-share amounts)

Railway operating revenues

Income from railway operations

Net income

Per share — basic1

Per share — diluted

Dividends per share

Dividend pay-out ratio

Cash provided by operating activities

Property additions

Free cash flow2

At Year End
Total assets

Total debt

Stockholders’ equity

Shares outstanding

Stockholders’ equity per share

Financial Ratios (%)
Operating ratio

Total debt to total capitalization

7,969
$
1,962
$
$ 1,034
2.79
$
2.76
$
1.36
$
48%
1,860
1,299
561

$
$
$

$ 27,369
7,153
$
$ 10,353
369.0
28.06

$ 10,661
3,084
$
1,716
$
4.58
$
4.52
$
1.22
$
27%
2,715
1,558
1,157

$
$
$

$ 26,297
6,667
$
9,607
$
366.2
26.23

9,432
$
2,585
$
$ 1,464
3.73
$
3.68
$
.96
$
26%
2,333
1,341
992

$
$
$

$ 26,144
6,368
$
9,727
$
379.3
25.64

75.4%
40.9%

71.1%
41.0%

72.6%
39.6%

(1) Prior-year periods have been re-presented in accordance with the adoption of Financial Accounting Standards Board Staff Position Emerging Issues Task

Force No. 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities” [Accounting Standards
Codification (ASC) 260-10].

Total Stockholder
Returns*
(dollars)

Railway
Operating
Revenues
(in millions)

Income from
Railway
Operations
(in millions)

Free Cash
Flow2
(in millions)

$250

$200

$150

$100

$ 50

$ 0

12/04

$10,661

$9,432

$7,969

$3,084

$2,585

$1,157

$992

$1,962

$561

12/05

12/06

12/07

12/08

12/09

Norfolk Southern Corp. Common Stock

S&P Railroad Stock Price Index

S&P Composite-500 Stock Price Index

(2) 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.

* Assumes that the value of the investment in Norfolk

Southern Corporation common stock and each index was
$100 on Dec. 31, 2004, and that all dividends were rein-
vested. Data furnished by Bloomberg Financial Markets.

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, serves every major container

port in the eastern United States, and provides efficient connections to other rail carriers. Norfolk Southern operates the most

extensive intermodal network in the East and is a major transporter of coal and industrial products.

E
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Fellow Shareholders:

In sitting down to write this letter, it is impossible not to think back to the world we faced 12 months ago
when I last wrote to you. As you will undoubtedly recall, the U.S. economy seemed to be unraveling in front of
us, our rail loadings were plunging, and we had no real idea where the bottom might be or how we would be
able to respond to what was clearly going to be the worst economic recession that any of us had seen.

What a difference a year makes! Today our national economy, while in no way recovered, is far more stable.
At Norfolk Southern, we have a much clearer picture of our own economic outlook and can act accordingly. More
importantly, I’m very happy to say that the people of NS responded in true Thoroughbred fashion. Our 2009 results,
while down, were much better than I had feared they might be at the beginning of last year.

Our 2009 volumes were down 19 percent compared to 2008, a decline that quite frankly I’m not sure we

would have thought possible a few years ago. Volumes were down in all of our business groups, and our
company was particularly affected in some of the areas that are the traditional strengths of the Norfolk Southern
franchise: international containers, steel, autos, and coal for power plants. Among the few bright spots were our
growing ethanol business and our domestic intermodal traffic. The domestic intermodal business, which is driven
by the conversion of domestic highway truck traffic, is a particularly good story in that while it was essentially
even with 2008, those results were far better than most of the conventional trucking market, an indication that
we continue to grow market share with our intermodal service products. I’ve written before of the advantages
we have in the face of systematically higher fuel prices and the increasing congestion and state of disrepair of
the nation’s highway system. Our 2009 domestic intermodal results indicate that more and more of our customers
continue to recognize those advantages.

The overall decline in volume and reduced fuel surcharge revenue as a result of lower oil prices in 2009
produced total revenues of $7.969 billion, a decline of $2.692 billion, or 25 percent, compared to 2008 revenues.
Volume- and fuel-related revenue declines were offset to some extent by our continued ability to make core
pricing gains above the rate of inflation, a strong indication that customers continue to recognize the value of our
superior service products. One thing we understand very clearly at Norfolk Southern is that we are a service
company, and we remain relentlessly focused on continuous improvement of our service offerings.

On the expense side, we did a good job of managing our cost structure to conform to business levels,

not an easy thing to do in a networked company such as NS with a relatively high percentage of long-term
variable or fixed costs. Total railway operating expenses were down $1.570 billion year-over-year,
a reduction of 21 percent, driven primarily by lower fuel prices, but with significant reductions in all
other controllable expenses as well.
The result was a 36 percent reduction in income from railway operations, with net income of
$1.034 billion, down 40 percent year-over-year, and earnings per share of $2.76, down 39 percent
year-over-year. The railroad operating ratio for the year was 75.4, compared with 71.1 for 2008. This
is obviously a negative result in a metric that we pay a lot of attention to, but, as I stated earlier, given
the magnitude of the volume decline that we experienced year-over-year, I believe that it was an
excellent result and a tribute to the whole Norfolk Southern team.

Beyond our financial results, in 2009 we continued to make strides in our two primary areas of focus:
safety and service. In safety, I am delighted and proud to report NS was awarded its 20th consecutive
E. H. Harriman Gold Medal for employee safety as the safest of the major U.S. rail carriers. The safety
of our employees and the communities we serve is the single most important priority of everyone in our
company, and in many ways our safety ethic defines the culture of our company. Winning the Harriman
Gold Medal again is a tribute to the dedication and hard work of every Norfolk Southern employee, but
I can tell you that while they acknowledge the recognition, they know there is more to be done. Our goal
is no injuries and no fatalities every year.

2009 also saw continued improvements in our service products. A few years ago, we devised what we call our

composite service index, a weighted index based on three primary metrics that define our service delivery: on-time train
performance, connection performance for the cars going through our terminals, and how well we adhere to our operating
plan. We set the performance bar pretty high – for example, we measure every road train, including coal trains and Amtrak,
and we penalize early as well as late trains – and we made the index a component of our annual performance bonus
metrics, just to make sure that everyone stays focused on it. In 2009, our composite service metric improved by 2.4 percent.
As with safety, this improvement is a real tribute to the dedication and hard work of our Operating Department employees
in a year that saw significant ongoing changes to our operating plan as we adjusted to the business slowdown. Also,
as in safety, we know we can still do much better, and we’re determined to make significant progress in 2010.

In last year’s letter, I outlined the key strategies that we would continue to employ in the face of the downturn. The
first was disciplined cost control, relying on our superior technology to quickly design and implement new operating plans
to handle our declining traffic at lower costs without harming customer service. The second was to continue to invest in
key projects to drive business growth, promote new technologies for further efficiencies, and keep our infrastructure and
assets in a state of good repair. The third part of our strategy was to continue aggressively pursuing new business
opportunities wherever and whenever we could.

Even in the face of the recession, we made significant gains in each of these areas, and these same strategies will
drive our continuing success in 2010 and beyond. While the short-term economic outlook remains somewhat uncertain, the
longer-term prospects for Norfolk Southern and the railroad industry remain very bright. We go into the new year with some
positive momentum. Our traffic levels increased sequentially in both the third and fourth quarters of 2009, and we’re
confident many of the cost efficiencies we achieved in 2009 will remain in place as we see rail traffic continue to increase.
In addition, we continue to make excellent progress with our corridor strategies. The Heartland Corridor, our bridge and
tunnel clearance project that will create the shortest, fastest double-stack route between Hampton Roads and the Midwest,
is on schedule to be completed by mid-year 2010. Our new Pan Am Southern joint venture with Pan Am Railways for the
route between Mechanicville, N.Y., and Ayer, Mass., was finalized in 2009, and we already see transit time improvements
and traffic growth resulting from the investment. Finally, we continue to gain public support for our Crescent Corridor
initiative to create new high-capacity, truck-competitive intermodal service between the South and the Northeast. The
Crescent Corridor will provide significant growth opportunities for our company, while providing enormous public benefits
in terms of less highway congestion, reduced diesel fuel consumption, and lower emissions. I believe that it’s one of the best
examples anywhere of ways to address our nation’s transportation problems in a realistic, cost-effective, and environmentally
responsible manner, and I’m happy to report that more and more public policy leaders are sharing that view.

The greatest threat to our continued growth and prosperity is also in the public policy arena, and that’s the threat of
changes to the regulatory framework that governs our economics. There are longstanding challenges to that framework by
a limited number of shipper groups who are willing to sacrifice the long-term health of the rail network for lower rates in
the short term. We’ll see a lot of activity in Washington on this issue in 2010, but I believe that Congress ultimately will vote
to encourage and expand our industry and not to consign it to
the dark days that existed prior to the Staggers Act of 1980.
In summary, your company withstood the economic

Norfolk Southern’s
management team
(left to right):
Don Seale,
executive vice
president and chief
marketing officer
Jim Squires,
executive vice
president finance and
chief financial officer
Mark Manion,
executive vice
president and chief
operating officer
Wick Moorman,
chairman, president
and chief executive
officer
Jim Hixon,
executive vice
president law and
corporate relations
Deb Butler,
executive vice president
planning and chief
information officer
John Rathbone,
executive vice president
administration

shocks of 2009 to produce good economic results, and I go
into 2010 with a sense of optimism for our future prospects.
At its core, my optimism is driven by my belief in the people
of Norfolk Southern. They’re the best in the business, and
it’s great to be one of them.

Wick Moorman
Chairman, President
and Chief Executive Officer

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Norfolk Southern’s
board of directors
(left to right):
Gerald L. Baliles
Karen N. Horn
Michael D. Lockhart
Landon Hilliard
Steven F. Leer
Charles W. Moorman
Burton M. Joyce
Alston D. Correll
J. Paul Reason
Gene R. Carter
Daniel A. Carp
Thomas D. Bell Jr.

Gerald L. Baliles, 69, of Charlottesville, Va., has been
director of the Miller Center of Public Affairs at the University of Virginia

Landon Hilliard, 70, of Oyster Bay Cove, N.Y., is a partner of
Brown Brothers Harriman & Co., a private bank in New York City. His board

since April 2006. He is a former governor and attorney general of Virginia.

service began in 1992; his current term expires in 2010.

His board service began in 1990; his current term expires in 2011.

Committees: Executive, Finance (chair), Governance

and Nominating

Thomas D. Bell Jr., 60, of Atlanta, Ga., is chairman
of SecurAmerica LLC. His board service began in 2010; his current term

expires in 2010.

Committees: Audit, Compensation

Daniel A. Carp, 61, of Naples, Fla., is nonexecutive
chairman of Delta Air Lines, Inc., and formerly served as chairman and

chief executive officer of Eastman Kodak Company. His board service

began in January 2006; his current term expires in 2012.

Committees: Audit, Compensation, Performance-Based Compensation

Gene R. Carter, 70, of Spotsylvania, Va., is executive
director and chief executive officer of the Association for Supervision and

Curriculum Development, one of the world’s largest international education

associations. His board service began in 1992; his current term expires in 2011.

Committees: Audit (chair), Compensation, Performance-Based

Compensation (chair), Executive

Alston D. Correll, 68, of Atlanta, Ga., is chairman of
Atlanta Equity Investors, LLC, a private equity firm, and formerly was

chairman of Georgia-Pacific Corporation. His board service began in

2000; his current term expires in 2010.

Committees: Compensation (chair), Executive, Governance

and Nominating

Committees: Executive, Finance, Governance and Nominating (chair)

Karen N. Horn, 66, of Lyme, Conn., is a partner with Brock Capital
Group. Her board service began in 2008; her current term expires in 2011.

Committees: Finance, Governance and Nominating

Burton M. Joyce, 68, 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.

Committees: Audit, Compensation, Performance-Based Compensation

Steven F. Leer, 57, 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 2012.

Committees: Finance, Governance and Nominating

Michael D. Lockhart, 60, 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 2012.

Committees: Audit, Finance

Charles W. Moorman, 58, 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 2012.

Committee: Executive (chair)

J. Paul Reason, 68, Admiral, USN, retired, of Chesapeake
Beach, Md., is a member of the Naval Studies Board of the National Academies.

His board service began in 2002; his current term expires in 2011.

Committees: Audit, Compensation, Performance-Based Compensation

S
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Charles W. Moorman
Chairman, President
and Chief Executive 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
and Chief Operating Officer

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

Clyde H. Allison Jr.
Vice President and Controller

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 Process Engineering

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

Thomas E. Hurlbut
Vice President Audit and Compliance

David F. Julian
Vice President Safety and Environmental

Robert M. Kesler Jr.
Vice President Taxation

David T. Lawson
Vice President Industrial Products

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

Marta R. Stewart
Vice President and Treasurer

Gerhard A. Thelen
Vice President Operations
Planning and Support

Thomas G. Werner
Vice President Information Technology

Michael J. Wheeler
Vice President Transportation

F. Blair Wimbush
Vice President Real Estate
and Corporate Sustainability Officer

Howard D. McFadden
Corporate Secretary

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.

a
m
r

account
assistance
For assistance with lost
stock certificates, transfer
requirements, the Dividend
Reinvestment Plan, address
changes, dividend checks,
and direct deposit of
dividends, contact:

Registrar and Transfer Agent
BNY Mellon Shareowner Services
480 Washington Blvd., 29th Floor
Jersey City, N.J. 07310
866.272.9472

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.

Common Stock
Ticker symbol: NSC
Common stock of Norfolk Southern Corporation is listed and
traded on the New York Stock Exchange.

publications
All of the following-referenced publications are available on the
company’s Web site (www.nscorp.com).

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,
Thoroughbred 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 Thoroughbred Code of Ethics is encouraged
to contact our Ethics & Compliance Hotline at 800.732.9279.

Dividends
At its January 2010 meeting, the corporation’s board of directors
declared a quarterly dividend of 34 cents per share on its
common stock, payable on March 10, 2010, to stockholders of
record on Feb. 5, 2010.

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 110
consecutive quarterly dividends since its inception in 1982.

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

annual Meeting

May 13, 2010
10 a.m. EDT
Williamsburg Lodge Conference Center
310 South England St.
Williamsburg, Va. 23185

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Be the safest, most customer-focused, and successful transportation company in the world

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K

(X)

( )

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the fiscal year ended DECEMBER 31, 2009

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from __________ to __________

Commission file number 1-8339

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

Virginia
(State or other jurisdiction of incorporation)

Three Commercial Place
Norfolk, Virginia
(Address of principal executive offices)

Registrant’s telephone number, including area code:

52-1188014
(IRS Employer Identification No.)

23510-2191
Zip Code

(757) 629-2680

Securities registered pursuant to Section 12(b) of the Act:

Title of each Class

Norfolk Southern Corporation

Name of each exchange

on which registered

Common Stock (Par Value $1.00)

New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: NONE

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes (X) No ( )

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ( ) No (X)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or Section 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes (X) No ( )

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulations S-T during the preceding 12 months. Yes (X) No ( )

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. ( )

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer or smaller reporting company. See
definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer (X) Accelerated filer ( ) Non-accelerated filer ( ) Smaller reporting company ( )

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act. Yes ( ) No (X)

The aggregate market value of the voting common equity held by non-affiliates as of June 30, 2009, was $13,820,960,718 (based on the closing price as
quoted on the New York Stock Exchange on that date.)

The number of shares outstanding of each of the registrant’s classes of common stock, as of January 31, 2010: 369,655,129 (excluding 20,434,078 shares
held by the registrant’s consolidated subsidiaries)

DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Registrant’s definitive proxy statement to be filed electronically pursuant to Regulation 14A not later than 120 days after the end of the fiscal
year, are incorporated herein by reference in Part III.

Page

K3
K13
K15
K16
K16
K17

K18

K19
K20

K37
K38
K76

K76
K76

TABLE OF CONTENTS

NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES (NS)

Part I.

Items 1 and 2.
Item 1A.
Item 1B.
Item 3.
Item 4.

Business and Properties
Risk Factors
Unresolved Staff Comments
Legal Proceedings
Submission of Matters to a Vote of Security Holders
Executive Officers of the Registrant

Part II.

Item 5.

Item 6.
Item 7.

Item 7A.
Item 8.
Item 9.

Item 9A.
Item 9B.

Item 10.
Item 11.
Item 12.

Item 13.

Item 14.

Part III.

Market for Registrant’s Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
Controls and Procedures
Other Information

K77
Directors, Executive Officers and Corporate Governance
Executive Compensation
K77
Security Ownership of Certain Beneficial Owners and Management K77
and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director
Independence
Principal Accountant Fees and Services

K80

Part IV.

Item 15.

Exhibits and Financial Statements Schedules

Power of Attorney

Signatures

K81

K94

PART I

NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES (NS)

Item 1. Business and Item 2. Properties

GENERAL – Norfolk Southern Corporation (Norfolk Southern) is a Norfolk, Virginia based company that
controls a major freight railroad, Norfolk Southern Railway Company. Norfolk Southern Railway Company is
primarily engaged in the rail transportation of raw materials, intermediate products, and finished goods primarily
in the Southeast, East, and Midwest and, via interchange with rail carriers, to and from the rest of the United
States. Norfolk Southern also transports overseas freight through several Atlantic and Gulf Coast ports. Norfolk
Southern provides comprehensive logistics services and offers the most extensive intermodal network in the
eastern half of the United States. The common stock of Norfolk Southern is listed on the New York Stock
Exchange (NYSE) under the symbol “NSC.”

Norfolk Southern was incorporated on July 23, 1980, under the laws of the Commonwealth of Virginia. On
June 1, 1982, Norfolk Southern acquired control of two major operating railroads, Norfolk and Western Railway
Company (NW) and Southern Railway Company (Southern) in accordance with an Agreement of Merger and
Reorganization dated as of July 31, 1980, and with the approval of the transaction by the Interstate Commerce
Commission (now the Surface Transportation Board [STB]). Effective December 31, 1990, Norfolk Southern
transferred all the common stock of NW to Southern and Southern’s name was changed to Norfolk Southern
Railway Company (Norfolk Southern Railway or NSR). Effective September 1, 1998, NW was merged with and
into Norfolk Southern Railway. As of December 31, 2009, all the common stock of Norfolk Southern Railway
was owned directly by Norfolk Southern.

Norfolk Southern makes available free of charge through its website, www.nscorp.com, its annual report on
Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports as
soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and
Exchange Commission (SEC). In addition, the following documents are available on the company’s website and
in print to any shareholder who requests them:

 Corporate Governance Guidelines
 Charters of the Committees of the Board of Directors
 The Thoroughbred Code of Ethics
 Code of Ethical Conduct for Senior Financial Officers
 Categorical Independence Standards for Directors

Unless otherwise indicated, Norfolk Southern and its subsidiaries are referred to collectively as NS.

RAILROAD OPERATIONS – As of December 31, 2009, NS’ railroads operated approximately 21,000 route
miles in 22 states and the District of Columbia.

The system’s lines reach many individual industries, electric generating facilities, mines (in western Virginia,
eastern Kentucky, southern and northern West Virginia, and western Pennsylvania), distribution centers, transload
facilities, and other businesses located in smaller communities in its service area.

Corridors with heaviest freight volume:

New York City area to Chicago (via Allentown and Pittsburgh)

Chicago to Macon (via Cincinnati, Chattanooga, and Atlanta)

Appalachian coal fields of Virginia, West Virginia, and Kentucky to Norfolk and Sandusky, Ohio

Cleveland to Kansas City

Birmingham to Meridian

Memphis to Chattanooga

The miles operated, which include major leased lines between Cincinnati, Ohio, and Chattanooga, Tennessee, and
trackage rights over property owned by North Carolina Railway Company, were as follows:

Mileage Operated as of December 31, 2009

Passing
Track,

Crossovers

Way and

Miles

of
Road

Second and
Other Main

and

Track

Turnouts

Yard
Switching

8,353

965
9,318

Total

28,845

8,304
37,149

Owned
Operated under lease,
contract or trackage rights
Total

15,676

4,948
20,624

2,819

1,977
4,796

1,997

414
2,411

Triple Crown Operations – Triple Crown Services Company (Triple Crown), an NS subsidiary, provides
bimodal, truckload transportation service utilizing RoadRailer® trailers, a hybrid technology that facilitates both
over-the-road and on-the-rail transportation utilizing enclosed trailers that are pulled over the highways in tractor-
trailer configuration and over the rails by locomotives. Triple Crown provides service in the eastern two-thirds of
the United States as well as Ontario and Quebec through a network of terminals strategically located in 13 cities.

The following table sets forth certain statistics relating to NS’ railroads’ operations for the past 5 years:

Years Ended December 31,

2009

2008

2007

2006

2005

Revenue ton miles (billions)
Freight train miles traveled (millions)
Revenue per ton mile
Revenue ton miles per man-hour worked
Percentage ratio of railway operating
expenses to railway operating revenues

159
67.5
$0.0503
2,900

195
80.0
$0.0546
3,075

196
81.9
$0.0481
3,066

204
84.2
$0.0462
3,196

203
81.2
$0.0421
3,146

75.4%

71.1%

72.6%

72.8%

75.2%

RAILWAY OPERATING REVENUES – NS’ total railway operating revenues were $8.0 billion in 2009. See
the financial information by traffic segment in Part II, Item 7, “Management’s Discussion and Analysis of
Financial Condition and Results of Operations.”

COAL TRAFFIC – Coal, coke, and iron ore – most of which is bituminous coal – is NS’ railroads’ largest
commodity group as measured by revenues. The railroads handled a total of 157.5 million tons in 2009, most of
which originated on NS’ lines in West Virginia, Virginia, Pennsylvania, and Kentucky. Revenues from coal,
coke, and iron ore accounted for about 29% of NS’ total railway operating revenues in 2009.

Total coal handled through all system ports in 2009 was 29.8 million tons. Of this total, 14.9 million tons
(including coastwise traffic) moved through Norfolk, Virginia, 3.8 million tons (including coastwise traffic)
moved through the Baltimore Terminal, 7.5 million tons moved to various docks on the Ohio River, and
3.6 million tons moved to various Lake Erie ports. Other than coal for export, virtually all coal handled by NS’
railroads was terminated in states east of the Mississippi River.

See the discussion of coal traffic, by type of coal, in Part II, Item 7, “Management’s Discussion and Analysis of
Financial Condition and Results of Operations.”

GENERAL MERCHANDISE TRAFFIC – General merchandise traffic is composed of five major commodity
groupings: automotive; chemicals; metals and construction; agriculture, consumer products and government; and
paper, clay and forest products. The automotive group includes finished vehicles for BMW, Chrysler, Ford Motor
Company, General Motors, Honda, Isuzu, Mazda, Mercedes-Benz, Mitsubishi, Nissan, Subaru, Suzuki, Toyota,
and Volkswagen, and auto parts for Ford Motor Company, General Motors, and Chrysler. The chemicals group
includes sulfur and related chemicals, petroleum products, chlorine and bleaching compounds, plastics, rubber,
industrial chemicals, chemical wastes, and municipal wastes. The metals and construction group includes steel,
aluminum products, machinery, scrap metals, cement, aggregates, bricks, and minerals. The agriculture,
consumer products, and government group includes soybeans, wheat, corn, fertilizer, animal and poultry feed,
food oils, flour, beverages, canned goods, sweeteners, consumer products, ethanol, and items for the military.
The paper, clay and forest products group includes lumber and wood products, pulp board and paper products,
wood fibers, wood pulp, scrap paper, and clay.

In 2009, 105 million tons of general merchandise freight, or approximately 65% of total general merchandise
tonnage handled by NS, originated online. The balance of general merchandise traffic was received from
connecting carriers at interterritorial gateways. The principal interchange points for NS-received traffic included
Chicago, Memphis, New Orleans, Cincinnati, Kansas City, Detroit, Hagerstown, St. Louis/East St. Louis, and
Louisville. General merchandise carloads handled in 2009 were 2.0 million, the revenues from which accounted
for 52% of NS’ total railway operating revenues in 2009.

See the discussion of general merchandise rail traffic by commodity group in Part II, Item 7, “Management’s
Discussion and Analysis of Financial Condition and Results of Operations.”

INTERMODAL TRAFFIC – The intermodal market consists of shipments moving in trailers, domestic and
international containers, and RoadRailer® equipment. These shipments are handled on behalf of intermodal
marketing companies, international steamship lines, truckers, and other shippers. Intermodal units handled in
2009 were 2.5 million, the revenues from which accounted for 19% of NS’ total railway operating revenues for
the year.

See the discussion of intermodal traffic in Part II, Item 7, “Management’s Discussion and Analysis of Financial
Conditions and Results of Operations.”

FREIGHT RATES – In 2009, NS’ railroads continued their reliance on private contracts and exempt price
quotes as their predominant pricing mechanisms. Thus, a major portion of NS’ freight business is not currently
economically regulated by the government. In general, market forces have been substituted for government
regulation and now are the primary determinant of rail service prices.

In 2009, NS’ railroads were found by the STB to be “revenue adequate” based on results for the year 2008. The
STB has not made its revenue adequacy determination for the year 2009. A railroad is “revenue adequate” under
the applicable law when its return on net investment exceeds the rail industry’s composite cost of capital. This
determination is made pursuant to a statutory requirement.

PASSENGER OPERATIONS

 Regularly scheduled passenger trains are operated by Amtrak on NS’ lines between the following

locations:
-
-
-
-
-
-
-
-

Alexandria, Virginia, and New Orleans, Louisiana
Raleigh and Charlotte, North Carolina
Selma and Charlotte, North Carolina
Chicago, Illinois, and Porter, Indiana
Chicago, Illinois, and Battle Creek, Michigan
Chicago, Illinois, and Pittsburgh, Pennsylvania
Chicago, Illinois, and Detroit, Michigan
Pittsburgh and Harrisburg, Pennsylvania

 Commuter trains are operated on the NS line between Manassas and Alexandria in accordance with

contracts with two transportation commissions of the Commonwealth of Virginia

 NS leases the Chicago to Manhattan, Illinois, line to the Commuter Rail Division of the Regional

Transportation Authority of Northeast Illinois

 NS operates freight service over lines with significant ongoing Amtrak and commuter passenger

operations, and is conducting freight operations over trackage owned by:

-
-
-
-
-

Amtrak
New Jersey Transit
Southeastern Pennsylvania Transportation Authority
Metro-North Commuter Railroad Company
Maryland Department of Transportation

 Passenger operations are conducted either by Amtrak or by the commuter agencies over trackage owned

by Conrail in the Shared Assets Areas

NONCARRIER OPERATIONS – NS’ noncarrier subsidiaries engage principally in the acquisition, leasing, and
management of coal, oil, gas and minerals; the development of commercial real estate; telecommunications; and
the leasing or sale of rail property and equipment. In 2009, no such noncarrier subsidiary or industry segment
grouping of noncarrier subsidiaries met the requirements for a reportable business segment, under relevant
authoritative accounting guidance.

RAILWAY PROPERTY

The NS railroad system extends across 22 states and the District of Columbia. The railroad infrastructure makes
the company capital intensive with net property of approximately $23 billion.

Capital Expenditures – Capital expenditures for road, equipment, and other property for the past five years were
as follows (including capitalized leases):

Road and other
property
Equipment
Total

2009

2008

Capital Expenditures
2007
($ in millions)

2006

2005

1,128
171
1,299

1,070
488
1,558

894
447
1,341

756
422
1,178

741
284
1,025

Capital spending and maintenance programs are and have been designed to assure the ability to provide safe,
efficient, and reliable rail transportation services. For 2010, NS has budgeted $1.44 billion of capital
expenditures. On May 1, 2006, NS and Kansas City Southern (KCS) formed a joint venture, Meridian Speedway
LLC (MSLLC), pursuant to which NS intends to contribute $300 million in cash, substantially all of which will

be used for capital improvements over a period of approximately three years, in exchange for a 30% interest in the
joint venture. Through December 31, 2009, NS has contributed $283 million. See the discussion following
“Cash used for investing activities,” in Part II, Item 7, “Management’s Discussion and Analysis of Financial
Condition and Results of Operations.”

Equipment – As of December 31, 2009, NS owned or leased the following units of equipment:

Owned*

Units Leased**

Total

Number of

Locomotives:
Multiple purpose
Switching
Auxiliary units
Total locomotives

Freight cars:
Hopper
Box
Covered hopper
Gondola
Flat
Caboose
Other
Total freight cars

Other:
Work equipment
Vehicles
Highway trailers
and containers
RoadRailer®
Miscellaneous
Total other

3,584
146
103
3,833

17,495
13,656
8,421
31,511
2,618
171
4,461
78,333

5,035
4,068

59
6,268
1,246
16,676

132
--
--
132

805
1,450
2,353
5,647
1,330
--
19
11,604

243
--

10,681
27
13,108
24,059

3,716
146
103
3,965

18,300
15,106
10,774
37,158
3,948
171
4,480
89,937

5,278
4,068

10,740
6,295
14,354
40,735

Capacity of
Equipment

(Horsepower)
12,916,050
214,650
--
13,130,700

(Tons)

1,995,324
1,240,384
1,186,372
4,008,658
315,545
--
222,661
8,968,944

* Includes equipment leased to outside parties and equipment subject to equipment trusts, conditional sale
agreements, and capitalized leases.
** Includes 3,078 freight cars leased from CRC.

The following table indicates the number and year built for locomotives and freight cars owned at December 31,
2009.

2009

2008

2007

2006

2005

2000-
2004

1995-
1999

1994 &
Before

Total

Year Built

Locomotives:
No. of units
% of fleet

Freight cars:
No. of units
% of fleet

--
--%

40
1%

90
2%

514
1%

2,359
3%

1,200
2%

143
4%

404
--%

89
2%

89
--%

667
17%

586
1%

713
19%

2,091
55%

3,833
100%

6,403
8%

66,778
85%

78,333
100%

The following table shows the average age of NS’ locomotive and freight car fleets at December 31, 2009, and the
number of retirements in 2009:

Average age – in service
Retirements
Average age – retired

Locomotives

Freight Cars

19.9 years
13 units
31.2 years

30.3 years
3,446 units
40.5 years

Ongoing locomotive and freight car maintenance programs are intended to ensure the highest standards of safety,
reliability, customer satisfaction, and equipment marketability. The locomotive bad order ratio includes units out
of service for required inspections every 92 days and program work such as overhauls.

Locomotives
Freight Cars

2009

6.1%
4.5%

Annual Average Bad Order Ratio
2007

2006

2008

5.8%
4.5%

5.7%
4.9%

5.7%
6.4%

2005

6.2%
6.3%

Encumbrances – Certain railroad equipment is subject to the prior lien of equipment financing obligations
amounting to approximately $150 million as of December 31, 2009, and $236 million as of December 31, 2008.

Track Maintenance – Of the approximately 37,100 total miles of track operated, NS had responsibility for
maintaining about 29,600 miles of track, with the remainder being operated under trackage rights from another
party responsible for maintenance.

Over 75% of the main line trackage (including first, second, third, and branch main tracks, all excluding rail
operated pursuant to trackage rights) has rail ranging from 131 to 155 pounds per yard with the standard
installation currently at 136 pounds per yard. Approximately 36% of NS lines, excluding rail operated pursuant to
trackage rights, carried 20 million or more gross tons per track mile during 2009.

The following table summarizes several measurements regarding NS’ track roadway additions and replacements
during the past five years:

2009

2008

2007

2006

2005

Track miles of rail installed
Miles of track surfaced
New crossties installed (millions)

434
5,568
2.7

459
5,209
2.7

401
5,014
2.7

327
4,871
2.7

302
4,663
2.5

Microwave System – The NS microwave system, consisting of approximately 7,400 radio route miles, 429 core
stations, 30 secondary stations, and 5 passive repeater stations, provides communications between most operating
locations. The microwave system is used primarily for voice communications, VHF radio control circuits, data
and facsimile transmissions, traffic control operations, and AEI data transmissions.

Traffic Control – Of the approximately 16,600 route miles dispatched by NS, about 11,100 miles are signalized,
including 8,200 miles of centralized traffic control (CTC) and 2,900 miles of automatic block signals. Of the 8,200
miles of CTC, approximately 3,900 miles are controlled by data radio originating at 271 base station radio sites.

Computers – A computer network consisting of a centralized data center in Atlanta, Georgia, and various
distributed computers throughout the company connects the yards, terminals, transportation offices, rolling stock
repair points, sales offices, and other key system locations. Operating and traffic data are processed and stored to
provide customers with information on their shipments throughout the system. Computer systems provide current
information on the location of every train and each car on line, as well as related waybill and other train and car
movement data. In addition, the computer systems are utilized to assist management in the performance of a variety
of functions and services including payroll, car and revenue accounting, billing, material management activities and
controls, and special studies.

ENVIRONMENTAL MATTERS – Compliance with federal, state, and local laws and regulations relating to the
protection of the environment is a principal NS goal. To date, such compliance has not affected materially NS’
capital additions, earnings, liquidity, or competitive position. See “Legal Proceedings,” Part I, Item 3; “Personal
Injury, Environmental, and Legal Liabilities” in Part II, Item 7, “Management’s Discussion and Analysis of
Financial Condition and Results of Operations,” and Note 17 to the Consolidated Financial Statements.

EMPLOYEES – The following table shows the average number of employees and the average cost per employee
for wages and benefits:

2009

2008

2007

2006

2005

Average number of employees

28,593

30,709

30,806

30,541

30,294

Average wage cost per employee

$63,000

$66,000

$62,000

$61,000

Average benefit cost per employee

$32,000

$31,000

$30,000

$32,000

$29,000

More than 80% of NS’ railroad employees are covered by collective bargaining agreements with various labor
unions. See the discussion of “Labor Agreements” in Part II, Item 7, “Management’s Discussion and Analysis of
Financial Condition and Results of Operations.”

GOVERNMENT REGULATION – In addition to environmental, safety, securities, and other regulations
generally applicable to all businesses, NS’ railroads are subject to regulation by the STB. The STB has jurisdiction
over some rates, routes, fuel surcharges, conditions of service, and the extension or abandonment of rail lines. The
STB also has jurisdiction over the consolidation, merger, or acquisition of control of and by rail common carriers.
The Federal Railroad Administration regulates certain track and mechanical equipment standards.

K10

The relaxation of economic regulation of railroads, under the Staggers Rail Act of 1980, includes exemptions of
intermodal business (trailer-on-flat-car, container-on-flat-car), rail boxcar traffic, lumber, manufactured steel,
automobiles, and certain bulk commodities such as sand, gravel, pulpwood, and wood chips for paper
manufacturing. Transportation contracts on these shipments and on regulated shipments effectively remove those
shipments from regulation as well for the duration of the contract. About 88% of NS’ freight revenues come from
either exempt traffic or traffic moving under transportation contracts.

Efforts were made in 2009 to re-subject the rail industry to increased federal economic regulation and such efforts
are expected to continue in 2010. The Staggers Rail Act of 1980, which substantially balanced such regulation,
encouraged and enabled rail carriers to innovate and to compete for business, thereby contributing to the economic
health of the nation and to the revitalization of the industry. Accordingly, NS will continue to oppose efforts to
reimpose increased economic regulation.

COMPETITION – There is continuing strong competition among rail, water, and highway carriers. Price is
usually only one factor of importance as shippers and receivers choose a transport mode and specific hauling
company. Inventory carrying costs, service reliability, ease of handling, and the desire to avoid loss and damage
during transit are also important considerations, especially for higher-valued finished goods, machinery, and
consumer products. Even for raw materials, semifinished goods, and work-in-progress, users are increasingly
sensitive to transport arrangements that minimize problems at successive production stages.

NS’ primary rail competitor is the CSX system; both operate throughout much of the same territory. Other railroads
also operate in parts of the territory. NS also competes with motor carriers, water carriers, and with shippers who
have the additional option of handling their own goods in private carriage, of sourcing products from different
geographic areas, and of using substitute products.

Certain marketing strategies among railroads and between railroads and motor carriers enable carriers to compete
more effectively in specific markets.

SECURITY OF OPERATIONS – NS has taken significant steps to provide enhanced security for the NS rail
system. In particular, NS has developed and implemented a comprehensive security plan that is modeled on and
was developed in conjunction with the security plan prepared by the Association of American Railroads (AAR) post
September 11, 2001. The AAR Security Plan defines four Alert Levels and details the actions and countermeasures
that are being applied across the railroad industry as the terrorist threat increases or decreases. The Alert Level
actions include countermeasures that will be applied in three general areas: (1) operations (including transportation,
engineering, and mechanical); (2) information technology and communications; and (3) railroad police. Although
security concerns preclude public disclosure of its contents, the NS Departmental Security Plan outlines the protocol
within NS for all concerned to be notified of AAR Alert Level changes. All NS Operations Division employees are
advised by their supervisors or train dispatchers, as appropriate, of any change in Alert Level and any additional
responsibilities they may incur due to such change.

The NS plan also effectively addresses and complies with Department of Transportation security regulations
pertaining to training and security plans with respect to the transportation of hazardous materials. As part of the
plan, security awareness training is given to all railroad employees who directly affect hazardous material
transportation safety, and this training is integrated into recurring hazardous material training and re-certification
programs. Toward that end, NS, working closely with the National Transit Institute at Rutgers University, has
developed a four-module uniform national training program. NS also has worked with the Transportation Security
Administration (TSA) in developing other industry training programs. More in-depth security training has been
given to those select NS employees who have been given specific security responsibilities, and additional, location-
specific security plans have been developed for certain metropolitan areas and each of six port facilities served by
NS. With respect to the ports, each facility plan has been approved by the applicable Captain of the Port and subject
to inspection by the U.S. Coast Guard.

K11

Additionally, NS engages in close and regular coordination with numerous federal and state agencies, including the
U.S. Department of Homeland Security (DHS), the TSA, the Federal Bureau of Investigation (FBI), the Federal
Railroad Administration (FRA), the U.S. Coast Guard, U.S. Customs and Border Protection, and various state
Homeland Security offices. As one notable example, an NS Police Special Agent, under the auspices of the AAR,
has been assigned to the National Joint Terrorism Task Force (NJTTF) operating out of FBI Headquarters in
Washington, DC to represent and serve as liaison to the North American rail industry. This arrangement improves
logistical flow of vital security and law enforcement information with respect to the rail industry as a whole, while
having the post filled by an NS Special Agent has served to foster a strong working relationship between NS and the
FBI. NS also has become a member of the Customs-Trade Partnership Against Terrorism (C-TPAT) program
sponsored by U.S. Customs. C-TPAT allows NS to work closely with U.S. Customs and its customers to develop
measures that will help ensure the integrity of freight shipments moving on NS, particularly those moving to or
from a foreign country. Based on participation in C-TPAT, NS has ensured that its plan meets all current applicable
security recommendations made by U.S. Customs.

Similarly, NS is guided in its operations by various supplemental security action items issued by DHS and U.S.
Department of Transportation (DOT), U.S. Coast Guard Maritime Security requirements, as well as voluntary
security action items developed in 2006 in collaboration with TSA, DOT, and the freight railroads. Many of the
action items are based on lessons learned from DHS and DOT security assessments of rail corridors in High Threat
Urban Areas (HTUA) begun in 2004. Particular attention is aimed at reducing risk in HTUA by: (1) the
establishment of secure storage areas for rail cars carrying toxic-by-inhalation (TIH) materials; (2) the expedited
movement of trains transporting rail cars carrying TIH materials; (3) the minimization of unattended loaded tank
cars carrying TIH materials; and (4) cooperation with federal, state, local and tribal governments to identify,
through risk assessments, those locations where security risks are the highest. These action items and NS’
compliance initiatives are outlined in the various departmental sections of the NS Departmental Security Plan. NS
has taken appropriate actions to be compliant with the 2008 TSA Final Security Rule addressing Rail Security
Sensitive Materials (RSSM) to ensure these shipments are properly inspected and that positive chain-of-custody is
maintained when required. NS has met the September 2009 deadline to be in compliance with the 2008 Pipeline
and Hazardous Materials Safety Administration (PHMSA) rail-routing regulations outlined in Docket HM-232E.

In 2009, through participation in the Transportation Community Awareness and Emergency Response
(TRANSCAER) Program, NS provided rail accident response training to approximately 4,500 emergency
responders, such as local police and fire personnel, representing over 34,000 man-hours of emergency response
training. NS also conducted railroad operations classes for FBI agents and the railroad liaison agents from Joint
Terrorism Task Forces. NS’ other training efforts throughout 2009 included participation in 10 drills for local,
state, and federal agencies. NS also has ongoing programs to sponsor local emergency responders at the Security
and Emergency Response Training Course (SERTC) conducted at the AAR Transportation Technology Center in
Pueblo, Colorado. Also, the NS annual TRANSCAER Whistle-Stop train makes stops in numerous cities, its
special training cars serving as a resource to an audience of nearly 1,000 emergency responders annually.

Improvements in equipment design also are expected to play a role in enhancing rail security. The Pipeline and
Hazardous Materials Safety Administration (PHMSA), in coordination with the FRA, is amending the Hazardous
Materials Regulations to prescribe enhanced safety measures for rail transportation of TIH materials, including
interim design standards for railroad tank cars. The rule mandates commodity-specific improvements in safety
features and design standards for newly manufactured DOT specification tank cars and an improved top fittings
performance standard. The interim standards established in this rule will enhance the accident survivability of TIH
tank cars.

K12

Item 1A. Risk Factors

NS is subject to significant governmental legislation and regulation over commercial, operating and
environmental matters. Railroads are subject to the enactment of laws by Congress that could increase economic
regulation of the industry. Railroads presently are subject to commercial regulation by the STB, which has
jurisdiction over some routes, rates and fuel surcharges, conditions of service, and the extension or abandonment of
rail lines. The STB also has jurisdiction over the consolidation, merger, or acquisition of control of and by rail
common carriers. Additional economic regulation of the rail industry by Congress or the STB, whether under new
or existing laws, could have a significant negative impact on NS’ ability to determine prices for rail services and
result in a material adverse effect in the future on NS’ financial position, results of operations, or liquidity in a
particular year or quarter. This potential material adverse effect could also result in reduced capital spending on
NS’ rail network or abandonment of lines.

Railroads are subject to safety and security regulation by the DOT and the DHS, which regulate most aspects of NS’
operations. Compliance with the Rail Safety Improvement Act of 2008 will result in additional operating costs
associated with the statutorily mandated implementation of positive train control by 2015. In addition to increased
capital expenditures, implementation may result in reduced operational efficiency and service levels, as well as
increased compensation and benefits expenses and increased claims and litigation costs.

NS’ operations are subject to extensive federal and state environmental laws and regulations concerning, among
other things, emissions to the air; discharges to waterways or ground water supplies; handling, storage,
transportation, and disposal of waste and other materials; and the cleanup of hazardous material or petroleum
releases. The risk of incurring environmental liability – for acts and omissions, past, present, and future – is
inherent in the railroad business. This risk includes property owned by NS, whether currently or in the past, that is
or has been subject to a variety of uses, including NS railroad operations and other industrial activity by past owners
or past and present tenants of NS. Environmental problems that are latent or undisclosed may exist on these
properties, and NS could incur environmental liabilities or costs, the amount and materiality of which cannot be
estimated reliably at this time, with respect to one or more of these properties. Moreover, lawsuits and claims
involving other unidentified environmental sites and matters are likely to arise from time to time, and the resulting
liabilities could have a significant effect on financial position, results of operations, or liquidity in a particular year
or quarter.

NS, as a common carrier by rail, must offer to transport hazardous materials, regardless of risk.
Transportation of certain hazardous materials could create catastrophic losses in terms of personal injury and
property damage costs, and compromise critical parts of our rail network.

NS may be affected by terrorism or war. Any terrorist attack, or other similar event, any government response
thereto, and war or risk of war could cause significant business interruption and may adversely affect NS’ results of
operations, financial position, or liquidity in a particular year or quarter. Because NS plays a critical role in the
nation’s transportation system, it could become the target of such an attack or have a significant role in the
government’s preemptive approach or response to an attack or war.

Although NS currently maintains insurance coverage for third-party liability arising out of war and acts of
terrorism, it maintains only limited insurance coverage for first-party property damage and damage to property in
NS’ care, custody, or control caused by certain acts of terrorism. In addition, premiums for some or all of NS’
current insurance programs covering these losses could increase dramatically, or insurance coverage for certain
losses could be unavailable to NS in the future.

NS may be affected by general economic conditions. Prolonged negative changes in domestic and global
economic conditions affecting the producers and consumers of the commodities NS carries may have an adverse
effect on its operating results, financial position, or liquidity. Economic conditions resulting in bankruptcies of one
or more large customers could have a significant impact on NS’ financial position, results of operations, or liquidity
in a particular year or quarter.

K13

NS may be affected by the impact of environmental regulation on its utility coal customers and/or the value
of certain NS assets. A number of evolving environmental issues could affect the U.S. utility coal market,
including potential regional programs aimed at capping and reducing power plant CO2 emissions and ongoing
efforts at addressing climate change. Although certain utilities have begun adding or are planning to add
emissions control technologies to their electric generating units, allowing them to utilize their existing coal-fired
power plants, future regulatory developments in this area could have a negative effect on NS’ utility coal
customers and/or the value of coal reserves owned by NS and than an adverse effect on NS’ operating results,
financial position, and liquidity.

NS faces competition from other transportation providers. NS is subject to competition from motor carriers,
railroads, and to a lesser extent, ships, barges, and pipelines, on the basis of transit time, pricing, and the quality
and reliability of service. While NS has used primarily internal resources to build or acquire and maintain its rail
system, trucks and barges have been able to use public rights-of-way maintained by public entities. Any future
improvements or expenditures materially increasing the quality or reducing the cost of alternative modes of
transportation in the regions in which NS operates, or legislation granting materially greater latitude for motor
carriers with respect to size or weight limitations, could have a material adverse effect on its financial position,
results of operations, or liquidity in a particular year or quarter.

The operations of carriers with which NS interchanges may adversely affect its operations. NS’ ability to
provide rail service to customers in the U.S. and Canada depends in large part upon its ability to maintain
cooperative relationships with connecting carriers with respect to, among other matters, freight rates, revenue
division, car supply and locomotive availability, data exchange and communications, reciprocal switching,
interchange, and trackage rights. Deterioration in the operations of, or service provided by connecting carriers, or in
our relationship with those connecting carriers, could result in NS’ inability to meet its customers’ demands or
require NS to use alternate train routes, which could result in significant additional costs and network inefficiencies.

NS relies on technology and technology improvements in its business operations. If NS experiences
significant disruption or failure of one or more of its information technology systems, including computer
hardware, software, and communications equipment, NS could experience a service interruption, security breach,
or other operational difficulties, which could have a material adverse impact on its results of operations, financial
condition, and liquidity in a particular year or quarter. Additionally, if NS does not have sufficient capital to
acquire new technology or if it is unable to implement new technology, NS may suffer a competitive disadvantage
within the rail industry and with companies providing other modes of transportation service, which could have a
material adverse effect on its financial position, results of operations, or liquidity in a particular year or quarter.

The vast majority of NS employees belong to labor unions, and labor agreements, strikes, or work
stoppages could adversely affect its operations. More than 80% of NS railroad employees are covered by
collective bargaining agreements with various labor unions. If unionized workers were to engage in a strike, work
stoppage, or other slowdown, NS could experience a significant disruption of its operations. Additionally, future
national labor agreements, or renegotiation of labor agreements or provisions of labor agreements, could
significantly increase NS’ costs for healthcare, wages, and other benefits. Any of these factors could have a
material adverse impact on NS’ financial position, results of operations, or liquidity in a particular year or quarter.

NS may be subject to various claims and lawsuits that could result in significant expenditures. The nature
of NS’ business exposes it to the potential for various claims and litigation related to labor and employment,
personal injury, commercial disputes, freight loss and other property damage, and other matters. Job-related
personal injury and occupational claims are subject to the Federal Employers’ Liability Act (FELA), which is
applicable only to railroads. FELA’s fault-based tort system produces results that are unpredictable and
inconsistent as compared with a no-fault worker’s compensation system. The variability inherent in this system
could result in actual costs being very different from the liability recorded.

K14

Any material changes to current litigation trends or a catastrophic rail accident involving any or all of freight loss
or property damage, personal injury, and environmental liability could have a material adverse effect on NS’
operating results, financial condition, and liquidity to the extent not covered by insurance. NS has obtained
insurance for potential losses for third-party liability and first-party property damages. Specified levels of risk are
retained on a self-insurance basis (currently up to $25 million and above $1 billion per occurrence for bodily
injury and property damage to third parties and $25 million and above $175 million per occurrence for property
owned by NS or in its care, custody, or control). Insurance is available from a limited number of insurers and
may not continue to be available or, if available, may not be obtainable on terms acceptable to NS.

Severe weather could result in significant business interruptions and expenditures. Severe weather conditions
and other natural phenomena, including hurricanes, floods, fires, and earthquakes, may cause significant business
interruptions and result in increased costs, increased liabilities, and decreased revenues, which could have an
adverse effect on NS’ financial position, results of operations, or liquidity in a particular year or quarter.

Unpredictability of demand for rail services resulting in the unavailability of qualified personnel could
adversely affect NS’ operational efficiency and ability to meet demand. Workforce demographics, training
requirements, and the availability of qualified personnel, particularly engineers and trainmen, could each have a
negative impact on NS’ ability to meet demand for rail service. Unpredictable increases in demand for rail
services may exacerbate such risks, which could have a negative impact on NS’ operational efficiency and
otherwise have a material adverse effect on its financial position, results of operations, or liquidity in a particular
year or quarter.

NS may be affected by supply constraints resulting from disruptions in the fuel markets or the nature of
some of its supplier markets. NS consumed about 400 million gallons of diesel fuel in 2009. Fuel availability
could be affected by any limitation in the fuel supply or by any imposition of mandatory allocation or rationing
regulations. If a severe fuel supply shortage arose from production curtailments, increased demand in existing or
emerging foreign markets, disruption of oil imports, disruption of domestic refinery production, damage to
refinery or pipeline infrastructure, political unrest, war or other factors, NS’ financial position, results of
operations, or liquidity in a particular year or quarter could be materially adversely affected. Also, such an event
would impact NS as well as its customers and other transportation companies.

Due to the capital intensive nature and industry-specific requirements of the rail industry, there are high barriers
of entry for potential new suppliers of core railroad items, such as locomotives and rolling stock equipment.
Additionally, NS competes with other industries for available capacity and raw materials used in the production of
certain track materials, such as rail and ties. Changes in the competitive landscapes of these limited-supplier
markets could result in increased prices or material shortages that could materially affect NS’ financial position,
results of operations, or liquidity in a particular year or quarter.

The state of capital markets could adversely affect NS’ liquidity. NS from time-to-time relies on the capital
markets to provide some of its capital requirements, including the issuance of long-term debt instruments and
commercial paper, as well as the sale of certain receivables. Significant instability or disruptions of the capital
markets, including the credit markets, or deterioration of NS’ financial condition due to internal or external factors
could restrict or eliminate NS’ access to, and/or significantly increase the cost of, various financing sources,
including bank credit facilities and issuance of corporate bonds. Instability or disruptions of the capital markets
and deterioration of NS’ financial condition, alone or in combination, could also result in a reduction in NS’ credit
rating to below investment grade, which could prohibit or restrict NS from accessing external sources of short-
and long-term debt financing and/or significantly increase the associated costs.

Item 1B. Unresolved Staff Comments

None.

K15

Item 3. Legal Proceedings

The Ohio Environmental Protection Agency has notified Norfolk Southern that it intends to seek penalties and
require Norfolk Southern to take remedial actions in connection with alleged violations of the Clean Air and
Water Acts stemming from the operation of NS’ coal dock in Ashtabula, Ohio. The Pennsylvania Department of
Environmental Protection has submitted to NS a proposed Consent Assessment of Civil Penalty with respect to
several alleged environmental releases from September 2007 to the present. Although NS will contest liability
and the imposition of any penalties, because these governmental proceedings with respect to environmental laws
and regulations involve potential fines, penalties or other monetary sanctions in excess of $100,000, they are
described here consistent with SEC rules and requirements. NS does not believe that the outcome of these
proceedings will have a material effect on its financial position, results of operations, or liquidity.

On November 6, 2007, various antitrust class actions filed against NS and other Class I railroads in various
Federal district courts regarding fuel surcharges were consolidated in the District of Columbia by the Judicial
Panel on Multidistrict Litigation. NS believes the allegations in the complaints are without merit and intends to
vigorously defend the cases. NS does not believe that the outcome of these proceedings will have a material
effect on its financial position, results of operations, or liquidity. A lawsuit containing similar allegations against
NS and four other major railroads that was filed on March 25, 2008, in the U.S. District Court for the District of
Minnesota was voluntarily dismissed by the plaintiff subject to a tolling agreement entered into in August 2008.

On April 24, 2008, the United States Department of Justice (DOJ) brought an action against NS for alleged
violations of federal environmental laws resulting from the discharge of chlorine and oil that occurred as a result
of the January 6, 2005 derailment in Graniteville, SC, including claims for civil penalties as well as injunctive
relief. Although NS’ June 24, 2008 motion to dismiss for failure to allege sufficient facts was granted, DOJ was
given leave to, and did, amend its complaint. The litigation has been stayed by the district court as the parties
work to conclude an agreed upon consent decree, which when finalized will include fines in excess of $100,000.
NS does not believe that the resolution of these claims will have a material adverse effect on its financial position,
results of operations, or liquidity.

Item 4. Submission of Matters to a Vote of Security Holders

There were no matters submitted to a vote of security holders during the fourth quarter of 2009.

K16

Executive Officers of the Registrant.

Norfolk Southern’s executive officers generally are elected and designated annually by the Board of Directors at
its first meeting held after the annual meeting of stockholders, and they hold office until their successors are
elected. Executive officers also may be elected and designated throughout the year as the Board of Directors
considers appropriate. There are no family relationships among the officers, nor any arrangement or
understanding between any officer and any other person pursuant to which the officer was selected. The
following table sets forth certain information, as of February 1, 2010, relating to the executive officers.

Name, Age, Present Position

Business Experience During Past Five Years

Charles W. Moorman, 57,
Chairman, President and
Chief Executive Officer

Present position since February 1, 2006.
Served as President and Chief Executive Officer from November 1, 2005
to February 1, 2006; and as President from October 1, 2004 to
November 1, 2005.

Deborah H. Butler, 55,
Executive Vice President –
Planning and Chief
Information Officer

Present position since June 1, 2007. Served as Vice President –
Customer Service from July 1, 2004 to June 1, 2007.

James A. Hixon, 56,
Executive Vice President –
Law and Corporate Relations

Present position since October 1, 2005.
Served as Executive Vice President – Finance and Public Affairs from
October 1, 2004 to October 1, 2005.

Mark D. Manion, 57,
Executive Vice President and
Chief Operating Officer

Present position since April 1, 2009.
Served as Executive Vice President – Operations from October 1, 2004
to April 1, 2009.

John P. Rathbone, 57,
Executive Vice President –
Administration

Present position since October 1, 2004.

Donald W. Seale, 57,
Executive Vice President and
Chief Marketing Officer

Present position since April 1, 2006.
Served as Executive Vice President – Sales and Marketing from
October 1, 2004 to April 1, 2006.

James A. Squires, 48,
Executive Vice President –
Finance and Chief Financial
Officer

Present position since July 1, 2007.
Served as Executive Vice President – Finance from April 1, 2007 to
July 1, 2007; as Senior Vice President – Financial Planning from April 1,
2006 to April 1, 2007; and as Senior Vice President – Law from October 1,
2004 to April 1, 2006.

Daniel D. Smith, 57,
Senior Vice President –
Energy and Properties

Clyde H. Allison, Jr., 46,
Vice President and Controller

Present position since December 1, 2003.

Present position since April 1, 2009.
Served as Assistant Vice President Corporate Accounting from
February 1, 2008 to April 1, 2009; as Assistant Vice President Accounting
Operations from June 1, 2006 to February 1, 2008; and Assistant
Vice President Strategic Sourcing from November 1, 2001 to June 1, 2006.

K17

PART II

NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES (NS)

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities

NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES
STOCK PRICE AND DIVIDEND INFORMATION

The Common Stock of Norfolk Southern Corporation, owned by 37,486 stockholders of record as of December
31, 2009, is traded on the New York Stock Exchange under the symbol “NSC.” The following table shows the
high and low sales prices as reported by Bloomberg L.P. on its internet-based service and dividends per share, by
quarter, for 2009 and 2008.

2009

Market Price
High
Low
Dividends per share

2008

Market Price
High
Low
Dividends per share

1st

2nd

Quarter

3rd

4th

49.90
26.95
0.34

41.23
34.43
0.34

49.23
35.87
0.34

54.24
43.26
0.34

1st

2nd

3rd

4th

56.89
44.15
0.29

67.38
54.94
0.29

73.64
57.82
0.32

65.04
43.29
0.32

___________________________________________________________________________________________

ISSUER PURCHASES OF EQUITY SECURITIES

(a) Total Number
of Shares
(or Units)
Purchased (1)

(b) Average
Price Paid
per Share
(or Unit)

(d) Maximum Number
(or Approximate Dollar
Value) of Shares (or Units)
that may yet be Purchased
Under the Plans or Programs(2)

3,511

2,175

5,686

51.86

52.29

10,312,150

Period

October 1-31, 2009

November 1-30, 2009

December 1-31, 2009

Total

(1)

(2)

Represents shares tendered by employees in connection with the exercise of stock options under the
Long-term Incentive Plan.
On November 22, 2005, the Board of Directors authorized a share repurchase program, pursuant to which
up to 50 million shares of Common Stock could be purchased through December 31, 2015. On March 27,
2007, the Board of Directors amended the program and increased the number of shares that may be
repurchased to 75 million, and shortened the repurchase term by five years to December 31, 2010.

K18

Item 6. Selected Financial Data

NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES
FIVE-YEAR FINANCIAL REVIEW

2009

2008
2006
2007
($ in millions, except per share amounts)

20051

RESULTS OF OPERATIONS
Railway operating revenues
Railway operating expenses
Income from railway
operations

Other income – net
Interest expense on debt
Income before income taxes

Provision for income taxes
Net income

PER SHARE DATA
Net income – basic2
– diluted
Dividends
Stockholders’ equity at year end

FINANCIAL POSITION
Total assets
Total debt
Stockholders’ equity

OTHER
Capital expenditures

Average number of shares
outstanding (thousands)
Number of stockholders at year end
Average number of employees:
Rail
Nonrail
Total

$
$
$
$

$
$
$

7,969
6,007

1,962

127
467
1,622

588
1,034

2.79
2.76
1.36
28.06

27,369
7,153
10,353

10,661
7,577

3,084

110
444
2,750

1,034
1,716

4.58
4.52
1.22
26.23

26,297
6,667
9,607

$
$
$
$

$
$
$

$
$
$
$

$
$
$

9,432
6,847

2,585

93
441
2,237

773
1,464

3.73
3.68
0.96
25.64

26,144
6,368
9,727

$
$
$
$

$
$
$

9,407
6,850

2,557

149
476
2,230

749
1,481

3.62
3.57
0.68
24.19

26,028
6,600
9,615

$
$
$
$

$
$
$

8,527
6,410

2,117

74
494
1,697

416
1,281

3.17
3.11
0.48
22.63

25,859
6,930
9,276

1,299

1,558

1,341

1,178

1,025

367,077
37,486

28,173
420
28,593

372,276
35,466

30,241
468
30,709

389,626
36,955

30,336
470
30,806

405,988
38,900

30,079
462
30,541

404,170
48,180

29,851
443
30,294

2005 provision for income taxes includes a $96 million benefit related to the reduction of NS’ deferred income tax
liabilities resulting from tax legislation enacted by Ohio. This benefit increased net income by $96 million, or 23
cents per diluted share.
Prior year periods reflect the retrospective application of Financial Accounting Standards Board Staff Position,
Emerging Issues Task Force No. 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment
Transactions are Participating Securities” (Accounting Standards Codification (ASC) 260-10), which was adopted
in 2009.

See accompanying Consolidated Financial Statements and notes thereto.

K19

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Norfolk Southern Corporation and Subsidiaries
Management’s Discussion and Analysis of
Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the Consolidated Financial Statements
and Notes and the Selected Financial Data.

OVERVIEW

While NS’ results in 2009 reflect the decline of the domestic and global economies, they also demonstrate NS’
ability to focus on safety, service, asset management, and sustainability—all while controlling costs. Revenues
decreased $2.7 billion, or 25%, in 2009, as manufacturers reduced production to meet sagging consumer demand
and the decline in oil prices resulted in lower fuel surcharge revenues. Carloadings were down 1.4 million units,
or 19%, reflecting declines across all commodity groups. NS partially offset this 25% decline in revenues with a
$1.6 billion, or 21%, decrease in operating expenses. Notwithstanding these cost reductions, income from railway
operations fell 36%, and the operating ratio, a measure of the amount of operating revenues consumed by
operating expenses, rose to 75.4%.

Despite the decline in NS’ net income for 2009, cash provided by operating activities was $1.9 billion, which
exceeded cash used for capital expenditures and dividends. Net proceeds from borrowings minus debt
repayments was $403 million resulting in an increase in cash, cash equivalents, and short-term investments, which
at December 31, 2009 totaled $1.1 billion.

Looking forward to 2010, NS expects revenues to increase, reflecting improved average revenue per unit and
higher traffic volume due to a gradual, yet steady economic recovery. NS plans to continue to improve service
and maintain a market-based approach to pricing.

SUMMARIZED RESULTS OF OPERATIONS

2009 Compared with 2008

Net income in 2009 was $1.0 billion, or $2.76 per diluted share, down $682 million, or 40%, compared with
$1.7 billion, or $4.52 per diluted share, in 2008. The decrease in net income was primarily due to lower income
from railway operations that was offset in part by lower income taxes (see Note 3). Railway operating revenues
decreased $2.7 billion, reflecting lower traffic volumes and lower average revenue per unit primarily a result of
decreased fuel surcharges. Railway operating expenses decreased $1.6 billion, principally due to lower volume-
related expenses and fuel prices.

Oil prices affect NS’ results of operations in a variety of ways and can have an overall favorable or unfavorable
impact in any particular period. In addition to the impact of oil prices on general economic conditions and traffic
volume, oil prices directly affect NS’ revenues through market-based fuel surcharges and contract escalators (see
“Railway Operating Revenues”) and also affect fuel costs (see “Railway Operating Expenses”). For 2009,
excluding the impact of decreased consumption, the decline in fuel surcharge revenue was greater than the decline
in fuel expense. Future changes in oil prices may cause volatility in operating results that could be material to a
particular year or quarter.

K20

2008 Compared with 2007

Net income in 2008 was $1.7 billion, up $252 million, or 17%, compared with 2007. Diluted earnings per share
were $4.52, up 84¢, or 23%. The greater percentage increase in per share earnings was due to fewer shares
outstanding as a result of NS’ share repurchase program (see Note 14). The increase in net income was primarily
due to higher income from railway operations that was offset in part by higher income taxes (see Note 3).
Railway operating revenues increased $1.2 billion, as higher average revenue per unit outweighed lower traffic
volumes. Railway operating expenses increased $730 million, principally due to higher fuel costs and increased
compensation and benefits expenses.

DETAILED RESULTS OF OPERATIONS

Railway Operating Revenues

Railway operating revenues were $8.0 billion in 2009, $10.7 billion in 2008, and $9.4 billion in 2007. The
following table presents a three-year comparison of revenues, volume, and average revenue per unit by market
group.

Revenues

2009

2008

2007

2009

Units
2008

($ in millions)

(in thousands)

Revenue per Unit

2007

2009

2008
($ per unit)

2007

$ 2,264 $

3,111 $

2,315

1,418.5

1,765.7

1,699.4 $

1,596 $ 1,762 $

1,363

1,181
1,056
745
666
527
4,175

1,282
1,238
1,251
898
823
5,492

1,047
1,166
1,149
860
974
5,196

563.3
345.0
504.2
306.4
289.4
2,008.3

612.4
393.7
742.4
394.1
412.2
2,554.8

601.5
426.7
783.6
428.1
533.0
2,772.9

2,097
3,061
1,478
2,172
1,821
2,079

2,093
3,144
1,686
2,280
1,997
2,150

1,740
2,732
1,467
2,010
1,827
1,874

Coal
General merchandise:
Agr./consumer/gov’t.
Chemicals
Metals/construction
Paper/clay/forest
Automotive
General merchandise

Intermodal

1,530

2,058

1,921

2,530.5

3,029.0

3,120.7

605

679

615

Total

$ 7,969 $ 10,661 $

9,432

5,957.3

7,349.5

7,593.0 $

1,338 $ 1,451 $

1,242

Revenues decreased $2.7 billion in 2009, but increased $1.2 billion in 2008. As reflected in the table on the
following page, the decrease in 2009 was due to decreased traffic volumes and lower average revenue per unit, as
a result of lower fuel surcharges that more than offset rate increases. The improvement in 2008 was the result of
increased average revenue per unit, including fuel surcharge revenue, which more than offset decreased traffic
volumes. Fuel surcharge revenue amounted to $370 million in 2009, compared with $1.6 billion in 2008, and
$792 million in 2007. If fuel prices remain at or near year-end 2009 levels, fuel surcharge revenues will increase
in 2010.

Many of NS’ negotiated fuel surcharges for coal and general merchandise traffic are based on the monthly
average price of West Texas Intermediate Crude Oil (WTI Average Price). These surcharges are reset the first
day of each calendar month based on the WTI Average Price for the second preceding calendar month. This two-
month lag in applying WTI Average Price decreased fuel surcharge revenue by approximately $50 million in
2009 and increased fuel surcharge revenue by approximately $100 million in 2008.

K21

Revenue Variance Analysis
Increases (Decreases)

2009 vs. 2008

2008 vs. 2007

($ in millions)

Traffic volume (units)
Revenue per unit/mix
Total

(2,020)
(672)
(2,692)

(302)
1,531
1,229

For 2009, the unfavorable volume variance accounted for 75% of the total variance, reflecting traffic volume
declines for all commodity groups. Volumes declined by 1.4 million units, or 19%, reflecting the weakened
economy. The unfavorable revenue per unit/mix variance was driven by decreased fuel surcharges, offset in part
by higher rates.

In 2008, revenues increased $1.2 billion compared to 2007, reflecting large increases in average revenue per unit,
a result of higher rates and increased fuel surcharges. Traffic volumes for all commodity groups except coal and
agriculture/consumer products/government decreased compared to 2007.

On January 26, 2007, the Surface Transportation Board (STB) issued a decision that the type of fuel surcharge
imposed by NS and most other large railroads – a fuel surcharge based on a percentage of line haul revenue –
would no longer be permitted for regulated traffic that moves under public (tariff) rates. The STB gave the
railroads a 90-day transition period to adjust their fuel surcharge programs. During the second quarter of 2007,
NS discontinued assessing fuel surcharges on its published (non-intermodal) public rates. Adjustments to public
prices now reflect ongoing market conditions. The traffic moving under these tariffs and public quotes comprises
about 10% of NS’ total revenue base.

COAL revenues decreased $847 million, or 27%, compared with 2008, reflecting a 20% decrease in traffic
volume due to lower coal consumption in the utility and global raw steel sectors and lower average revenue per
unit. Coal average revenue per unit was down 9% compared with 2008, reflecting decreased fuel surcharges and
declining rate adjustment factors that more than offset rate increases. For 2010, average revenue per unit is
expected to increase reflecting the effects of higher rates comprised of pricing increases, increasing contract
escalators, higher fuel surcharges, and increased length of haul for export coal traffic.

Coal represented 29% of NS’ revenues in 2009 and 80% of shipments handled originated on NS’ lines. As shown
in the following table, tonnage declined in all coal markets.

Total Coal, Coke, and Iron Ore Tonnage

Utility
Export
Domestic metallurgical
Industrial
Total

2009

2008

2007

(Tons in thousands)

120,278
17,885
11,848
7,509
157,520

144,451
23,069
18,155
8,553
194,228

142,734
15,564
17,873
9,794
185,965

In 2008, coal revenues increased $796 million, or 34%, compared with 2007, reflecting higher rates, including
fuel surcharges, and a 4% increase in traffic volume. Coal average revenue per unit was up 29% compared with
2007, reflecting higher rates (which were comprised of pricing increases, contract escalators and the effect of
increased longer-haul export coal traffic) and increased fuel surcharges.

K22

NS was recently involved in litigation with Virginia Electric and Power Company/Old Dominion Electric
Cooperative (Virginia Power) regarding rate adjustment provisions in a transportation contract between them. NS
was also recently involved in litigation with a coal customer to enforce provisions of a transportation contract
related to reimbursement of certain infrastructure expenses incurred by NS and minimum tonnage commitments
and related deficit charges. NS settled both of these matters during the fourth quarter of 2009. The settlements
did not have a material impact on NS’ financial condition, results of operations, or liquidity.

Utility coal tonnage decreased 17% compared with 2008, a result of lower demand for electricity induced by the
downturn in the U.S. economy, natural gas competition, and utility coal stockpiles that were above target levels
across NS’ service area.

In 2008, utility coal tonnage increased 1% compared with 2007, as a result of modest stockpile growth in the
Northeast.

For 2010, NS expects electricity demand and natural gas prices to increase, which should lead to higher coal-fired
generation and demand. However, utility coal tonnage may lag this recovery due to high stockpile levels, at least
through the first half of the year.

Export coal tonnage decreased 22% compared to 2008, reflecting the global recession, reduced demand for steel
production and high inventory levels. Norfolk volume decreased about 34,000 carloads, or 20%, and Baltimore
volume was down about 21,000 carloads, or 38%.

In 2008, export coal tonnage increased 48% compared to 2007, primarily due to increased global demand coupled
with weather-related supply constraints in Australia, reduced export volume from China, and the weak U.S.
dollar. Norfolk volume increased about 51,000 carloads, or 39%, and Baltimore volume was up about 28,000
carloads, or 102%.

For 2010, export coal tonnage is expected to increase, reflecting improved demand for raw steel production.

Domestic metallurgical coal, coke, and iron ore tonnage decreased 35% compared with 2008, reflecting reduced
demand for raw steel caused by the downturn in the U.S. economy which led to blast furnace outages, reduced
coke production schedules, and high inventory levels.

In 2008, domestic metallurgical coal, coke, and iron ore tonnage increased 2% compared with 2007, reflecting the
start up of a new coke plant.

For 2010, domestic metallurgical coal, coke, and iron ore tonnage is expected to improve as the economy
continues to recover, resulting in increased demand for raw steel production.

Other coal tonnage (principally steam coal shipped to industrial plants) decreased 12% compared to 2008,
principally due to reduced production at NS-served plants caused by the downturn in the U.S. economy. In 2008,
other coal tonnage decreased 13% compared to 2007, primarily due to coal supply constraints.

For 2010, other coal tonnage is expected to be down compared to 2009, reflecting reduced industrial coal
consumption.

GENERAL MERCHANDISE revenues in 2009 decreased $1.3 billion, or 24%, compared with 2008, reflecting
a 21% decline in traffic volume and a 3% decrease in average revenue per unit, as higher rates were
overshadowed by decreased fuel surcharge revenues.

K23

In 2008, general merchandise revenues increased $296 million, or 6%, compared with 2007, as a 15% increase in
average revenue per unit, reflecting continued market-based pricing and higher fuel surcharges, more than offset
an 8% decline in traffic.

Agriculture, consumer products, and government revenues decreased 8% in 2009, compared with 2008. The
revenue decline resulted from an 8% decrease in traffic volumes as plant closures and production curtailments led
to fewer shipments of fertilizer and corn.

In 2008, agriculture, consumer products, and government revenues increased 22%, compared with 2007. The
revenue improvement resulted from higher average revenue per unit, which reflected increased rates and higher
fuel surcharge revenues. Traffic volume increased 2% as more ethanol, military, feed, soybeans, and food oils
shipments offset declines in fertilizers, corn, beverages, and consumer products.

For 2010, agriculture revenues are expected to increase as a result of increased volumes and higher average
revenue per unit, reflecting expected growth in the agri-fuels market, including corn for ethanol production and
finished ethanol as well as increased fertilizer shipments.

Chemicals revenues in 2009 decreased 15%, compared with 2008, due to a 12% decrease in traffic volume and a
3% decline in average revenue per unit, primarily a result of lower fuel surcharges. The decline in traffic volume
was a result of continued weakness in housing construction which drove declines in industrial intermediates,
plastics and miscellaneous chemicals. Volumes associated with petroleum-based products also declined as a
result of reduced demand for asphalt and production curtailments.

In 2008, chemicals revenue increased 6%, compared with 2007, a result of increased rates and higher fuel
surcharge revenue. Traffic volume declined 8%, reflecting continued weakness in both industrial intermediates
and plastics (linked to housing construction declines) in addition to miscellaneous chemicals and petroleum-based
products.

For 2010, chemicals revenues are expected to improve, principally due to higher average revenue per unit and
modestly increased traffic volumes.

Metals and construction revenues decreased 40% in 2009, reflecting a 32% decrease in traffic volume and a
12% decline in average revenue per unit, primarily a result of lower fuel surcharges. The decline in traffic
volume was principally due to lower coil, scrap metal, iron and steel shipments, in addition to reduced demand for
construction materials as a result of continued weakness in the housing, infrastructure, and automotive sectors.

In 2008, metals and construction revenues increased 9% as a 15% increase in average revenue per unit that
resulted from increased rates and higher fuel surcharge more than offset the effects of a 5% decrease in traffic
volume. The decline in volume was due to reduced demand for construction materials and lower coil, iron, and
steel shipments, reflecting the weak housing and automotive sectors.

For 2010, metals and construction revenues are expected to increase as a result of a rise in average revenue per
unit, and higher construction-related traffic volumes due to growth driven by increased federal and state
infrastructure projects and recovery in residential construction.

Paper, clay, and forest products revenues decreased 26% in 2009, compared with 2008, due to a 22% decrease
in traffic volumes and a 5% decline in average revenue per unit, primarily a result of lower fuel surcharges. The
volume decline reflected lower pulp board, lumber, kaolin, printing paper, and wood chip shipments due to
reduced U. S. paper production and the slowdown in the housing market.

K24

In 2008, paper, clay, and forest products revenues increased 4% compared with 2007 due to a 13% increase in
average revenue per unit which more than offset an 8% decrease in traffic volume. The volume decline reflected
the continued housing slowdown and increased trucking capacity available to paper customers.

For 2010, paper, clay, and forest products revenues are expected to be modestly higher as slight average revenue
per unit increases will be offset in part by slightly lower volumes driven by expectations for a gradual economic
recovery during the course of the year as the housing market rebounds from historical lows.

Automotive revenues decreased 36% in 2009, compared to 2008, reflecting lower traffic volumes and decreased
average revenue per unit as fuel surcharges were lower. Volumes decreased 30%, primarily as a result of a 32%
decrease in North American light vehicle production as manufacturers cut production in line with consumer
demand.

In 2008, automotive revenues decreased 16% compared to 2007 as lower traffic volumes offset higher average
revenue per unit. Volumes decreased 23%, reflecting reduced North American sales and production. Automotive
manufacturers, especially the domestic producers, continued to experience significant sales declines during the
year. Three assembly plants closed during the year and six implemented shift reductions. In addition, one
manufacturer temporarily closed an assembly plant to retool for a new product in 2010.

For 2010, automotive revenues are expected to increase driven by higher average revenue per unit related to
network changes and the renegotiation of several contracts. Automotive volumes are expected to remain
relatively flat.

INTERMODAL revenues decreased $528 million, or 26%, compared with 2008, reflecting a 16% reduction in
traffic volume and an 11% decrease in average revenue per unit. In 2009, all intermodal segments experienced
depressed volumes, reflecting the weak economy and lower consumer demand. International traffic volume
declined 30%; Premium business, which includes parcel and less-than-truckload (LTL) carriers, decreased 14%;
Triple Crown Services (Triple Crown), a service with rail-to-highway trailers, experienced a 10% drop in volume;
and Domestic volume (which includes truckload and intermodal marketing companies’ volumes) decreased less
than 1%.

In 2008, intermodal revenues increased $137 million, or 7%, compared with 2007, as a 10% increase in average
revenue per unit (including fuel surcharges) offset a 3% reduction in traffic volumes. Domestic volume increased
8% compared with 2007, reflecting the relative fuel efficiency of intermodal versus over-the-road transportation
and service improvements. International traffic volume declined 9%, primarily driven by the weak economy and
less inland rail movement of West Coast port traffic that was partially offset by East Coast port volume growth.
The Premium business, which includes parcel and LTL carriers, decreased 6%, as reduced private empty
movements and soft parcel business offset LTL conversions. Triple Crown, a service with rail-to-highway
trailers, experienced a 3% drop in volume primarily driven by reduced auto parts shipments.

For 2010, intermodal revenues are expected to experience a moderate increase due to higher average revenue per
unit and volumes as a result of a slowly strengthening economy.

Railway Operating Expenses

Railway operating expenses in 2009 were $6 billion, down $1.6 billion, or 21%, compared to 2008. Expenses in
2008 were $7.6 billion, up $730 million, or 11%, compared to 2007. The decrease in 2009 was primarily due to
lower volume-related expenses and lower fuel prices. The increase in 2008 was primarily due to higher fuel costs
and increased compensation and benefits expenses. The railway operating ratio, which measures the percentage
of operating revenues consumed by operating expenses, rose to 75.4% in 2009, compared with 71.1% in 2008 and
72.6% in 2007.

K25

The following table shows the changes in railway operating expenses summarized by major classifications.

Operating Expense Variances
Increases (Decreases)

2009 vs. 2008

2008 vs. 2007

($ in millions)

Compensation and benefits
Purchased services and rents
Fuel
Depreciation
Materials and other
Total

(283) $
(196)
(913)
33
(211)
(1,570) $

132
48
469
29
52
730

Compensation and benefits, which represents 40% of total operating expenses, decreased $283 million, or 11%,
compared with 2008, primarily due to lower volume-related payroll (down $217 million); reduced incentive and
stock-based compensation (down $117 million); the absence of the cost of lump-sum payments due under the
2008 Brotherhood of Locomotive Engineers and Trainmen (BLET) agreement ($31 million); and, lower payroll
taxes (down $26 million). These decreases were partially offset by increased wage rates (up $53 million);
increased pension costs (up $42 million); and higher medical benefits (up $25 million).

In 2008, compensation and benefits increased $132 million, or 5%, compared with 2007, primarily due to higher
incentive compensation (up $66 million); increased wage rates (up $54 million); costs associated with lump-sum
payments due under the BLET agreement; higher payroll taxes (up $15 million); and, the absence of the 2007
employment tax refund ($9 million). These were partially offset by lower costs associated with trainees (down
$19 million); lower medical benefits resulting from higher employee contributions (down $19 million); and, lower
stock-based compensation (down $7 million). In 2008, compensation and benefits expense also benefited from a
net pension credit of $39 million.

NS employment averaged 28,593 in 2009 compared with 30,709 in 2008 and 30,806 in 2007. The 2009 decrease
was a direct result of volume declines during the year. NS monitors forecasted volumes in light of current
economic conditions to ensure appropriate employment levels for service needs. For 2010, NS expects agreement
wages and premiums for medical benefits, combined, will increase by approximately $148 million compared to
2009.

Purchased services and rents includes the costs of services purchased from outside contractors, including the net
costs of operating joint (or leased) facilities with other railroads and the net cost of equipment rentals. This
category of expenses decreased $196 million, or 12%, in 2009 compared to 2008, but increased $48 million, or
3%, in 2008 compared to 2007.

Purchased services costs were $1.087 billion in 2009, $1.242 billion in 2008, and $1.172 billion in 2007. The
decrease in 2009 reflected lower volume-related expenses such as transportation operating costs (including
automotive-related costs and crew transportation expenses), intermodal operations costs, and mechanical and
engineering expenses (largely because of reduced maintenance activities). These declines were offset in part by
increased professional and legal services. The increase in 2008 reflected higher intermodal operations costs,
transportation operating costs, and professional and legal services.

Equipment rents, which includes the cost to NS of using equipment (mostly freight cars) owned by other railroads
or private owners less the rent paid to NS for the use of its equipment, amounted to $316 million, $357 million,
and $379 million for 2009, 2008, and 2007, respectively. The decrease in 2009 and 2008 was principally due to
lower shipment volumes while 2008 also reflected improved fleet utilization.

K26

Fuel expense, which includes the cost of locomotive fuel as well as other fuel used in railway operations,
decreased $913 million, or 56%, in 2009 compared with 2008, but increased $469 million, or 40%, in 2008
compared with 2007. The decline in 2009 was principally the result of lower fuel prices which had an impact of
$600 million and reduced fuel consumption which had an impact of $313 million. The increase in 2008 reflected
higher fuel prices which had an impact of $511 million that was offset in part by a decline in consumption which
had an impact of $42 million. Locomotive fuel prices declined 47% in 2009 compared with a 45% increase in
2008, and locomotive fuel consumption was down 19% in 2009 and 3% in 2008.

Depreciation expense increased $33 million, or 4%, in 2009 compared to 2008, and $29 million, or 4%, in 2008
compared to 2007, reflecting substantial capital investments and improvements as NS continues to invest in its
infrastructure and equipment.

Materials and other expenses (including the estimates of costs related to personal injury, property damage, and
environmental matters) decreased $211 million, or 25%, in 2009 compared with 2008, but increased $52 million,
or 7%, in 2008 compared with 2007, as shown in the following table.

Materials
Casualties and other claims
Other

2009

2008
($ in millions)

2007

309 $
102
230

380 $
180
292

641 $

852 $

359
171
270

800

The decrease in 2009 reflects lower locomotive, freight car, and roadway materials expenses, lower loss and damage
claims, favorable personal injury claims development, reduced employee travel costs, a $21 million favorable
adjustment related to settlement of a multi-year state tax dispute, and the absence of the 2008 Avondale Mills
settlement (see additional discussion below).

The increase in 2008 was primarily due to costs associated with the Avondale Mills settlement, as well as higher loss
and damage claims and increased material costs for equipment and roadway repairs. These increases were partially
offset by favorable personal injury claims development.

In April 2008, NS settled the lawsuit brought by Avondale Mills for claims associated with the January 6, 2005
derailment in Graniteville, SC. A portion of the settlement was not reimbursed by insurance and was included in
2008 expenses. The total liability related to the derailment represents NS’ best estimate based on current facts and
circumstances. The estimate includes amounts related to property damage, personal injury and response costs. NS’
commercial insurance policies are expected to cover substantially all expenses related to this derailment above the
unreimbursed portion and NS’ self-insured retention, including NS’ response costs and legal fees. The Consolidated
Balance Sheets reflect long-term receivables for estimated recoveries from NS’ insurance carriers. NS is engaged in
arbitration with two of its insurance carriers that failed to respond to insurance claims submitted by NS. NS believes
these expenses are covered by the insurance policies and recoveries of the contested amounts are probable.
Accordingly, NS has recorded the full recovery attributable to each carrier ($100 million and $43 million).

The largest component of casualties and other claims expense is personal injury costs. Cases involving occupational
injuries comprised about 48% of total employee injury cases resolved and about 19% of total payments made. With
its long-established commitment to safety, NS continues to work actively to eliminate all employee injuries and to
reduce the associated costs. With respect to occupational injuries, which are not caused by a specific accident or
event but allegedly result from a claimed exposure over time, the benefits of any existing safety initiatives may not be
realized immediately. These types of claims are being asserted by former or retired employees, some of whom have

K27

not been actively employed in the rail industry for decades. The rail industry remains uniquely susceptible to
litigation involving job-related accidental injury and occupational claims because of the Federal Employers’ Liability
Act (FELA), which is applicable only to railroads. FELA’s fault-based system, which covers employee claims for
job-related injuries, produces results that are unpredictable and inconsistent as compared with a no-fault workers’
compensation system.

NS maintains substantial amounts of insurance for potential third-party liability and property damage claims. It also
retains reasonable levels of risk through self-insurance (see Note 17). NS expects insurance costs to be slightly higher
in 2010.

Other Income – Net

Other income – net was $127 million in 2009, $110 million in 2008, and $93 million in 2007 (see Note 2). The
increase in 2009 reflected higher net returns from corporate-owned life insurance (up $32 million) offset in part by
fewer gains on the sale of property (down $11 million).

The increase in 2008 reflected the absence of expenses related to synthetic fuel adjustments (see “Income Taxes”
below), reduced other interest expense ($27 million) largely due to adjustments to reflect the outcome of certain tax
examinations and higher coal royalties (up $12 million). These benefits were offset in part by lower returns and
higher borrowing costs on corporate-owned life insurance (down $38 million), lower interest income (down
$25 million), fewer gains on sales of property and investments (down $22 million), and lower equity in the earnings
of Conrail (down $16 million), which reflects the absence of a tax audit settlement recorded by Conrail in 2007
($18 million).

NS has membership interests representing ownership in companies that owned and operated facilities that produced
synthetic fuel from coal. In addition, NS purchased two facilities that produced synthetic fuel from coal in 2007. The
production of synthetic fuel resulted in tax credits as well as expenses related to the investments. The expenses are
recorded as a component of “Other income – net” and the tax credits, as well as tax benefits related to the expenses,
are reflected in “Provision for income taxes” (see further discussion below).

Income Taxes

Income tax expense in 2009 was $588 million, for an effective rate of 36%, compared with effective rates of 38% in
2008 and 35% in 2007. The decrease in the rate for 2009 was primarily due to improved net returns from corporate-
owned life insurance and the favorable resolution of state tax issues. The increase in the rate for 2008 was primarily
due to the absence of synthetic fuel-related tax credits that expired at the end of 2007.

The tax credits generated by NS’ synthetic fuel-related investments reduced the effective tax rate by 3% in 2007. Net
income in 2007 reflected $13 million in net benefits from these credits as shown below:

Effect in “Other income – net:”
Expenses on synthetic fuel-related investments
Effect in “Provision for income taxes:”
Tax credits
Tax benefit of expenses on synthetic-fuel related investments
Total reduction of income tax expense
Effect in “Net income:”
Net benefit from synthetic-fuel related investments

2007
($ in millions)

60
30
90

K28

Bonus depreciation was allowed for federal income taxes for 2008 and 2009 but expired at the end of 2009. As a
result, current taxes have been lower in recent years than might be expected in future years.

During 2009, the Internal Revenue Service (IRS) concluded its examination of NS’ 2006 and 2007 consolidated
federal income tax returns without a material effect on income tax expense. NS’ consolidated federal income tax
return for 2008 is being audited by the IRS.

FINANCIAL CONDITION, LIQUIDITY, AND CAPITAL RESOURCES

Cash provided by operating activities, NS’ principal source of liquidity, was $1.9 billion in 2009 compared with
$2.7 billion in 2008 and $2.3 billion in 2007. The decline in 2009 reflects the $1.1 billion decrease in income from
railway operations offset in part by lower income tax payments. The improvement in 2008 resulted from increased
railway operating income and from bonus tax depreciation which reduced current tax payments. NS had working
capital of $457 million at December 31, 2009, compared with a working capital deficit of $106 million at December
31, 2008. The improvement was largely due to higher cash, cash equivalents and short-term investment balances at
year end, as well as the impact of lower income from railway operations that resulted in decreases in current income
taxes and accounts payable, offset in part by decreases in accounts receivable and increases in short-term debt. NS
expects that cash on hand combined with cash flow provided by operating activities will be sufficient to meet its
ongoing obligations. NS’ cash, cash equivalents, and short-term investment balances totaled $1.1 billion and
$618 million at December 31, 2009 and 2008, respectively.

Contractual obligations at December 31, 2009, comprised of NS’ long-term debt (including capital leases) (see
Note 8), operating leases (see Note 9), agreements with CRC and long-term advances from Conrail (see Note 5),
unconditional purchase obligations (see Note 17), and unrecognized tax benefits (see Note 3),were as follows:

Total

2010

Payments Due By Period
2011-
2012

2013-
2014

($ in millions)

2015 and
Subsequent

Other

Long-term debt and
capital lease principal
Operating leases
Agreements with CRC
Unconditional purchase
obligations
Long-term advances
from Conrail
Unrecognized tax
benefits*
Total

7,053 $
724
424

228

133

94
8,656 $

374
111
29

105

--
619

414
177
58

492
124
58

5,773 $
312
279

133

--
693

--
697

--
6,553 $

--
--
--

94
94

* When the amount and timing of liabilities for unrecognized tax benefits can be reasonably estimated, the amount is
shown in the table under the appropriate period. When the year of settlement cannot be reasonably estimated, the
amount is shown in the Other column.

Off balance sheet arrangements consist of obligations related to operating leases, which are included in the table of
contractual obligations above and disclosed in Note 9.

Cash used in investing activities was $1.5 billion in 2009, compared with $1.2 billion in 2008 and $1 billion in 2007.
The increase in 2009 primarily reflected lower proceeds from investment sales and higher investment purchases,
offset in part by lower property additions. The increase in 2008 primarily reflected increased property additions.

K29

Property additions account for most of the recurring spending in this category. The following tables show capital
spending (including capital leases) and track and equipment statistics for the past five years.

Capital Expenditures

2009

2008

2007

2006

2005

($ in millions)

Road and other property
Equipment
Total

1,128 $
171
1,299 $

1,070
488
1,558

894
447
1,341

756 $
422
1,178 $

741
284
1,025

Track Structure Statistics (Capital and Maintenance)

2009

2008

2007

2006

2005

Track miles of rail installed
Miles of track surfaced
New crossties installed (millions)

434
5,568
2.7

459
5,209
2.7

401
5,014
2.7

327
4,871
2.7

302
4,663
2.5

Average Age of Owned Railway Equipment

Freight cars
Locomotives
Retired locomotives

2009

2008

30.3
19.9
31.2

29.9
18.9
34.4

2007
(years)

30.1
18.1
30.0

2006

2005

30.0
17.7
35.0

29.4
17.4
27.4

For 2010, NS has budgeted $1.44 billion for capital expenditures. The anticipated spending includes $706 million
for roadway projects, including the normalized replacement of rail, ties and ballast, and the improvement or
replacement of bridges. Planned investments in facilities and terminals of $184 million are primarily for
intermodal terminals and equipment to add capacity to the intermodal network, including the Crescent Corridor
initiative, and bulk transfer facilities and mechanical service shops. Technology investments of $140 million are
planned for new or upgraded systems and computers. The majority of the anticipated spending on technology
investments is attributable to preliminary implementation of positive train control. Infrastructure investments of
$110 million are planned for various public-private partnership investments such as the Heartland Corridor and
the Chicago Regional Environmental and Transportation Efficiency (CREATE) project, and network
improvements to increase mainline capacity and accommodate traffic growth. NS also expects to spend
$81 million on equipment, primarily continued improvements to the locomotive fleet, including the rebuild and
upgrade of existing units. All capital expenditures are expected to be made with internally generated funds. NS
expects implementation of positive train control to result in additional capital expenditures of at least $700 million
in the years 2011 through 2015.

The Heartland Corridor is a package of proposed clearance improvements and other facilities that will create a
seamless high-capacity intermodal route across Virginia and West Virginia to Midwest markets. During 2006,
NS, the Federal Highway Administration (FHWA), and the states of Ohio, West Virginia and Virginia entered
into a Memoranda of Agreement with respect to the tunnel clearance component of the Heartland Corridor that
governs the release of up to $95 million in authorized federal funding. In 2006, NS also entered into agreements
with two states governing the use of up to $11 million in state funding for the Heartland Corridor rail double-stack
clearance project. NS began work on the Heartland Corridor tunnel clearances in October 2007 and the entire
project is expected to be completed in 2010. NS expects to spend about $23 million in 2010 in connection with
this project.

K30

The CREATE project is a public-private partnership to reduce rail and highway congestion and add freight and
passenger capacity in the metropolitan Chicago area. NS and other railroads have agreed to participate in
CREATE. A portion of public funding has been approved and the parties have developed a list of projects to be
included in Phase I of the project. A total of $100 million in public funding has been secured for Phase I and the
railroads have contributed an additional $100 million. The railroads expect to complete Phase I by the end of
2011. As currently planned, the total project is estimated to cost $3.1 billion with city, state, and federal support.
If additional public funding is secured, the railroads are expected to contribute a total of $169 million towards the
entire project. NS expects to spend approximately $11 million in 2010 related to the CREATE projects.

The Meridian Speedway is a 320-mile rail line between Meridian, Mississippi and Shreveport, Louisiana. On
May 1, 2006, NS and Kansas City Southern (KCS) formed a joint venture, Meridian Speedway LLC (MSLLC),
pursuant to which NS will contribute $300 million in cash, substantially all of which will be used for capital
improvements in exchange for a 30% interest in the joint venture. To date, NS has contributed $283 million. At
the formation of MSLLC, KCS contributed the Meridian Speedway. NS is recognizing its pro rata share of the
joint venture’s earnings or loss as required under the equity method of accounting. NS’ total investment in
MSLLC is supported by the fair value of the rail line as well as intangible assets obtained through the transaction.
The joint venture increases capacity and is designed to improve service over the Meridian Speedway into the
Southeast.

During the second quarter of 2009, NS and Pan Am Railways, Inc. (Pan Am) formed a joint venture, Pan Am
Southern LLC (PAS), a railroad company in which each has a 50% equity interest. Pan Am contributed to PAS a
155-mile main line track that runs between Mechanicville, New York and Ayer, Massachusetts, along with 281
miles of secondary and branch lines, including trackage rights in New York, Connecticut, Massachusetts, New
Hampshire, and Vermont (collectively, the “PAS Lines”), and as of December 31, 2009, NS has contributed cash
and other property with a combined value of approximately $69 million and committed to contribute an additional
$71 million in cash over the next three years as evidenced by the Pan Am Notes (see Note 8). A significant
portion of NS’ contributions has and will continue to be used for capital improvements to the PAS Lines and the
related construction of new intermodal and automotive terminals in Albany, New York and the Ayer,
Massachusetts areas. PAS is jointly controlled by NS and Pan Am, accordingly, NS accounts for its interest in
PAS using the equity method of accounting.

The Crescent Corridor consists of a program of improvements to infrastructure and other facilities geared toward
creating a seamless, high-capacity intermodal route spanning 11 states from New Jersey to Louisiana and offering
truck-competitive service along several major interstate highway corridors, including I-81, I-85, I-20, I-40, I-59,
and I-75. Based on the public benefits that stand to be derived in the form of highway congestion relief, NS plans
to implement certain elements of the Crescent Corridor program of projects through a series of public-private
partnerships. Although there is not yet a single, integrated plan for the Crescent Corridor, preliminary work has
begun and is slated to continue in 2010, including continued infrastructure improvements and other design and
engineering work along the Virginia portion of the Corridor consistent with NS’ matching obligation with respect
to funds provided by the Commonwealth of Virginia. If requested public-private partnership agreements are
funded in 2010, NS’ capital expenditures in 2010 related to Crescent Corridor projects may be as high as
$41 million.

The MidAmerica Corridor is a proposed cooperative arrangement between NS and Canadian National Railway
(CN) to effectively share track between Chicago, St. Louis, Kentucky, and Mississippi in order to establish more
efficient routes for traffic moving between the midwestern and southeastern U.S., including potential coal traffic
moving to NS-served southeastern utility plants from CN-served Illinois Basin coal producers. To implement the
MidAmerica Corridor, NS, at its option, would expend funds to upgrade the rail line operated by West Tennessee
Railway between Fulton, Kentucky, and Corinth, Mississippi, a line over which NS would operate pursuant to
recently obtained trackage rights. Full implementation of the MidAmerica Corridor arrangement is subject to
regulatory approvals.

K31

Cash used in financing activities was $31 million in 2009, compared with $1.1 billion in 2008, and $1.6 billion
in 2007. The change in 2009 reflected the absence of share repurchase activity during the period and higher
borrowings net of debt repayments that were offset in part by fewer exercises of employee stock options and
increased dividends. Due to current economic and market conditions, the amount of future share repurchases is
uncertain and the timing and volume of such repurchases will be guided by management’s assessment of market
conditions and other pertinent factors. The decrease in cash used in financing activities in 2008 reflected a net
increase in debt, compared with a net decline in 2007, which was offset in part by higher dividend payments.

During the second quarter of 2009, NS issued $500 million of unsecured notes at 5.90% due 2019 pursuant to its
automatic shelf registration statement described below (see Note 8). The net proceeds from the offering were
$496 million after deducting the purchase discount and expenses. NS also issued a total of $75 million in non-
interest bearing notes payable with maturity dates beginning in 2010 and ending in 2012 as part of its total
investment in Pan Am Southern LLC.

During the first quarter of 2009, NS issued $500 million of unsecured notes at 5.75% due 2016 in a private
offering. The net proceeds from the offering were $494 million after deducting the purchase discount and
expenses. During the fourth quarter of 2009, NS exchanged the unregistered securities with essentially identical
securities registered under the Securities Act of 1933.

NS has authority from its Board of Directors to issue an additional $500 million of debt or equity securities
through public or private sale. During the first quarter of 2009, NS filed a Form S-3 automatic shelf registration
statement for well-known seasoned issuers under which, as of December 31, 2009, up to $500 million could be
issued under this authority.

NS also has in place and available a $1 billion, five-year credit agreement expiring in 2012, which provides for
borrowings at prevailing rates and includes covenants. NS had no amounts outstanding under this facility at
December 31, 2009, and NS is in compliance with all of its covenants. In October 2009, NS renewed and
amended its accounts receivable securitization program with a 364-day term to run until October 2010. NS
reduced the total amount that can be borrowed from $500 million to $350 million to more closely match its
liquidity requirements and receivables profile. There was $200 million outstanding under this program at
December 31, 2009 (see Note 8).

Looking forward, NS’ annual debt maturities are relatively modest and stable from year to year (see Note 8).
Overall, NS’ goal is to maintain a capital structure with appropriate leverage to support NS’ business strategy and
provide flexibility through business cycles.

APPLICATION OF CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of
revenue and expenses during the reporting period. These estimates and assumptions may require significant
judgment about matters that are inherently uncertain, and future events are likely to occur that may require
management to make changes to these estimates and assumptions. Accordingly, management regularly reviews
these estimates and assumptions based on historical experience, changes in the business environment, and other
factors that management believes to be reasonable under the circumstances. Management regularly discusses the
development, selection, and disclosures concerning critical accounting estimates with the Audit Committee of its
Board of Directors.

K32

Pensions and Other Postretirement Benefits

Accounting for pensions and other postretirement benefit plans requires management to make several estimates
and assumptions (see Note 11). These include the expected rate of return from investment of the plans’ assets,
projected increases in medical costs, and the expected retirement age of employees as well as their projected
earnings and mortality. In addition, the amounts recorded are affected by changes in the interest rate environment
because the associated liabilities are discounted to their present value. Management makes these estimates based
on the company’s historical experience and other information that it deems pertinent under the circumstances (for
example, expectations of future stock market performance). Management utilizes an independent consulting
actuarial firm’s studies to assist it in selecting appropriate assumptions and valuing its related liabilities.

NS’ net pension expense, which is included in “Compensation and benefits” in its Consolidated Statements of
Income, was $1 million for the year ended December 31, 2009. In recording this amount, NS assumed a long-
term investment rate of return of 8.75%, which was supported by the long-term total rate of return on plan assets
since inception. A one percentage point change to this rate of return assumption would result in a $16 million
change to the pension expense, and, as a result, an equal change in “Compensation and benefits” expense.
Changes that are reasonably likely to occur in assumptions concerning retirement age, projected earnings, and
mortality would not be expected to have a material effect on NS’ net pension expense or net pension liability in
the future. The net pension liability is recorded at its net present value using a discount rate that is based on the
current interest rate environment in light of the timing of expected benefit payments. NS utilizes an analysis in
which the projected annual cash flows from the pension and postretirement benefit plans were matched with a
yield curve based on an appropriate universe of high-quality corporate bonds. NS used the results of the yield
curve to select the discount rate that matches the payment stream of the benefits in these plans.

NS’ net cost for other postretirement benefits, which is also included in “Compensation and benefits,” was
$91 million for the year ended December 31, 2009. In recording this expense and valuing the net liability for
other postretirement benefits, which is included in “Other postretirement benefits,” management estimated future
increases in health-care costs. These assumptions, along with the effect of a one percentage point change in them,
are described in Note 11.

Properties and Depreciation

Most of NS’ total assets are long-lived railway properties (see Note 6). As disclosed in Note 1, NS’ properties are
depreciated using group depreciation. Rail is depreciated primarily on the basis of use measured by gross-ton
miles. Other properties are depreciated generally using the straight-line method over the lesser of estimated
service or lease lives. NS reviews the carrying amount of properties whenever events or changes in circumstances
indicate that such carrying amount may not be recoverable based on future undiscounted cash flows. Assets that
are deemed impaired as a result of such review are recorded at the lesser of carrying amount or fair value.

NS’ depreciation expense is based on management’s assumptions concerning service lives of its properties as well
as the expected net salvage that will be received upon their retirement. In developing these assumptions, NS’
management utilizes periodic depreciation studies that are performed by an outside firm of consulting engineers.
These studies analyze NS’ historical patterns of asset use and retirement and take into account any expected
change in operation or maintenance practices. NS’ recent experience with these studies has been that while they
do result in changes in the rates used to depreciate its properties, these changes have not caused a significant
effect to its annual depreciation expense. The studies may also indicate that the recorded amount of accumulated
depreciation is deficient (or in excess) of the amount indicated by the study. Any such deficiency (or excess) is
amortized as a component of depreciation expense over the remaining service lives of the affected class of
property. NS’ depreciation expense for the year ended December 31, 2009, amounted to $837 million. NS’
weighted-average depreciation rates for 2009 are disclosed in Note 6; a one-tenth percentage point increase (or
decrease) in these rates would have resulted in a $29 million increase (or decrease) to depreciation expense.

K33

Personal Injury, Environmental, and Legal Liabilities

NS’ expense for casualties and other claims, included in “Materials and other,” amounted to $102 million for the
year ended December 31, 2009. Most of this expense was NS’ accrual related to personal injury liabilities. Job-
related personal injury and occupational claims are subject to FELA, which is applicable only to railroads.
FELA’s fault-based tort system produces results that are unpredictable and inconsistent as compared with a no-
fault worker’s compensation system. The variability inherent in this system could result in actual costs being very
different from the liability recorded. In all cases, NS records a liability when the expected loss for the claim is
both probable and estimable.

To aid in valuing its personal injury liability and determining the amount to accrue during each period, NS’
management utilizes studies prepared by an independent consulting actuarial firm. For employee personal injury
cases, the actuarial firm studies NS’ historical patterns of reserving for claims and subsequent settlements, taking
into account relevant outside influences. An estimate of the ultimate amount of the liability, which includes
amounts for incurred but unasserted claims, is based on the results of this analysis. For occupational injury
claims, the actuarial firm studies NS’ history of claim filings, severity, payments and other relevant facts.
Additionally, the estimate of the ultimate loss for occupational injuries includes a provision for those claims that
have been incurred but not reported by projecting NS’ experience into the future as far as can be reasonably
determined. NS has recorded this actuarially determined liability. The liability is dependent upon many
individual judgments made as to the specific case reserves as well as the judgments of the consulting actuary and
management in the periodic studies. Accordingly, there could be significant changes in the liability, which NS
would recognize when such a change became known. Recent actuarial studies have reflected favorable claims
development and, accordingly, those changes in estimates have reduced the annual cost related to personal
injuries to $51 million in 2009 from $78 million in 2008. While the liability recorded is supported by the most
recent study, it is reasonably possible that the ultimate liability could be higher or lower.

NS is subject to various jurisdictions’ environmental laws and regulations. It is NS’ policy to record a liability
where such liability or loss is probable and its amount can be estimated reasonably (see Note 17). Claims, if any,
against third parties for recovery of cleanup costs incurred by NS, are reflected as receivables (when collection is
probable) in the Consolidated Balance Sheets and are not netted against the associated NS liability.
Environmental engineers regularly participate in ongoing evaluations of all known sites and in determining any
necessary adjustments to liability estimates. NS also has established an Environmental Policy Council, composed
of senior managers, to oversee and interpret its environmental policy.

Operating expenses for environmental matters totaled approximately $20 million in 2009, $18 million in 2008,
and $16 million in 2007, and capital expenditures for environmental matters totaled approximately $11 million in
2009 and $7 million in both 2008 and 2007. Capital expenditures for environmental matters in 2010 are expected
to be about $9 million.

NS’ Consolidated Balance Sheets included liabilities for environmental exposures in the amount of $32 million at
December 31, 2009, and $42 million at December 31, 2008 (of which $12 million is classified as a current
liability at the end of each period). At December 31, 2009, the liability represents NS’ estimate of the probable
cleanup and remediation costs based on available information at 144 known locations. As of that date, nine sites
accounted for $15 million of the liability, and no individual site was considered to be material. NS anticipates
that much of this liability will be paid out over five years; however, some costs will be paid out over a longer
period.

At 30 locations, one or more NS subsidiaries, usually in conjunction with a number of other parties, have been
identified as potentially responsible parties by the Environmental Protection Agency (EPA) or similar state
authorities under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, or
comparable state statutes, which often impose joint and several liability for cleanup costs.

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With respect to known environmental sites (whether identified by NS or by the EPA or comparable state
authorities), estimates of NS’ ultimate potential financial exposure for a given site or in the aggregate for all such
sites are necessarily imprecise because of the widely varying costs of currently available cleanup techniques, the
likely development of new cleanup technologies, the difficulty of determining in advance the nature and full
extent of contamination and each potential participant’s share of any estimated loss (and that participant’s ability
to bear it), and evolving statutory and regulatory standards governing liability. NS estimates its environmental
remediation liability on a site-by-site basis, using assumptions and judgments that management deems appropriate
for each site. As a result, it is not practical to quantitatively describe the effects of changes in these many
assumptions and judgments. NS has consistently applied its methodology of estimating its environmental
liabilities.

On April 24, 2008, the United States Department of Justice (DOJ) brought an action against NS for alleged
violations of federal environmental laws resulting from the discharge of chlorine and oil that occurred as a result
of the January 6, 2005 derailment in Graniteville, SC, including claims for civil penalties as well as injunctive
relief. Although NS’ June 24, 2008 motion to dismiss for failure to allege sufficient facts was granted, DOJ was
given leave to, and did, amend its complaint. The litigation has been stayed by the district court as the parties
work to conclude an agreed upon consent decree. NS does not believe that the resolution of these claims will
have a material adverse effect on its financial position, results of operations, or liquidity.

Based on its assessment of the facts and circumstances now known, management believes that it has recorded the
probable costs for dealing with those environmental matters of which NS is aware. Further, management believes
that it is unlikely that any known matters, either individually or in the aggregate, will have a material adverse
effect on NS’ financial position, results of operations, or liquidity.

Norfolk Southern and certain subsidiaries are defendants in numerous lawsuits and other claims relating
principally to railroad operations. When management concludes that it is probable that a liability has been
incurred and the amount of the liability can be reasonably estimated, it is accrued through a charge to expenses.
While the ultimate amount of liability incurred in any of these lawsuits and claims is dependent on future
developments, in management’s opinion the recorded liability, if any, is adequate to cover the future payment of
such liability and claims. However, the final outcome of any of these lawsuits and claims cannot be predicted
with certainty, and unfavorable or unexpected outcomes could result in additional accruals that could be
significant to results of operations in a particular year or quarter. Any adjustments to recorded liabilities will be
reflected in expenses in the periods in which such adjustments are known.

Income Taxes

NS’ net long-term deferred tax liability totaled $6.7 billion at December 31, 2009 (see Note 3). This liability is
estimated based on the expected future tax consequences of items recognized in the financial statements. After
application of the federal statutory tax rate to book income, judgment is required with respect to the timing and
deductibility of expenses in the corporate income tax returns. For state income and other taxes, judgment is also
required with respect to the apportionment among the various jurisdictions. A valuation allowance is recorded if
management expects that it is more likely than not that its deferred tax assets will not be realized. NS had a
$14 million valuation allowance on $871 million of deferred tax assets as of December 31, 2009, reflecting the
expectation that most of these assets will be realized.

In addition, NS has a recorded liability for its estimate of uncertain tax positions taken or expected to be taken in a
tax return. Judgment is required in evaluating the application of federal and state tax laws and assessing whether
it is more likely than not that a tax position will be sustained on examination and, if so, judgment is also required
as to the measurement of the amount of tax benefit that will be realized upon settlement with the taxing authority.
Management believes this liability for uncertain tax positions to be adequate. Income tax expense is adjusted in
the period in which new information about a tax position becomes available or the final outcome differs from the

K35

amounts recorded. For every one half percent change in the 2009 effective tax rate, net income would have
changed by $8 million.

OTHER MATTERS

Labor Agreements

More than 80% of NS’ railroad employees are covered by collective bargaining agreements with various labor
unions. These agreements remain in effect until changed pursuant to the Railway Labor Act (RLA). NS largely
bargains nationally in concert with other major railroads. Moratorium provisions in the labor agreements govern
when the railroads and the unions may propose changes.

NS reached national agreements that extended through 2009 with all of the major rail unions. The current
agreement with the BLET extends through 2014. Because NS has reached separate agreements with the BLET
and the American Train Dispatchers Association (ATDA), only the health and welfare provisions from the
national agreements apply to NS’ locomotive engineers and ATDA-represented dispatchers. NS has also reached
agreement with Longshoremen at Ashtabula (Ohio) Docks who are represented by the International
Longshoremen’s Association (ILA) and do not participate in national bargaining. On or after November 1, 2009,
NS and the nation’s other major carriers served new proposals to begin the next round of negotiations. The
outcome of the negotiations cannot be determined at this point.

Market Risks and Hedging Activities

NS manages its overall exposure to fluctuations in interest rates by issuing both fixed- and floating-rate debt
instruments and by entering into interest-rate hedging transactions to achieve an appropriate mix within its debt
portfolio.

At December 31, 2009, NS’ debt subject to interest rate fluctuations totaled $204 million. A 1% point increase in
interest rates would increase NS’ total annual interest expense related to all its variable debt by approximately
$2 million. Management considers it unlikely that interest rate fluctuations applicable to these instruments will
result in a material adverse effect on NS’ financial position, results of operations, or liquidity.

Some of NS’ capital leases, which carry an average fixed rate of 7%, were effectively converted to variable rate
obligations using interest rate swap agreements. On December 31, 2009, the average pay rate under these
agreements was 1%, and the average receive rate was 6%. During 2009 and 2008, the effect of the swaps was to
reduce interest expense by less than $1 million in both periods. A portion of the lease obligations is payable in
Japanese yen. NS eliminated the associated exchange rate risk at the inception of each lease with a yen deposit
sufficient to fund the yen-denominated obligation. Most of these deposits are held by foreign banks, primarily
Japanese. As a result, NS is exposed to financial market risk relative to Japan. Counterparties to the interest rate
swaps and Japanese banks holding yen deposits are major financial institutions believed by management to be
creditworthy.

Inflation

In preparing financial statements, U.S. generally accepted accounting principles require the use of historical cost
that disregards the effects of inflation on the replacement cost of property. NS, a capital-intensive company, has
most of its capital invested in such property. The replacement cost of these assets, as well as the related
depreciation expense, would be substantially greater than the amounts reported on the basis of historical cost.

K36

Proposed Legislation and Regulations on Safety and Transportation of Hazardous Materials

Federal regulations were adopted in late 2008 on safety and transportation of hazardous materials. NS is in
compliance with those regulations currently effective and expects to be in compliance with those regulations to
become effective at a later date.

FORWARD-LOOKING STATEMENTS

This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains 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; the operations of carriers with which NS interchanges; acts of
terrorism or war; fluctuation in prices of key materials, in particular diesel fuel; labor difficulties, including strikes
and work stoppages; legislative and regulatory developments; results of litigation; changes in securities and
capital markets; disruptions to NS’ technology infrastructure, including computer systems; and natural events
such as severe weather, hurricanes, and floods. For a discussion of significant risk factors applicable to NS, see
Part I, Item 1A “Risk Factors.” 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.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

The information required by this item is included in Part II, Item 7, “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” under the heading “Market Risks and Hedging Activities.”

K37

Item 8. Financial Statements and Supplementary Data

INDEX TO FINANCIAL STATEMENTS

Report of Management

Reports of Independent Registered Public Accounting Firm

Consolidated Statements of Income
Years ended December 31, 2009, 2008, and 2007

Consolidated Balance Sheets
As of December 31, 2009 and 2008

Consolidated Statements of Cash Flows
Years ended December 31, 2009, 2008, and 2007

Consolidated Statements of Changes in Stockholders’ Equity
Years ended December 31, 2009, 2008, and 2007

Notes to Consolidated Financial Statements

The Index to Consolidated Financial Statement Schedule in Item 15

Page

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K42

K43

K44

K45

K46

K81

K38

Report of Management

February 17, 2010

To the Stockholders
Norfolk Southern Corporation

Management is responsible for establishing and maintaining adequate internal control over financial reporting. In
order to ensure that the Corporation’s internal control over financial reporting is effective, management regularly
assesses such controls and did so most recently for its financial reporting as of December 31, 2009. This
assessment was based on criteria for effective internal control over financial reporting described in Internal
Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission. Based on this assessment, management has concluded that the Corporation maintained effective
internal control over financial reporting as of December 31, 2009.

KPMG LLP, independent registered public accounting firm, has audited the Corporation’s financial statements and
issued an attestation report on the Corporation’s internal control over financial reporting as of December 31, 2009.

/s/ Charles W. Moorman
Charles W. Moorman
Chairman, President and
Chief Executive Officer

/s/ James A. Squires
James A. Squires
Executive Vice President Finance and Vice President and
Chief Financial Officer

/s/ Clyde H. Allison, Jr.
Clyde H. Allison, Jr.

Controller

K39

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
Norfolk Southern Corporation:

We have audited Norfolk Southern Corporation’s internal control over financial reporting as of December 31, 2009,
based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). Norfolk Southern Corporation’s management is responsible
for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting, included in the accompanying Report of Management. Our responsibility
is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether effective internal control over financial reporting was maintained in all material respects. Our audit
included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk. Our audit also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.

In our opinion, Norfolk Southern Corporation maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2009, based on criteria established in Internal Control – Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the consolidated balance sheets of Norfolk Southern Corporation and subsidiaries as of
December 31, 2009 and 2008, and the related consolidated statements of income, changes in stockholders’ equity,
and cash flows for each of the years in the three-year period ended December 31, 2009, and our report dated
February 17, 2010, expressed an unqualified opinion on those consolidated financial statements.

/s/ KPMG LLP
KPMG LLP
Norfolk, Virginia
February 17, 2010

K40

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
Norfolk Southern Corporation:

We have audited the accompanying consolidated balance sheets of Norfolk Southern Corporation and subsidiaries
as of December 31, 2009 and 2008, and the related consolidated statements of income, changes in stockholders’
equity, and cash flows for each of the years in the three-year period ended December 31, 2009. In connection with
our audits of the consolidated financial statements, we also have audited the financial statement schedule as listed in
Item 15(A)2. These consolidated financial statements and financial statement schedule are the responsibility of the
Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and
financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
financial position of Norfolk Southern Corporation and subsidiaries as of December 31, 2009 and 2008, and the
results of their operations and their cash flows for each of the years in the three-year period ended December 31,
2009, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related financial
statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), Norfolk Southern Corporation’s internal control over financial reporting as of December 31, 2009,
based on criteria established in Internal Control – Integrated Framework, issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO), and our report dated February 17, 2010 expressed an
unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

/s/ KPMG LLP
KPMG LLP
Norfolk, Virginia
February 17, 2010

K41

Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Income

2009

Years ended December 31,
2008
($ in millions, except earnings per share)

2007

Railway operating revenues

7,969

10,661

9,432

Railway operating expenses:
Compensation and benefits
Purchased services and rents
Fuel
Depreciation
Materials and other

Total railway operating expenses

Income from railway operations

Other income – net
Interest expense on debt

Income before income taxes

Provision for income taxes

2,401
1,403
725
837
641

6,007

1,962

127
467

1,622

588

2,684
1,599
1,638
804
852

7,577

3,084

110
444

2,750

1,034

2,552
1,551
1,169
775
800

6,847

2,585

93
441

2,237

773

Net income

1,034

1,716

1,464

Per share amounts:
Net income
Basic
Diluted

$
$

2.79
2.76

$
$

4.58
4.52

$
$

3.73
3.68

See accompanying notes to consolidated financial statements.

K42

Norfolk Southern Corporation and Subsidiaries
Consolidated Balance Sheets

Assets
Current assets:
Cash and cash equivalents
Short-term investments
Accounts receivable – net
Materials and supplies
Deferred income taxes
Other current assets
Total current assets

Investments
Properties less accumulated depreciation
Other assets

As of December 31,

2009

2008

($ in millions)

996
90
766
164
142
88
2,246

2,164
22,643
316

618
--
870
194
149
168
1,999

1,779
22,247
272

Total assets

27,369

26,297

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable
Short-term debt
Income and other taxes
Other current liabilities
Current maturities of long-term debt
Total current liabilities

Long-term debt
Other liabilities
Deferred income taxes
Total liabilities

Stockholders’ equity:
Common stock $1.00 per share par value, 1,350,000,000 shares
authorized; outstanding 369,019,990 and 366,233,106 shares,
respectively, net of treasury shares
Additional paid-in capital
Accumulated other comprehensive loss
Retained income

Total stockholders’ equity

974
100
109
232
374
1,789

6,679
1,801
6,747
17,016

370
1,809
(853)
9,027

10,353

1,140
--
261
220
484
2,105

6,183
2,030
6,372
16,690

368
1,680
(942)
8,501

9,607

Total liabilities and stockholders’ equity

27,369

26,297

See accompanying notes to consolidated financial statements.

K43

Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Cash Flows

2009

Years Ended December 31,
2008
($ in millions)

2007

1,034

1,716 $

1,464

845
338
(18)

63
30
72
(365)
(139)
1,860

(1,299)
84
(266)
30
(1,451)

(500)
66
--
1,090
(687)
(31)

378

618

815
290
(29)

269
(18)
(8)
(262)
(58)
2,715

(1,558)
109
(86)
307
(1,228)

(456)
229
(1,128)
1,425
(1,145)
(1,075)

412

206

996

618 $

$
$

458
381

$
$

421 $
615 $

786
125
(51)

30
(25)
(17)
38
(17)
2,333

(1,341)
124
(635)
827
(1,025)

(377)
183
(1,196)
250
(489)
(1,629)

(321)

527

206

441
603

Cash flows from operating activities
Net income
Reconciliation of net income to net cash
provided by operating activities:
Depreciation
Deferred income taxes
Gains and losses on properties and investments
Changes in assets and liabilities affecting operations:
Accounts receivable
Materials and supplies
Other current assets
Current liabilities other than debt
Other – net
Net cash provided by operating activities

Cash flows from investing activities
Property additions
Property sales and other transactions
Investments, including short-term
Investment sales and other transactions
Net cash used in investing activities

Cash flows from financing activities
Dividends
Common stock issued – net
Purchase and retirement of common stock
Proceeds from borrowings – net
Debt repayments
Net cash used in financing activities

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents
At beginning of year

At end of year

Supplemental disclosure of cash flow information
Cash paid during the year for:
Interest (net of amounts capitalized)
Income taxes (net of refunds)

See accompanying notes to consolidated financial statements.

K44

Norfolk Southern Corporation and Subsidiaries
Consolidated Statements of Changes in Stockholders’ Equity

Common
Stock

Accum.
Other
Compre-
hensive
Retained
Income
Loss
($ in millions, except per share amounts)

Additional
Paid-in
Capital

Total

Balance December 31, 2006

398 $

1,303 $

(369) $

8,283 $

9,615

Comprehensive income
Net income
Other comprehensive loss
Total comprehensive income
Adoption of FIN 48, net of tax
Dividends on Common Stock,
$0.96 per share
Share repurchases
Stock-based compensation,
including tax benefit of $57
Other

(30)

1,464

(377)
(1,091)

(9)

1,464
(30)
1,434
10

(377)
(1,196)

235
6

(24)

(81)

238
6

Balance December 31, 2007

380 $

1,466 $

(399) $

8,280 $

9,727

Comprehensive income
Net income
Other comprehensive loss
Total comprehensive income
Dividends on Common Stock,
$1.22 per share
Share repurchases
Stock-based compensation,
including tax benefit of $76
Other

(543)

1,716

(456)
(1,030)

(9)

1,716
(543)
1,173

(456)
(1,128)

284
7

(19)

6
1

(79)

287
6

Balance December 31, 2008

368 $

1,680 $

(942) $

8,501 $

9,607

Comprehensive income
Net income
Other comprehensive income
Total comprehensive income
Dividends on Common Stock,
$1.36 per share
Stock-based compensation,
including tax benefit of $15
Other

1,034

(500)

(8)

1,034
89
1,123

(500)

117
6

123
6

Balance December 31, 2009

370 $

1,809 $

(853) $

9,027 $

10,353

See accompanying notes to consolidated financial statements.

K45

Norfolk Southern Corporation and Subsidiaries
Notes to Consolidated Financial Statements

The following Notes are an integral part of the Consolidated Financial Statements. Management has evaluated
subsequent events through February 17, 2010, which is the date these consolidated financial statements were issued.

1. Summary of Significant Accounting Policies

Description of Business

Norfolk Southern Corporation is a Virginia-based holding company engaged principally in the rail transportation
business, operating approximately 21,000 route miles primarily in the East and Midwest. These consolidated
financial statements include Norfolk Southern Corporation (Norfolk Southern) and its majority-owned and
controlled subsidiaries (collectively, NS). Norfolk Southern’s major subsidiary is Norfolk Southern Railway
Company (NSR). All significant intercompany balances and transactions have been eliminated in consolidation.

NSR and its railroad subsidiaries transport raw materials, intermediate products and finished goods classified in the
following market groups (percent of total railway operating revenues in 2009): coal (29%); intermodal (19%);
agriculture/consumer products/government (15%); chemicals (13%); metals/construction (9%); paper/clay/forest
products (8%); and, automotive (7%). Although most of NS’ customers are domestic, ultimate points of origination
or destination for some of the products transported (particularly coal bound for export and some intermodal
containers) may be outside the U.S. More than 80% of NS’ railroad employees are covered by collective bargaining
agreements with various labor unions.

Use of Estimates

The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Management periodically reviews its estimates, including those
related to the recoverability and useful lives of assets, as well as liabilities for litigation, environmental remediation,
casualty claims, income taxes and pension and other postretirement benefits. Changes in facts and circumstances
may result in revised estimates.

Revenue Recognition

Transportation revenue is recognized proportionally as a shipment moves from origin to destination and related
expenses are recognized as incurred. Refunds (which are primarily volume-based incentives) are recorded as a
reduction to revenues on the basis of management’s best estimate of projected liability, which is based on historical
activity, current traffic counts and the expectation of future activity. NS regularly monitors its contract refund
liability, and historically, the estimates have not differed significantly from the amounts ultimately refunded.
Switching, demurrage and other incidental service revenues are recognized when the services are performed.

Derivatives

NS does not engage in the trading of derivatives. NS uses derivative financial instruments in the management of its
mix of fixed- and floating-rate debt. Management has determined that these derivative instruments qualify as fair-
value hedges, having values that highly correlate with the underlying hedged exposures, and has designated such
instruments as hedging transactions. Income and expense related to the derivative financial instruments are
recorded in the same category as generated by the underlying asset or liability. Credit risk related to the derivative

K46

financial instruments is considered to be minimal and is managed by requiring high credit standards for
counterparties and periodic settlements (see Note 16).

Cash Equivalents

“Cash equivalents” are highly liquid investments purchased three months or less from maturity.

Allowance for Doubtful Accounts

NS’ allowance for doubtful accounts was $5 million at December 31, 2009 and 2008. To determine its allowance
for doubtful accounts, NS evaluates historical loss experience (which has not been significant), the characteristics of
current accounts, and general economic conditions and trends.

Materials and Supplies

“Materials and supplies,” consisting mainly of fuel oil and items for maintenance of property and equipment, are
stated at the lower of average cost or market. The cost of materials and supplies expected to be used in capital
additions or improvements is included in “Properties.”

Investments

Debt securities classified as “held-to-maturity” are reported at amortized cost and marketable equity and debt
securities classified as “trading” or “available-for-sale” are recorded at fair value. Unrealized after-tax gains and
losses for investments designated as “available-for-sale” are recognized in “Accumulated other comprehensive
loss.”

Investments where NS has the ability to exercise significant influence over but does not control the entity are
accounted for using the equity method, whereby the investment is carried at the cost of the acquisition plus NS’
equity in undistributed earnings or losses since acquisition.

Properties

“Properties” are stated principally at cost and are depreciated using group depreciation. Rail is depreciated
primarily on the basis of use measured by gross ton-miles. Other properties are depreciated generally using the
straight-line method over the lesser of estimated service or lease lives. Depletion of natural resources (see Note 2)
is based on units of production. Depreciation in the Consolidated Statements of Cash Flows includes depreciation
and depletion. NS capitalizes interest on major capital projects during the period of their construction.
Expenditures, including those on leased assets that extend an asset’s useful life or increase its utility, are capitalized.
Expenditures capitalized include those that are directly related to a capital project and may include materials, labor
and equipment, in addition to an allocable portion of indirect costs that clearly relate to a particular project. Costs
related to repairs and maintenance activities that do not extend an asset’s useful life or increase its utility are
expensed when such repairs are performed. When properties other than land and nonrail assets are sold or retired in
the ordinary course of business, the cost of the assets, net of sale proceeds or salvage, is charged to accumulated
depreciation, and no gain or loss is recognized through income. Gains and losses on disposal of land and nonrail
assets are included in “Other income – net” (see Note 2) since such income is not a product of NS’ railroad
operations.

NS reviews the carrying amount of properties whenever events or changes in circumstances indicate that such
carrying amount may not be recoverable based on future undiscounted cash flows. Assets that are deemed impaired
as a result of such review are recorded at the lower of carrying amount or fair value.

K47

Required Accounting Changes

In June 2009, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting
Standards (SFAS) No. 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally
Accepted Accounting Principles, a replacement of FASB Statement No. 162” (Accounting Standards Update
(ASU) 2009-01). This statement, effective for interim and annual periods ending after September 15, 2009,
established the FASB Accounting Standards Codification (Codification or ASC) as the single source of
authoritative Generally Accepted Accounting Principles (GAAP). SFAS 168 is recognized by the FASB to be
applied by nongovernmental entities and stated that all guidance contained in the Codification has an equal level
of authority. The authoritative accounting guidance recognized that rules and interpretive releases of the
Securities and Exchange Commission (SEC) under federal securities laws are also sources of authoritative GAAP
for SEC registrants. NS adopted the provisions of the authoritative accounting guidance for the interim reporting
period ending September 30, 2009, the adoption of which did not have a material effect on NS’ consolidated
financial statements.

FASB Staff Position (FSP) No. 132 (R)-1, “Employers’ Disclosures about Postretirement Benefit Plan Assets”
(ASC 715-20-65-2), was issued on December 30, 2008. The FSP, effective for fiscal years ending after
December 15, 2009, clarifies an employer’s disclosures about plan assets of a defined benefit pension or other
postretirement plan. The FSP prescribes expanded disclosures regarding investment allocation decisions,
categories of plan assets, inputs, and valuation techniques used to measure fair value, the effect of Level 3 inputs
on changes in plan assets and significant concentrations of risk. NS adopted the FSP at the end of 2009 and it did
not have a material effect on NS’ consolidated financial statements.

Effective January 1, 2008, NS adopted SFAS No. 157, “Fair Value Measurements” (ASC 820), related to financial
instrument assets and liabilities. NS adopted the provisions of this standard relative to nonfinancial assets and
nonfinancial liabilities that are not remeasured at fair value on a recurring basis in the first quarter of 2009. This
statement, effective for interim or annual reporting periods beginning after November 15, 2007, establishes a
framework for measuring fair value in U.S. generally accepted accounting principles and expands disclosures about
fair value measurements. Adoption did not have a material effect on NS’ consolidated financial statements.

In December 2007, the FASB issued SFAS No. 160 (SFAS 160), “Noncontrolling Interests in Consolidated
Financial Statements” (ASC 810-10), which requires that noncontrolling (minority) interests be reported as a
component of equity. NS adopted the statement in the first quarter of 2009 with no material effect on NS’
consolidated financial statements.

In June 2008, the FASB issued FSP Emerging Issues Task Force (EITF) 03-6-1, “Determining Whether Instruments
Granted in Share-Based Payment Transactions are Participating Securities” (ASC 260-10). This FSP addresses
whether instruments granted in share-based payment transactions are participating securities prior to vesting and,
therefore, need to be included in the earnings allocation in computing earnings per share under the two-class method
as described in SFAS No. 128, “Earnings per Share” (ASC 260-10). NS adopted the FSP, which affects the
calculation of earnings per share, in the first quarter of 2009. The provisions of the FSP were applied
retrospectively, but did not have a material effect on NS’ consolidated financial statements.

Effective January 1, 2007, NS adopted FASB Interpretation No. 48 (FIN 48), “Accounting for Uncertainty in
Income Taxes” (ASC 740-10), which clarifies accounting for uncertainty in income taxes recognized in an
enterprise’s financial statements in accordance with SFAS No. 109, “Accounting for Income Taxes” (ASC 740-10).
FIN 48 prescribes a recognition threshold and measurement attribute for a tax position taken or expected to be taken
in a tax return. Under the guidelines of FIN 48, an entity should recognize the financial statement benefit of a tax
position if it determines that it is more likely than not that the position will be sustained on examination (see
Note 3).

K48

2. Other Income – Net

2009

2008
($ in millions)

2007

Income from natural resources:
Royalties from coal
Nonoperating depletion and depreciation
Subtotal

Rental income
Equity in earnings of Conrail (Note 5)
Gains and losses from sale of properties and investments
Interest income
Corporate-owned life insurance – net
Expenses related to synthetic fuel investments
Taxes on nonoperating property
Other interest expense – net
Other
Total

67
(8)
59

47
32
18
13
1
--
(10)
(5)
(28)
127

64
(11)
53

47
29
29
20
(31)
--
(10)
2
(29)
110

52
(11)
41

46
45
51
45
7
(77)
(10)
(25)
(30)
93

“Other income – net” includes income and costs not part of rail operations and the income generated by the
activities of NS’ noncarrier subsidiaries as well as the costs incurred by those subsidiaries in their operations. NS
had a 40.5% interest in a limited liability company that owned and operated facilities that produced synthetic fuel
from coal. In addition, in 2007 NS purchased two facilities that produced synthetic fuel from coal. The production
of synthetic fuel resulted in tax credits as well as expenses related to the investments. The expenses are included in
“Expenses related to synthetic fuel investments” above. The tax credits related to the synthetic fuel investments
expired at the end of 2007 and are no longer available.

3. Income Taxes

Provision for Income Taxes

2009

2008
($ in millions)

2007

Current:
Federal
State
Total current taxes

Deferred:
Federal
State
Total deferred taxes

239
11
250

289
49
338

657
87
744

257
33
290

Provision for income taxes

588

1,034

570
78
648

77
48
125

773

K49

Reconciliation of Statutory Rate to Effective Rate

The “Provision for income taxes” in the Consolidated Statements of Income differs from the amounts computed by
applying the statutory federal corporate tax rate as follows:

2009

Amount

2008

Amount
($ in millions)

2007

Amount

Federal income tax at
statutory rate
State income taxes, net of
Federal tax effect
Illinois tax law change, net of
Federal tax effect
Tax credits
Other – net

568

963

783

--
(4)
(15)

--
--
(1)

1
(2)
(5)

--
--
--

19
(65)
(27)

1
(3)
(1)

Provision for income taxes

588

$ 1,034

773

Illinois enacted tax legislation in August 2007, revised in January 2008, which modified the way transportation
companies apportion their taxable income to the state. The change resulted in an increase in NS’ income tax
liability as shown above.

Deferred Tax Assets and Liabilities

Certain items are reported in different periods for financial reporting and income tax purposes. Deferred tax assets
and liabilities are recorded in recognition of these differences. The tax effects of temporary differences that give
rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows:

Deferred tax assets:
Compensation and benefits, including postretirement
Accruals, including casualty and other claims
Other
Total gross deferred tax assets
Less valuation allowance
Net deferred tax asset

Deferred tax liabilities:
Property
Other
Total gross deferred tax liabilities

Net deferred tax liability
Net current deferred tax asset

December 31,

2009

2008

($ in millions)

661
164
46
871
(14)
857

(7,195)
(267)
(7,462)

(6,605)
142

728
218
45
991
(11)
980

(6,957)
(246)
(7,203)

(6,223)
149

Net long-term deferred tax liability

(6,747)

(6,372)

K50

Except for amounts for which a valuation allowance has been provided, management believes that it is more likely
than not that the results of future operations will generate sufficient taxable income to realize the deferred tax assets.
The valuation allowance at the end of each year relates to subsidiary state income tax net operating losses that may
not be utilized prior to their expiration. The total valuation allowance increased $3 million in 2009, and $1 million
in 2008 and 2007, respectively.

Uncertain Tax Positions

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows ($ in millions):

Balance at beginning of year

Additions based on tax positions related to the current year
Additions for tax positions of prior years
Reductions for tax positions of prior years
Settlements with taxing authorities
Lapse of statutes of limitations
Balance at end of year

December 31,

2009

2008

169

25
24
(85)
(22)
(17)
94

167

73
4
(63)
(9)
(3)
169

Included in the balance of unrecognized tax benefits at December 31, 2009, are potential benefits of $48 million that
would affect the effective tax rate if recognized. As a result of the implementation of FIN 48 (ASC 740-10) on
January 1, 2007 (see Note 1), NS recognized a $10 million increase to stockholders equity, $2 million of which
related to investments accounted for under the equity method of accounting. Unrecognized tax benefits are adjusted
in the period in which new information about a tax position becomes available or the final outcome differs from the
amount recorded.

NS expects that the total amount of unrecognized tax benefits at December 31, 2009, will decrease by
approximately $17 million in 2010 due to tax positions for which there was an uncertainty about the timing of
deductibility in earlier years but deductibility may become certain by the close of 2010. NS’ consolidated federal
income tax return for 2008 is being audited by the Internal Revenue Service (IRS). State income tax returns
generally are subject to examination for a period of three to four years after filing of the return. In addition, NS is
generally obligated to report changes in taxable income arising from federal income tax examinations to the states
within a period of up to two years from the date the federal examination is final. NS has various state income tax
returns either under examination, administrative appeals, or litigation. It is reasonably possible that the amount of
unrecognized tax benefits will decrease in 2010 as a result of the lapse of state statutes of limitations, but the
amount is not expected to be significant. NS does not expect that any of the above potential changes in
unrecognized tax benefits will have a material effect on NS’ financial position, results of operations, or liquidity.

Interest related to unrecognized tax benefits, which is included in “Other income – net,” amounted to $6 million of
income in 2009, $15 million of income in 2008, and $12 million of expense in 2007. Penalties related to tax matters
are included in “Provision for income taxes” and totaled zero in each of 2009, 2008, and 2007. NS has recorded a
liability of $12 million at December 31, 2009, and $20 million at December 31, 2008, for the payment of interest on
unrecognized tax benefits. NS has no liability recorded at December 31, 2009 and 2008, for the payment of
penalties on unrecognized tax benefits.

K51

4. Fair Value

Fair Value Measurements

ASC 820-10, “Fair Value Measurements,” established a framework for measuring fair value and a fair value
hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels, as
follows:

Level 1

Inputs to the valuation methodology are unadjusted quoted prices for identical assets or
liabilities in active markets that NS has the ability to access.

Level 2

Inputs to the valuation methodology include:

 Quoted prices for similar assets or liabilities in active markets;
 Quoted prices for identical or similar assets or liabilities in inactive markets;



Inputs other than quoted prices that are observable for the asset or liability;
Inputs that are derived principally from or corroborated by observable market data
by correlation or other means.

If the asset or liability has a specified (contractual) term, the Level 2 input must be
observable for substantially the full term of the asset or liability.

Level 3

Inputs to the valuation methodology are unobservable and significant to the fair value
measurement.

The asset’s or liability’s fair value measurement level within the hierarchy is based on the lowest level of any
input that is significant to the fair value measurement. At December 31, 2009 for assets measured at fair value on
a recurring basis, there were $90 million of available-for-sale securities as valued under level 2 of the fair value
hierarchy. There were no such assets valued under level 1 or level 3 valuation techniques.

Fair Values of Financial Instruments

In accordance with ASC 825, “Financial Instruments,” NS has evaluated the fair values of financial instruments and
methods used to determine those fair values. The fair values of “Cash and cash equivalents,” “Short-term
investments,” “Accounts receivable,” “Accounts payable,” and “Short-term debt” approximate carrying values
because of the short maturity of these financial instruments. The carrying value of corporate-owned life insurance is
recorded at cash surrender value and, accordingly, approximates fair value. The carrying amounts and estimated fair
values for the remaining financial instruments, excluding derivatives and investments accounted for under the equity
method, consisted of the following at December 31:

2009

2008

Carrying
Amount

Fair
Value

Carrying
Amount

Fair
Value

($ in millions)

Investments
Long-term debt

$
$

237
(7,053)

$
$

260
(8,048)

$
163
$ (6,667)

$
$

179
(6,885)

Underlying net assets were used to estimate the fair value of investments. The fair value of notes receivable are based
on future discounted cash flows. The fair values of debt were estimated based on quoted market prices or discounted
cash flows using current interest rates for debt with similar terms, company rating, and remaining maturity.

K52

Carrying amounts of available-for-sale securities reflect unrealized holding losses of less than $1 million on
December 31, 2009, and zero on December 31, 2008. Sales of “available-for-sale” securities were immaterial for the
years ended December 31, 2009, 2008, and 2007.

5. Investments

December 31,

2009

2008

($ in millions)

Short-term investments with average maturities:
Federal government notes, 9 months
Other short-term investments, 8 months
Total short-term investments
Long-term investments:
Investment in Conrail Inc.
Other equity method investments
Company-owned life insurance at net
cash surrender value
Corporate bonds, held to maturity, with
average maturities of 19 months
Federal government notes, held to maturity,
with average maturities of 26 months
Other investments
Total long-term investments

60
30
90

924
829

173

45
137

2,164

--
--
--

868
674

--
123
1,779

“Other equity method investments” above includes $272 million at December 31, 2009, and $267 million at
December 31, 2008, related to NS’ investment in Meridian Speedway LLC, a joint venture formed with Kansas City
Southern. Also included is NS’ investment in Pan Am Southern LLC, a joint venture formed with Pan Am
Railways, Inc. in 2009, which was $140 million at December 31, 2009.

Investment in Conrail

Through a limited liability company, Norfolk Southern and CSX Corporation (CSX) jointly own Conrail Inc.
(Conrail), whose primary subsidiary is Consolidated Rail Corporation (CRC). NS has a 58% economic and 50%
voting interest in the jointly owned entity, and CSX has the remainder of the economic and voting interests. NS is
applying the equity method of accounting to its investment in Conrail. NS is amortizing the excess of the purchase
price over Conrail’s net equity using the principles of purchase accounting, based primarily on the estimated useful
lives of Conrail’s depreciable property and equipment, including the related deferred tax effect of the differences in
tax accounting bases for such assets, as all of the purchase price at acquisition was allocable to Conrail’s tangible
assets and liabilities.

At December 31, 2009, based on the funded status of Conrail’s pension plans, NS increased its proportional
investment in Conrail by $24 million. This resulted in income of $22 million recorded to “other comprehensive
income (loss)” and a combined federal and state deferred tax liability of $2 million. At December 31, 2008, NS’
year-end adjustment reduced its proportional investment in Conrail by $60 million. This resulted in a $55 million
loss recorded to “other comprehensive income (loss)” and a combined federal and state deferred tax asset of
$5 million. At December 31, 2009, the difference between NS’ investment in Conrail and its share of Conrail’s
underlying net equity was $548 million. NS’ equity in the earnings of Conrail, net of amortization, included in
“Other income – net” was $32 million, $29 million, and $45 million in 2009, 2008 and 2007, respectively.

CRC owns and operates certain properties (the Shared Assets Areas) for the joint and exclusive benefit of NSR and
CSX Transportation, Inc. (CSXT). The costs of operating the Shared Assets Areas are borne by NSR and CSXT

K53

based on usage. In addition, NSR and CSXT pay CRC a fee for access to the Shared Assets Areas. “Purchased
services and rents” and “Fuel” include expenses for amounts due to CRC for operation of the Shared Assets Areas
totaling $123 million in 2009, $131 million in 2008 and $126 million in 2007. Future minimum lease payments due
to CRC under the Shared Assets Areas agreements are as follows: $29 million in each of 2010 through 2014 and
$279 million thereafter. NS provides certain general and administrative support functions to Conrail, the fees for
which are billed in accordance with several service-provider arrangements and approximate $7 million annually.

“Accounts payable” includes $104 million at December 31, 2009, and $82 million at December 31, 2008, due to
Conrail for the operation of the Shared Assets Areas. In addition, “Other liabilities” includes $133 million at
December 31, 2009 and 2008, for long-term advances from Conrail, maturing 2035, that bear interest at an average
rate of 4.4%.

Investment in Pan Am Southern LLC

During the second quarter of 2009, NS and Pan Am Railways, Inc. (Pan Am) formed a joint venture, Pan Am
Southern LLC (PAS), a railroad company in which each has a 50% equity interest. Pan Am contributed to PAS a
155-mile main line track that runs between Mechanicville, New York and Ayer, Massachusetts, along with 281
miles of secondary and branch lines, including trackage rights in New York, Connecticut, Massachusetts, New
Hampshire, and Vermont (collectively, the “PAS Lines”). As of December 31, 2009, NS has contributed cash
and other property with a combined value of approximately $69 million and committed to contribute an additional
$71 million in cash over the next three years as evidenced by the Pan Am Notes (see Note 8). A significant
portion of NS’ contributions will be used for capital improvements to the PAS Lines and the related construction
of new intermodal and automotive terminals in Albany, New York and the Ayer, Massachusetts areas. PAS is
jointly controlled by NS and Pan Am, accordingly NS accounts for its interest in PAS using the equity method of
accounting.

6. Properties

Land
Railway property:
Road
Equipment
Other property

Less accumulated depreciation

December 31,

2009

2008

($ in millions)

Depreciation
Rate for 2009

2,181

2,119

21,049
7,737
469
31,436

(8,793)

2.7%
3.7%
1.7%

20,240
7,688
473
30,520

(8,273)

Net properties

22,643

22,247

Railway property includes $243 million at December 31, 2009, and $483 million at December 31, 2008, of assets
recorded pursuant to capital leases with accumulated amortization of $94 million and $189 million at December 31,
2009 and 2008, respectively. Other property includes the costs of obtaining rights to natural resources of
$336 million at December 31, 2009 and 2008, with accumulated depletion of $184 million and $179 million
respectively.

K54

Capitalized Interest

Total interest cost incurred on debt in 2009, 2008, and 2007 was $484 million, $459 million, and $455 million,
respectively, of which $17 million, $15 million and $14 million was capitalized.

7. Current Liabilities

Accounts payable:
Accounts and wages payable
Casualty and other claims (Note 17)
Vacation liability
Due to Conrail (Note 5)
Equipment rents payable – net
Other
Total

Other current liabilities:
Interest payable
Retiree benefit obligations (Note 11)
Liabilities for forwarded traffic
Other
Total

December 31,

2009

2008

($ in millions)

417 $
233
123
104
75
22
974 $

106 $
65
42
19
232 $

577
248
125
82
84
24
1,140

91
59
44
26
220

K55

8. Debt

Debt with weighted average interest rates and maturities is presented below:

December 31,

2009

2008

($ in millions)

Notes and debentures:
6.70%, maturing to 2014
6.40%, maturing 2016 and 2018
7.27%, maturing 2019 to 2025
7.11%, maturing 2027 to 2031
7.21%, maturing 2037 and 2043
7.02%, maturing 2097 and 2105
Securitization borrowings, 2.22%
Equipment obligations, 6.43%, maturing to 2014
Capitalized leases, 4.32%, maturing to 2024
PAS non-interest bearing, maturing to 2012
Other debt, 7.50%, maturing to 2019
Discounts and premiums, net
Total debt
Less current maturities and short-term debt
Long-term debt excluding current maturities and short-term debt

Long-term debt maturities subsequent to 2010 are as follows:
2011
2012
2013
2014
2015 and subsequent years
Total

1,031 $
1,650
1,264
1,290
855
650
200
80
73
71
113
(124)
7,153
(474)
6,679 $

371
43
46
446
5,773
6,679

1,431
1,150
764
1,290
855
650
300
99
139
--
113
(124)
6,667
(484)
6,183

During the second quarter of 2009, NS issued $500 million of unsecured notes at 5.90% due 2019 pursuant to its
automatic shelf registration statement described below. The net proceeds from the offering were approximately
$496 million after deducting the purchase discount and expenses.

During the first quarter of 2009, NS issued $500 million of unsecured notes at 5.75% due 2016 in a private
offering. The net proceeds from the offering were approximately $494 million after deducting the purchase
discount and expenses. During the fourth quarter of 2009, NS exchanged the unregistered securities with
essentially identical securities registered under the Securities Act of 1933.

During the second quarter of 2008, $200 million of commercial paper matured and was refinanced as part of a
private offering under which NS issued and sold $600 million of unsecured notes at 5.75% due 2018. NS
subsequently exchanged substantially all of these unregistered securities with essentially identical securities
registered under the Securities Act of 1933.

In November 2007, NS entered into a $500 million receivables securitization facility under which NSR sells
substantially all of its eligible third-party receivables to an NS subsidiary, which in turn may transfer beneficial
interests in the receivables to various commercial paper vehicles. Amounts received under the facility are
accounted for as borrowings. Under this facility, NS received $100 million and repaid $200 million in 2009. At
December 31, 2009 and 2008, the amounts outstanding under the facility were $200 million at an average variable
interest rate of 2.22% and $300 million at an average variable interest rate of 3.01%, respectively. NS’ intent is to

K56

refinance $100 million and $300 million, respectively, of these borrowings by issuing long-term debt, which is
supported by its $1 billion credit agreement (see below). Accordingly, these amounts outstanding are included in
the line item “Long-term debt” and the remaining $100 million outstanding at December 31, 2009 is included in the
line item “Short-term debt” in the Consolidated Balance Sheets. The facility has a 364-day term which was
renewed and amended in October 2009 to run until October 2010. NS reduced the total amount that can be
borrowed from $500 million to $350 million to more closely match its liquidity requirements and receivables
profile. At December 31, 2009, and December 31, 2008, the amounts of receivables included in “Accounts
receivable – net” serving as collateral for these borrowings were $571 million and $719 million, respectively.

The railroad equipment obligations and the capitalized leases are secured by liens on the underlying equipment.
Certain lease obligations require the maintenance of yen-denominated deposits, which are pledged to the lessor to
satisfy yen-denominated lease payments. These deposits are included in “Other assets” in the Consolidated
Balance Sheets and totaled $47 million at December 31, 2009, and $85 million at December 31, 2008.

Issuance of Debt or Equity Securities

NS has authority from its board of directors to issue an additional $500 million of debt or equity securities
through public or private sale. During the first quarter of 2009, NS filed a Form S-3 automatic shelf registration
statement for well-known seasoned issuers under which, as of December 31, 2009, up to $500 million can be
issued under this authority.

Credit Agreement, Debt Covenants, and Commercial Paper

NS has in place and available a $1 billion, five-year credit agreement expiring in 2012, which provides for
borrowings at prevailing rates and includes covenants. NS had no amounts outstanding under this facility at
December 31, 2009 and 2008, and NS is in compliance with all of the covenants.

NS has the ability to issue commercial paper supported by its $1 billion credit agreement. At December 31, 2009
and 2008, NS had no outstanding commercial paper.

K57

9. Lease Commitments

NS is committed under long-term lease agreements, which expire on various dates through 2067, for equipment,
lines of road and other property. The following amounts do not include payments to CRC under the Shared
Assets Areas agreements (see Note 5). Future minimum lease payments and operating lease expense are as
follows:

Operating
Leases

Capital
Leases

($ in millions)

2010
2011
2012
2013
2014
2015 and subsequent years
Total
Less imputed interest on capital leases at an average rate of 5.1%
Present value of minimum lease payments included in debt

111
96
81
72
52
312
724

27
25
17
3
2
3
77
(4)
73

Operating Lease Expense

2009

2008
($ in millions)

2007

Minimum rents
Contingent rents
Total

163
65
228

183
80
263

191
79
270

Contingent rents are primarily comprised of usage-based rent paid to other railroads for joint facility operations.

10. Other Liabilities

Retiree health and death benefit obligations (Note 11)
Casualty and other claims (Note 17)
Net pension obligations (Note 11)
Long-term advances from Conrail (Note 5)
Deferred compensation
Federal and state income taxes
Other
Total

December 31,

2009

2008

($ in millions)

829 $
265
170
133
130
94
180
1,801 $

732
320
329
133
131
144
241
2,030

K58

11. Pensions and Other Postretirement Benefits

Norfolk Southern and certain subsidiaries have both funded and unfunded defined benefit pension plans covering
principally salaried employees. Norfolk Southern and certain subsidiaries also provide specified health care and
death benefits to eligible retired employees and their dependents. Under the present plans, which may be amended
or terminated at NS’ option, a defined percentage of health care expenses is covered, reduced by any deductibles,
co-payments, Medicare payments, and in some cases, coverage provided under other group insurance policies.

Pension and Other Postretirement Benefit Obligations and Plan Assets

Pension Benefits

2009

2008

Other Postretirement Coverage

Under collective bargaining agreements, NS and certain subsidiaries participate in a multi-employer benefit plan,
which provides certain postretirement health care and life insurance benefits to eligible union employees.
Premiums under this plan are expensed as incurred and amounted to $33 million in both 2009 and 2008, and
$27 million in 2007.

Section 401(k) Plans

Norfolk Southern and certain subsidiaries provide Section 401(k) savings plans for employees. Under the plans, NS
matches a portion of employee contributions, subject to applicable limitations. NS’ matching contributions, recorded
as an expense, under these plans were $16 million in 2009, $15 million in 2008, and $14 million in 2007.

12. Stock-Based Compensation

Under the stockholder-approved Long-Term Incentive Plan (LTIP), a committee of nonemployee directors of the
Board or the chief executive officer (if delegated such authority by the committee) may grant stock options, stock
appreciation rights (SARs), restricted stock units, restricted shares, performance shares, and performance share units
(PSUs), up to a maximum of 88,025,000 shares of Norfolk Southern Common Stock (Common Stock). Of these
shares, 5,000,000 were approved by the Board for issuance to non-officer participants; as a broad-based issuance,
stockholder approval was not required. In May 2005, the stockholders approved an amended LTIP which provided
that 8,500,000 shares of stock previously approved for issuance under LTIP could be granted as restricted stock units,
restricted shares, or performance shares. Under the Board-approved Thoroughbred Stock Option Plan (TSOP), the
committee may grant stock options up to a maximum of 6,000,000 shares of Common Stock; as a broad-based stock
option plan, stockholder approval of TSOP was not required. NS uses newly issued shares to satisfy any exercises
and awards under LTIP and TSOP.

The LTIP also permits the payment – on a current or a deferred basis and in cash or in stock – of dividend equivalents
on shares of Common Stock covered by options, PSUs, or restricted stock units in an amount commensurate with

K64

regular quarterly dividends paid on Common Stock. Tax absorption payments also are authorized for any awards
under LTIP in amounts estimated to equal the federal and state income taxes applicable to shares of Common Stock
issued subject to a share retention agreement.

During the first quarter of 2009, a committee of nonemployee directors of NS’ Board granted stock options, restricted
stock units and PSUs pursuant to LTIP and granted stock options pursuant to TSOP. Receipt of an award under LTIP
was made contingent upon the awardee’s execution of a non-compete agreement, and all awards under LTIP were
made subject to forfeiture in the event the awardee “engages in competing employment” for a period of time
following retirement.

Accounting Method

NS accounts for its grants of PSUs, restricted stock units, restricted shares, dividend equivalents, tax absorption
payments, and SARs in accordance with ASC 718 “Share-Based Payment.” Accordingly, all awards result in charges
to net income while dividend equivalents, which are all related to equity classified awards, are charged to retained
income. Related compensation costs were $60 million in 2009, $89 million in 2008, and $96 million in 2007. The
total tax effects recognized in income in relation to stock-based compensation were benefits of $18 million in 2009,
$30 million in 2008, and $32 million in 2007.

“Common stock issued – net” in the Consolidated Statements of Cash Flows for the years ended December 31, 2009,
2008, and 2007 includes tax benefits generated from tax deductions in excess of compensation costs recognized
(excess tax benefits) for share-based awards of $15 million, $76 million, and $57 million, respectively.

Stock Options

Options may be granted for a term not to exceed 10 years and are subject to a vesting period of at least one year.
Option exercise prices are at not less than the fair market value of Common Stock on the effective date of the grant.
In the first quarter of 2009, 1,209,700 options were granted under the LTIP and 251,200 options were granted under
the TSOP. In each case, the grant price was $38.71, which was the higher of (i) the fair market value of Common
Stock on the date of grant or (ii) the closing price of Common Stock on the date of the grant. The options granted
under the LTIP and TSOP in 2009 may not be exercised prior to the fourth and third anniversaries of the date of grant,
respectively. Holders of the options granted under the LTIP who remain actively employed receive cash dividend
equivalent payments for four years in an amount equal to the regular quarterly dividends paid on Common Stock.

In the first quarter of 2008, 1,162,600 options were granted under the LTIP and 250,000 options were granted under
the TSOP, each with a grant price of $50.74, but may not be exercised prior to the third anniversary of the date of
grant. In the first quarter of 2007, 1,203,300 options were granted under the LTIP and 251,000 options were granted
under the TSOP, each with a grant price of $49.555, but may not be exercised prior to the third anniversary of the date
of grant. For both 2008 and 2007, the grant price was the higher of (i) the fair market value of Common Stock on the
date of grant or (ii) the closing price of Common Stock on the date of the grant, and the options have a term of ten
years.

K65

The fair value of each option awarded in 2009, 2008, and 2007 was measured on the date of grant using a lattice-
based option valuation model. Expected volatilities are based on implied volatilities from traded options on Common
Stock and historical volatility of Common Stock. NS uses historical data to estimate option exercises and employee
terminations within the valuation model. The average expected option life is derived from the output of the valuation
model and represents the period of time that options granted are expected to be outstanding. The average risk-free
interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. For options granted that include
dividend equivalent payments, a dividend yield of zero was used. For the 2009 and 2008 TSOP grants a dividend
yield of 2.4% and 2.29%, respectively, was used because no dividend equivalent payments are made on these options.
The assumptions for the 2009, 2008, and 2007 LTIP and TSOP grants are shown in the following table:

Expected volatility range
Average expected volatility
Average risk-free interest rate
Average expected option term – LTIP
Per-share grant-date fair value – LTIP
Average expected option term – TSOP
Per-share grant-date fair value – TSOP
Options granted (LTIP and TSOP)

2009

2008

2007

28% - 53%
43%
2.87%
6.5 years
$18.18
9.2 years
$15.41
1,460,900

25% - 32%
32%
3.68%
5.9 years
$19.32
8.0 years
$16.29
1,412,600

26% - 33%
33%
4.9%
5.6 years
$19.82
6.5 years
$17.88
1,454,300

A summary of options outstanding as of December 31, 2009, and changes during the twelve months then ended is
presented below:

Option
Shares

Weighted Avg.
Exercise Price

Outstanding at December 31, 2008
Granted
Exercised
Forfeited
Outstanding at December 31, 2009

14,284,723
1,460,900
(2,190,947)
(356,536)
13,198,140

Exercisable at December 31, 2009

9,314,040

30.95
38.71
23.66
33.60
32.95

27.58

The aggregate intrinsic value of options outstanding at December 31, 2009, was $257 million with a weighted-average
remaining contractual term of 5.1 years. Of these options outstanding, 9,314,040 were exercisable and had an
aggregate intrinsic value of $231 million with a weighted average remaining contractual term of 3.9 years. The
following table provides information related to options exercised as of December 31 for the respective years:

2009

2008
($ in millions)

2007

Options exercised
Total intrinsic value
Cash received upon exercise of options
Related excess tax benefits realized

2,190,947
48
51
18

$
$
$

5,697,049
208
137
73

$
$
$

5,110,334
145
126
52

$
$
$

At December 31, 2009, there was $12 million of total unrecognized compensation related to stock options granted
under the LTIP and TSOP, which is expected to be recognized over a weighted-average period of approximately
2.2 years.

K66

Restricted Stock Units and Restricted Shares

Restricted stock unit grants were 320,550 in 2009, with a grant-date fair value of $38.72 and a five-year restriction
period. In 2008, restricted stock unit grants were 299,950 with a grant-date fair value of $50.47 and a five-year
restriction period. In 2007, restricted stock unit grants were 321,450 with a grant-date fair value of $50.01 and a five-
year restriction period. Restricted stock units granted in 2009, 2008, and 2007 will be settled through issuance of
shares of Common Stock. The restricted stock unit grants include cash dividend equivalent payments during the
restriction period commensurate with regular quarterly dividends paid on Common Stock. No restricted shares were
issued during 2009, 2008, or 2007.

A summary of the status of restricted stock units and restricted shares as of December 31, 2009, and changes during
the twelve months then ended is presented below:

Nonvested at December 31, 2008
Granted
Vested
Forfeited
Nonvested at December 31, 2009

Units
1,251,865
320,550
(351,755)
(1,700)
1,218,960

Shares
803,444
--
(370,208)
--
433,236

Weighted-
Average
Grant-Date
Fair Value
43.72
38.72
47.85
50.01
40.94

At December 31, 2009, there was $9 million of total unrecognized compensation related to restricted stock units and
restricted shares granted under the LTIP, which is expected to be recognized over a weighted-average period of
approximately 3.2 years. The total fair values of the restricted stock units paid in cash and restricted shares vested
during the twelve months ended December 31, 2009, 2008, and 2007 were $26 million, $1 million, and $22 million,
respectively. The total related excess tax liability realized was $1 million in 2009, and total related excess tax benefits
were $1 million and $3 million in 2008 and 2007, respectively.

Performance Share Units

PSUs provide for awards based on achievement of certain predetermined corporate performance goals (total
shareholder return, return on average invested capital and operating ratio) at the end of a three-year cycle. PSU grants
and average grant-date fair values were 1,209,700 and $38.705 in 2009; 1,162,600 and $50.465 in 2008; and
1,203,300 and $49.555 in 2007. The PSUs granted in 2009 will be paid in the form of shares; however, one-half of
any previously granted PSUs earned will be paid in the form of shares of common stock, with the other half to be paid
in cash. A summary of the status of PSUs as of December 31, 2009, and changes during the twelve months then
ended is presented below:

Performance
Share Units

Weighted-
Average
Grant-Date
Fair Value

Balance December 31, 2008
Granted
Earned – paid in Common Stock
Earned – paid in cash
Unearned
Forfeited
Balance December 31, 2009

3,459,000 $
1,209,700
(491,762)
(492,203)
(144,435)
(9,300)
3,531,000 $

49.82
38.71
49.43
49.43
49.43
49.87
46.14

K67

As of December 31, 2009, there was $11 million of total unrecognized compensation related to PSUs granted under
the LTIP, which is expected to be recognized over a weighted-average period of approximately 1.6 years. The total
fair values of PSUs earned and paid in cash during the twelve months ended December 31, 2009, 2008, and 2007
were $19 million, $26 million, and $18 million, respectively. The total related excess tax liability realized was
$2 million in 2009, and the total related excess tax benefits in both 2008 and 2007 was $2 million.

Shares Available and Issued

Shares of stock available for future grants and issued in connection with all features of the LTIP and TSOP as of
December 31, were as follows:

Available for future grants:
LTIP
TSOP
Shares of Common Stock issued:
LTIP
TSOP

13. Stockholders’ Equity

Common Stock

2009

2008

2007

4,136,591
2,145,356

2,192,764
489,945

6,837,414
2,042,420

5,569,683
642,538

8,937,651
2,290,700

5,199,060
540,877

Common stock is reported net of shares held by consolidated subsidiaries (Treasury Shares) of Norfolk Southern.
Treasury Shares at December 31, 2009 and 2008, amounted to 20,443,337 and 20,579,088 shares, respectively, with a
cost of $19 million in both 2009 and 2008.

Accumulated Other Comprehensive Loss

“Accumulated other comprehensive loss” reported in the Consolidated Statements of Changes in Stockholders’ Equity
consisted of the following:

Balance
at Beginning
of Year

Net
Gain
(Loss)

Reclassification
Adjustments

Balance
at End
of Year

($ in millions)

Year-Ended 2009
Pension and other postretirement liabilities
Other comprehensive loss of equity investees
Accumulated other comprehensive loss

Year-Ended 2008
Pension and other postretirement liabilities
Other comprehensive loss of equity investees
Accumulated other comprehensive loss

(831)
(111)
(942)

(349)
(50)
(399)

29
22
51

(498)
(61)
(559)

38
--
38

16
--
16

(764)
(89)
(853)

(831)
(111)
(942)

K68

Other Comprehensive Income (Loss)

“Other comprehensive income (loss)” reported in the Consolidated Statements of Changes in Stockholders’ Equity
consisted of the following:

Pretax
Amount

Tax
(Expense)
Benefit
($ in millions)

Net-of-Tax
Amount

Year ended December 31, 2009
Net gain (loss) arising during the year:
Pensions and other postretirement benefits
Reclassification adjustments for costs
included in net income
Subtotal
Other comprehensive income (loss) of equity investees
Other comprehensive income (loss)

(18)

61
108
24
132

(23)
(41)
(2)
(43)

Year ended December 31, 2008
Net gain (loss) arising during the year:
Pensions and other postretirement benefits
Reclassification adjustments for costs
included in net income
Subtotal
Other comprehensive income (loss) of equity investees
Other comprehensive income (loss)

Year ended December 31, 2007
Net gain (loss) arising during the year:
Pensions and other postretirement benefits
Reclassification adjustments for costs
included in net income
Subtotal
Other comprehensive income of equity investees
Reclassification adjustment for unrealized gains
on securities included in net income
Other comprehensive income (loss)

14. Stock Repurchase Program

(812)

314

27
(785)
(65)
(850)

(11)
303
4
307

(88)

31
(57)
5

(2)
(54)

(11)
23
--

1
24

38
67
22
89

(498)

16
(482)
(61)
(543)

(54)

20
(34)
5

(1)
(30)

In March 2007, NS’ Board of Directors amended NS’ share repurchase program, increasing the authorized amount of
share repurchases from 50 million to 75 million shares and shortening the term of the program from 2015 to 2010.
The timing and volume of purchases is guided by management’s assessment of market conditions and other pertinent
facts. Any near-term purchases under the program are expected to be made with internally generated cash or proceeds
from borrowings. There were no shares repurchased under this program in 2009. NS repurchased and retired
19.4 million shares and 23.6 million shares of its common stock under this program in 2008 and 2007, respectively, at
a cost of $1.1 billion and $1.2 billion, respectively. Since inception of this program in 2006, NS has repurchased and
retired 64.7 million shares of Common Stock at a total cost of $3.3 billion.

K69

15. Earnings Per Share

The following tables set forth the calculation of basic and diluted earnings per share:

2009

2008
($ in millions except per share, shares in millions)

2007

Basic earnings per share:
Income available to common stockholders
Weighted-average shares outstanding
Basic earnings per share

1,026
367.1
2.79

1,707
372.3
4.58

1,455
389.6
3.73

In the first quarter of 2009, NS adopted the provisions of the FASB FSP EITF No. 03-6-1, “Determining Whether
Instruments Granted in Share-Based Payment Transactions are Participating Securities” (ASC 260-10), which
requires the treatment of unvested stock options receiving dividend equivalents as participating securities in
computing earnings per share under the two-class method. NS has retrospectively applied the provisions of this
FSP and accordingly, income available to common stockholders for 2009, reflects an $8 million reduction, and 2008
and 2007 both reflect a $9 million reduction from net income for the effect of dividend equivalent payments made
to holders of stock options, which had the effect of reducing the previously reported basic earnings per share for
2008, from $4.60 to $4.58 and for 2007, from $3.74 to $3.73.

2009

2008
($ in millions except per share, shares in millions)

2007

Diluted earnings per share:
Income available to common stockholders
Weighted-average shares outstanding per above
Dilutive effect of outstanding options, PSUs
and restricted shares
Adjusted weighted-average shares outstanding
Diluted earnings per share

1,026
367.1

5.0
372.1
2.76

1,716
372.3

7.7
380.0
4.52

1,464
389.6

8.2
397.8
3.68

As required under the provisions of FSP EITF No. 03-6-1 (ASC 260-10), diluted earnings per share for 2009 was
calculated under the more dilutive two-class method (as compared to the treasury stock method) and accordingly,
income available to common stockholders for 2009 reflects an $8 million reduction from net income for dividend
equivalent payments. The diluted calculations exclude options having exercise prices exceeding the average
market price of Common Stock as follows: in 2009, 1.4 million, and none in 2008 and 2007.

16. Derivative Financial Instruments

All derivatives are recognized in the financial statements as either assets or liabilities and are measured at fair value.
Changes in fair value are recorded as adjustments to the assets or liabilities being hedged in “Other comprehensive
loss,” or in current earnings, depending on whether the derivative is designated and qualifies for hedge accounting, the
type of hedge transaction represented, and the effectiveness of the hedge.

NS has used derivative financial instruments to manage its overall exposure to fluctuations in interest rates. NS does
not engage in the trading of derivatives. Management has determined that its derivative financial instruments qualify
as fair-value hedges, having values that highly correlate with the underlying hedged exposures, and has designated
such instruments as hedging transactions. Credit risk related to the derivative financial instruments is considered to be
minimal and is managed by requiring high credit standards for counterparties and periodic settlements.

K70

Interest Rate Hedging

NS manages its overall exposure to fluctuations in interest rates by issuing both fixed- and floating-rate debt
instruments, and by entering into interest rate hedging transactions to achieve an appropriate mix within its debt
portfolio. NS had $4 million, or less than 1%, and $17 million, or less than 1%, of its fixed-rate debt portfolio hedged
as of December 31, 2009, and 2008, respectively, using interest rate swaps that qualify for and are designated as fair-
value hedge transactions. NS’ interest rate hedging activity resulted in decreases in interest expense of approximately
$1 million for 2009, 2008 and 2007. These swaps have been effective in hedging the changes in fair value of the
related debt arising from changes in interest rates and there has been no impact on earnings resulting from
ineffectiveness associated with these derivative transactions.

Fair Values

Fair values of interest rate swaps at December 31, 2009, and 2008, were determined based upon the present value of
expected future cash flows discounted at the appropriate implied spot rate from the spot rate yield curve. Fair value
adjustments are noncash transactions and, accordingly, are excluded from the Consolidated Statements of Cash Flows.
The gross and net asset position of NS’ outstanding derivative financial instruments was less than $1 million at
December 31, 2009, and approximately $1 million at December 31, 2008.

17. Commitments and Contingencies

Lawsuits

Norfolk Southern and/or certain subsidiaries are defendants in numerous lawsuits and other claims relating principally
to railroad operations. When management concludes that it is probable that a liability has been incurred and the
amount of the liability can be reasonably estimated, it is accrued through a charge to earnings. While the ultimate
amount of liability incurred in any of these lawsuits and claims is dependent on future developments, in
management’s opinion, the recorded liability is adequate to cover the future payment of such liability and claims.
However, the final outcome of any of these lawsuits and claims cannot be predicted with certainty, and unfavorable or
unexpected outcomes could result in additional accruals that could be significant to results of operations in a
particular year or quarter. Any adjustments to the recorded liability will be reflected in earnings in the periods in
which such adjustments are known.

Casualty Claims

Casualty claims include employee personal injury and occupational claims as well as third-party claims, all exclusive
of legal costs. To aid in valuing its personal injury liability and determining the amount to accrue with respect to such
claim during the year, NS’ management utilizes studies prepared by an independent consulting actuarial firm. Job-
related accidental injury and occupational claims are subject to the Federal Employers’ Liability Act (FELA), which
is applicable only to railroads. FELA’s fault-based system produces results that are unpredictable and inconsistent as
compared with a no-fault workers’ compensation system. The variability inherent in this system could result in actual
costs being different from the liability recorded. While the ultimate amount of claims incurred is dependent on future
developments, in management’s opinion, the recorded liability is adequate to cover the future payments of claims and
is supported by the most recent actuarial study. In all cases, NS records a liability when the expected loss for the
claim is both probable and estimable.

In April 2008, NS settled the lawsuit brought by Avondale Mills for claims associated with the January 6, 2005,
derailment in Graniteville, SC. A portion of the settlement was not reimbursed by insurance and was included in first
quarter 2008 expenses. The total liability related to the derailment represents NS’ best estimate based on current facts
and circumstances. The estimate includes amounts related to property damage, personal injury and response costs.

K71

NS’ commercial insurance policies are expected to cover substantially all expenses related to this derailment above
the unreimbursed portion and NS’ self-insured retention, including NS’ response costs and legal fees. The
Consolidated Balance Sheets reflect long-term receivables for estimated recoveries from NS’ insurance carriers. NS
is engaged in arbitration with two of its insurance carriers that failed to respond to insurance claims submitted by NS.
NS believes these expenses are covered by the insurance policies and that recoveries of the contested amounts are
probable. Accordingly, NS has recorded the full recovery attributable to each carrier ($100 million and $43 million).

Employee personal injury claims – The largest component of casualties and other claims expense is employee
personal injury costs. The independent actuarial firm engaged by NS provides quarterly studies to aid in valuing its
employee personal injury liability and estimating its employee personal injury expense. The actuarial firm studies
NS’ historical patterns of reserving for claims and subsequent settlements, taking into account relevant outside
influences. The actuary uses the results of these analyses to estimate the ultimate amount of the liability, which
includes amounts for incurred but unasserted claims. NS adjusts its liability quarterly based upon management’s
assessment and the results of the study. Recent actuarial studies have reflected favorable claims development and,
accordingly, those changes in estimates have reduced the annual cost related to personal injuries to $51 million in
2009 from $78 million in 2008. The estimate of loss liabilities is subject to inherent limitation given the difficulty of
predicting future events such as jury decisions, court interpretations, or legislative changes and as such the actual loss
may vary from the estimated liability recorded.

Occupational claims – Occupational claims (including asbestosis and other respiratory diseases, as well as conditions
allegedly related to repetitive motion) are often not caused by a specific accident or event but rather allegedly result
from a claimed exposure over time. Many such claims are being asserted by former or retired employees, some of
whom have not been employed in the rail industry for decades. The independent actuarial firm provides an estimate
of the occupational claims liability based upon NS’ history of claim filings, severity, payments, and other pertinent
facts. The liability is dependent upon management’s judgments made as to the specific case reserves as well as
judgments of the consulting independent actuarial firm in the periodic studies. The actuarial firm’s estimate of
ultimate loss includes a provision for those claims that have been incurred but not reported. This provision is derived
by analyzing industry data and projecting NS’ experience into the future as far as can be reasonably determined. NS
adjusts its liability quarterly based upon management’s assessment and the results of the study. However, it is
possible that the recorded liability may not be adequate to cover the future payment of claims. Adjustments to the
recorded liability are reflected in operating expenses in the periods in which such adjustments become known.

Third-party claims – NS records a liability for third-party claims including those for highway crossing accidents,
trespasser and other injuries, automobile liability, property damage, and lading damage. The independent actuarial
firm assists with the calculation of potential liability for third-party claims, except lading damage, based upon NS’
experience including number and timing of incidents, amount of payments, settlement rates, number of open claims,
and legal defenses. The actuarial estimate includes a provision for claims that have been incurred but have not yet
been reported. Each quarter NS adjusts its liability based upon management’s assessment and the results of the study.
Given the inherent uncertainty in regard to the ultimate outcome of third-party claims, it is possible that the actual loss
may differ from the estimated liability recorded.

Environmental Matters

Environmental engineers regularly participate in ongoing evaluations of all known sites and in determining any
necessary adjustments to liability estimates. NS also has an Environmental Policy Council, composed of senior
managers, to oversee and interpret its environmental policy.

K72

NS’ Consolidated Balance Sheets include liabilities for environmental exposures in the amount of $32 million at
December 31, 2009, and $42 million at December 31, 2008 (of which $12 million is classified as a current liability at
December 31, 2009 and 2008). At December 31, 2009, the liability represents NS’ estimate of the probable cleanup
and remediation costs based on available information at 144 known locations compared with 148 locations at
December 31, 2008. As of December 31, 2009, 9 sites accounted for $15 million of the liability, and no individual
site was considered to be material. NS anticipates that much of this liability will be paid out over five years; however,
some costs will be paid out over a longer period.

At 30 locations, one or more Norfolk Southern subsidiaries, usually in conjunction with a number of other parties,
have been identified as potentially responsible parties by the Environmental Protection Agency (EPA) or similar state
authorities under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, or
comparable state statutes, which often impose joint and several liability for cleanup costs.

The risk of incurring environmental liability – for acts and omissions, past, present, and future – is inherent in the
railroad business. Some of the commodities in NS’ traffic mix, particularly those classified as hazardous materials,
pose special risks that NS and its subsidiaries work diligently to minimize. In addition, several NS subsidiaries own,
or have owned, land used as operating property, or which is leased and operated by others, or held for sale. Because
environmental problems may exist on these properties that are latent or undisclosed, there can be no assurance that NS
will not incur environmental liabilities or costs with respect to one or more of them, the amount and materiality of
which cannot be estimated reliably at this time. Moreover, lawsuits and claims involving these and potentially other
unidentified environmental sites and matters are likely to arise from time to time. The resulting liabilities could have
a significant effect on financial position, results of operations, or liquidity in a particular year or quarter.

On April 24, 2008, the United States Department of Justice (DOJ) brought an action against NS for alleged violations
of federal environmental laws resulting from the discharge of chlorine and oil that occurred as a result of the
January 6, 2005, derailment in Graniteville, SC, including claims for civil penalties as well as injunctive relief.
Although NS’ June 24, 2008 motion to dismiss for failure to allege sufficient facts was granted, DOJ was given leave
to, and did, amend its complaint. The litigation has been stayed by the district court as the parties work to conclude
an agreed upon consent decree. NS does not believe that the resolution of these claims will have a material adverse
effect on its financial position, results of operations, or liquidity.

Based on its assessment of the facts and circumstances now known, management believes that it has recorded the
probable costs for dealing with those environmental matters of which NS is aware. Further, management believes that
it is unlikely that any known matters, either individually or in the aggregate, will have a material adverse effect on
NS’ financial position, results of operations, or liquidity.

Insurance

Norfolk Southern obtains on behalf of itself and its subsidiaries insurance for potential losses for third-party liability
and first-party property damages. NS is currently self-insured up to $25 million and above $1 billion per occurrence
for bodily injury and property damage to third parties and up to $25 million and above $175 million per occurrence
for property owned by NS or in NS’ care, custody or control.

K73

Purchase Commitments

At December 31, 2009, NS had outstanding purchase commitments totaling approximately $228 million for long-term
service contracts through 2019 as well as track material, RoadRailer® trailers, and freight cars, in connection with its
capital programs through 2011.

Change-In-Control Arrangements

Norfolk Southern has compensation agreements with officers and certain key employees that become operative only
upon a change in control of Norfolk Southern, as defined in those agreements. The agreements provide generally for
payments based on compensation at the time of a covered individual’s involuntary or other specified termination and
for certain other benefits.

Guarantees

In a number of instances, Norfolk Southern and its subsidiaries have agreed to indemnify lenders for additional costs
they may bear as a result of certain changes in laws or regulations applicable to their loans. Such changes may
include impositions or modifications with respect to taxes, duties, reserves, liquidity, capital adequacy, special
deposits, and similar requirements relating to extensions of credit by, deposits with, or the assets of liabilities of such
lenders. The nature and timing of changes in laws or regulations applicable to NS’ financings are inherently
unpredictable, and therefore NS’ exposure in connection with the foregoing indemnifications cannot be quantified.
No liability has been recorded related to these indemnifications. In the case of one type of equipment financing,
NSR’s Japanese leverage leases, NSR may terminate the leases and ancillary agreements if such a change-in-law
indemnity is triggered. Such a termination would require NSR to make early termination payments that would not be
expected to have a material effect on NS’ financial position, results of operations, or liquidity.

NS has indemnified parties in a number of transactions for U.S. income tax withholding imposed as a result of
changes in U.S. tax law. In all cases, NS has the right to unwind the related transaction if the withholding cannot be
avoided in the future. Because these indemnities would be triggered and are dependent upon a change in the tax law,
the maximum exposure is not quantifiable. Management does not believe that it is likely that it will be required to
make any payments under these indemnities.

As of December 31, 2009, certain Norfolk Southern subsidiaries are contingently liable as guarantors with respect to
$7 million of indebtedness, due in 2019, of an entity in which they have an ownership interest, the Terminal Railroad
Association of St. Louis. Four other railroads are also jointly and severally liable as guarantors for this indebtedness.
No liability has been recorded related to this guaranty.

* * * * *

K74

NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES
QUARTERLY FINANCIAL DATA
(Unaudited)

Three Months Ended

March 31

June 30

September 30

December 31

($ in millions, except per share amounts)

2009
Railway operating revenues
Income from railway
operations
Net income
Earnings per share:
Basic
Diluted

2008
Railway operating revenues
Income from railway
operations
Net income
Earnings per share:
Basic
Diluted

$
$

1,943 $

1,857 $

2,063 $

2,106

383
177

0.48 $
0.47 $

468
247

0.67 $
0.66 $

562
303

0.82 $
0.81 $

549
307

0.83
0.82

2,500 $

2,765 $

2,894 $

2,502

578
291

0.77 $
0.76 $

799
453

1.20 $
1.18 $

894
520

1.39 $
1.37 $

813
452

1.23
1.21

K75

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Norfolk Southern’s Chief Executive Officer and Chief Financial Officer, with the assistance of management,
evaluated the effectiveness of NS’ disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of December 31, 2009.
Based on such evaluation, such officers have concluded that, as of December 31, 2009, NS’ disclosure controls and
procedures were effective to ensure that information required to be disclosed in NS’ reports under the Exchange Act is
recorded, processed, summarized, and reported, within the time period specified in the SEC’s rules and forms, and
that such information is accumulated and communicated to management, including the Chief Executive Officer and
the Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Internal Control Over Financial Reporting

The management of Norfolk Southern is responsible for establishing and maintaining adequate internal control over
financial reporting. Norfolk Southern’s internal control over financial reporting includes those policies and
procedures that pertain to its ability to record, process, summarize, and report reliable financial data. Management
recognizes that there are inherent limitations in the effectiveness of any internal control over financial reporting,
including the possibility of human error and the circumvention or overriding of internal control. Accordingly, even
effective internal control over financial reporting can provide only reasonable assurance with respect to financial
statement preparation. Further, because of changes in conditions, the effectiveness of internal control over financial
reporting may vary over time.

In order to ensure that Norfolk Southern’s internal control over financial reporting is effective, management regularly
assesses such controls and did so most recently for its financial reporting as of December 31, 2009. This assessment
was based on criteria for effective internal control over financial reporting set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on our
assessment, management has concluded that Norfolk Southern maintained effective internal control over financial
reporting as of December 31, 2009.

The Board of Directors, acting through its Audit Committee, is responsible for the oversight of Norfolk Southern’s
accounting policies, financial reporting, and internal control. The Audit Committee of the Board of Directors is
comprised entirely of outside directors who are independent of management. The independent registered public
accounting firm and the internal auditors have full and unlimited access to the Audit Committee, with or without
management, to discuss the adequacy of internal control over financial reporting, and any other matters which they
believe should be brought to the attention of the Audit Committee.

Norfolk Southern’s management has issued a report of its assessment of internal control over financial reporting, and
Norfolk Southern’s independent registered public accounting firm has issued an attestation report on Norfolk
Southern’s internal controls over financial reporting as of December 31, 2009. These reports appear in Part II, Item 8
of this report on Form 10-K.

During the fourth quarter of 2009, management has not identified any changes in internal controls over financial
reporting that have materially affected, or are reasonably likely to materially effect, NS’ internal control over
financial reporting.

Item 9B. Other Information

None.

K76

PART III

NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES (NS)

Item 10. Directors, Executive Officers, and Corporate Governance

In accordance with General Instruction G(3), information called for by Item 10, Part III, is incorporated herein by
reference from the information appearing under the caption “Election of Directors,” under the caption “Section
16(a) Beneficial Ownership Reporting Compliance,” under the caption “Corporate Governance,” and under the
caption “Committees” in Norfolk Southern’s definitive Proxy Statement for the Annual Meeting of Stockholders
to be held on May 13, 2010, which definitive Proxy Statement will be filed electronically with the Securities and
Exchange Commission (Commission) pursuant to Regulation 14A. The information regarding executive officers
called for by Item 401 of Regulation S-K is included in Part I hereof beginning under “Executive Officers of the
Registrant.”

Item 11. Executive Compensation

In accordance with General Instruction G(3), information called for by Item 11, Part III, is incorporated herein by
reference from the information:



appearing under the subcaption “Compensation” under the caption “Board of Directors” for directors,
including the “2009 Non-Employee Director Compensation Table” and the “Narrative to Non-Employee
Director Compensation Table;”
appearing under the caption “Executive Compensation” for executives, including the “Compensation
Discussion and Analysis,” the information appearing in the “Summary Compensation Table” and the
“2009 Grants of Plan-Based Awards” table, including the narrative to such tables, the “Outstanding
Equity Awards at Fiscal Year-End 2009” and “Option Exercises and Stock Vested in 2009” tables, and
the tabular and narrative information appearing under the subcaptions “Retirement Benefits,” “Deferred
Compensation,” and “Potential Payments Upon a Change in Control or Other Termination of
Employment;” and
appearing under the captions “Compensation Committee Interlocks and Insider Participation” and
“Compensation Committee Report,”

in each case included in Norfolk Southern’s definitive Proxy Statement for the Annual Meeting of Stockholders to
be held on May 13, 2010, which definitive Proxy Statement will be filed electronically with the Commission
pursuant to Regulation 14A.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters

In accordance with General Instruction G(3), information on security ownership of certain beneficial owners and
management called for by Item 12, Part III, Item 403 of Regulation S-K, is incorporated herein by reference from
the information appearing under the caption “Beneficial Ownership of Stock” in Norfolk Southern’s definitive
Proxy Statement for the Annual Meeting of Stockholders to be held on May 13, 2010, which definitive Proxy
Statement will be filed electronically with the Commission pursuant to Regulation 14A.

K77

Equity Compensation Plan Information (as of December 31, 2009)

Number of
securities
to be issued upon
exercise of
outstanding options,
warrants and rights

(a)

Weighted-
average
exercise price
of outstanding
options, warrants
and rights
(b)

Number of securities
remaining available
for future issuance
under equity
compensation plans
(excluding)
securities reflected
in column (a))
(c)

15,450,838(3)

$ 31.59(5)

4,136,591(6)

Plan
Category

Equity compensation
plans approved by
securities holders (1)

Equity compensation
plans not approved by
security holders (2)

Total

16,797,595

1,346,757(4)

$ 37.63

2,175,356(7)

6,311,947

1 The Long-Term Incentive Plan, excluding five million shares for broad-based issuance to non-officers.
2 The Long-Term Incentive Plan’s five million shares for broad-based issuance to non-officers, the Thoroughbred Stock
Option Plan and the Directors’ Restricted Stock Plan.
3 Includes options, restricted stock units and performance share units granted under the Long-Term Incentive Plan that may
be settled in shares of stock.
4 Includes options granted under the Long-Term Incentive Plan on 421,706 shares for non-officers and options granted
under the Thoroughbred Stock Option Plan.
5 Calculated without regard to 3,608,755 outstanding restricted stock units and performance share units at December 31,
2009.
6 Of the shares remaining available for grant under plans approved by stockholders, 4,079,856 are available for grant as
restricted shares, performance shares or restricted stock unit shares under the Long-Term Incentive Plan.
7 Of the shares remaining available for grant under plans not approved by stockholders, 30,000 are available for grant as
restricted stock under the Directors’ Restricted Stock Plan.

Norfolk Southern Corporation Long-Term Incentive Plan (“LTIP”)

Established on June 28, 1983, and approved by stockholders at their Annual Meeting held on May 10, 1984, LTIP
was adopted to promote the success of Norfolk Southern by providing an opportunity for non-employee directors,
officers, and other key employees to acquire a proprietary interest in the Corporation. On January 23, 2001, the
Board of Directors further amended LTIP and approved the issuance of an additional 5,000,000 shares of
authorized but unissued Common Stock under LTIP to participants who are not officers of Norfolk Southern. The
issuance of these shares was broadly-based, and stockholder approval of these shares was not required.
Accordingly, this portion of LTIP is included in the number of securities available for future issuance for plans
not approved by stockholders. Also on January 23, 2001, the Board amended LTIP, which amendment was
approved by shareholders on May 10, 2001, that included the reservation for issuance of an additional 30,000,000
shares of authorized but unissued Norfolk Southern Common Stock.

Pursuant to another amendment approved by stockholders on May 12, 2005, not more than 8,500,000 of the shares
remaining available for issuance under LTIP may be awarded as restricted shares, performance shares or restricted
stock unit shares. Cash payments of restricted stock units, stock appreciation rights, and performance share units

K78

will not be applied against the maximum number of shares issuable under LTIP. Any shares of Common Stock
subject to options, performance share units, restricted shares, or restricted stock units which are not issued as
Common Stock will again be available for award under LTIP after the expiration or forfeiture of an award.

Non-employee directors, officers, and other key employees residing in the United States or Canada are eligible for
selection to receive LTIP awards. Under LTIP, the Compensation Committee (Committee) may grant incentive
stock options, nonqualified stock options, stock appreciation rights, restricted shares, restricted stock units, and
performance share units. In addition, dividend equivalents may be awarded for options, restricted stock units, and
performance share units. The Committee may make awards under LTIP subject to forfeiture under certain
circumstances and may establish such other terms and conditions for the awards as provided in LTIP.

For options, the option price per share will not be less than 100% of the fair market value of Norfolk Southern’s
Common Stock on the effective date the option is granted. All options are subject to a vesting period of at least
one year, and the term of the option will not exceed ten years. LTIP specifically prohibits option repricing
without stockholder approval, except for capital adjustments.

Performance share units entitle a recipient to receive performance-based compensation at the end of a three-year
performance cycle based on Norfolk Southern’s performance during that three-year period. For the 2009
performance share unit awards, corporate performance will be measured using three equally weighted standards
established by the Committee: (1) three-year average return on average capital invested, (2) three-year average
operating ratio, and (3) three-year total return to stockholders as compared with the average total return on all
stocks comprising the S&P 500 composite stock price index. Performance share units may be payable in either
shares of Norfolk Southern Common Stock or cash.

Restricted stock units are payable in cash or in shares of Norfolk Southern Common Stock at the end of a
restriction period of not less than 36 months and not more than 60 months. During the restriction period, the
holder of the restricted stock units has no beneficial ownership interest in the Norfolk Southern Common Stock
represented by the restricted stock units and has no right to vote the shares represented by the units or to receive
dividends (except for dividend equivalent rights that may be awarded with respect to the restricted stock units).
The Committee at its discretion may waive the restriction period.

Norfolk Southern Corporation Thoroughbred Stock Option Plan

The Board adopted the Norfolk Southern Corporation Thoroughbred Stock Option Plan (“TSOP”) on January 26,
1999, to promote the success of Norfolk Southern by providing an opportunity for nonagreement employees to
acquire a proprietary interest in Norfolk Southern and thereby to provide an additional incentive to nonagreement
employees to devote their maximum efforts and skills to the advancement, betterment, and prosperity of Norfolk
Southern and its stockholders. Under the TSOP there were 6,000,000 shares of authorized but unissued Common
Stock reserved for issuance. TSOP has not been and is not required to have been approved by stockholders.

Active full-time nonagreement employees residing in the United States or Canada are eligible for selection to
receive TSOP awards. Under TSOP, the Committee may grant nonqualified stock options subject to such terms
and conditions as provided in TSOP.

The option price will not be less than 100% of the fair market value of Norfolk Southern’s Common Stock on the
effective date the options are granted. All options are subject to a vesting period of at least one year, and the term
of the option will not exceed ten years. Options awarded in 2009 are subject to a three-year vesting period.
TSOP specifically prohibits repricing without stockholder approval, except for capital adjustments.

K79

Norfolk Southern Corporation Directors’ Restricted Stock Plan

The Norfolk Southern Corporation Directors’ Restricted Stock Plan (“Plan”) was adopted on January 1, 1994, and
is designed to increase ownership of Norfolk Southern Common Stock by its non-employee directors so as to
further align their ownership interest in Norfolk Southern with that of stockholders. The Plan has not been and is
not required to have been approved by stockholders. Currently, a maximum of 66,000 shares of Norfolk Southern
Common Stock may be granted under the Plan. To make grants to eligible directors, Norfolk Southern purchases,
through one or more subsidiary companies, the number of shares required in open-market transactions at
prevailing market prices, or makes such grants from Norfolk Southern Common Stock already owned by one or
more of Norfolk Southern’s subsidiary companies.

Only non-employee directors who are not and never have been employees of Norfolk Southern are eligible to
participate in the Plan. Upon becoming a director, each eligible director receives a one-time grant of 3,000
restricted shares of Norfolk Southern Common Stock. No individual member of the Board exercises discretion
concerning the eligibility of any director or the number of shares granted.

The restriction period applicable to restricted shares granted under the Plan begins on the date of the grant and
ends on the earlier of the recipient’s death or six months after the recipient ceases to be a director by reason of
disability or retirement. During the restriction period shares may not be sold, pledged, or otherwise encumbered.
Directors will forfeit the restricted shares if they cease to serve as a director of Norfolk Southern for reasons other
than their disability, retirement, or death.

13. Certain Relationships and Related Transactions, and Director Independence

In accordance with General Instruction G(3), information called for by Part III, Item 13, is incorporated herein by
reference from the information appearing under the caption “Transactions with Related Persons” and under the
caption “Director Independence” in Norfolk Southern’s definitive Proxy Statement for the Annual Meeting of the
Stockholders to be held on May 13, 2010, which definitive Proxy Statement will be filed electronically with the
Commission pursuant to Regulation 14A.

14. Principal Accountant Fees and Services

In accordance with General Instruction G(3), information called for by Part III, Item 14, is incorporated herein by
reference from the information appearing under the caption “Ratification of Appointment of Independent
Registered Public Accounting Firm” in Norfolk Southern’s definitive Proxy Statement for the Annual Meeting of
Stockholders to be held on May 13, 2010, which definitive proxy statement will be filed electronically with the
Commission pursuant to Regulation 14A.

K80

PART IV

NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES (NS)

Item 15. Exhibits and Financial Statement Schedules

(A)

The following documents are filed as part of this report:

Index to Consolidated Financial Statements

Report of Management
Reports of Independent Registered Public Accounting Firm
Consolidated Statements of Income, Years ended December 31, 2009, 2008, and

2007

Consolidated Balance Sheets as of December 31, 2009 and 2008
Consolidated Statements of Cash Flows, Years ended December 31, 2009, 2008,

and 2007

Consolidated Statements of Changes in Stockholders’ Equity, Years ended

December 31, 2009, 2008, and 2007
Notes to Consolidated Financial Statements

Financial Statement Schedule:

The following consolidated financial statement schedule should be read in

connection with the consolidated financial statements:

Index to Consolidated Financial Statement Schedule

Schedule II – Valuation and Qualifying Accounts

Schedules other than the one listed above are omitted either because they are not

required or are inapplicable, or because the information is included in the
consolidated financial statements or related notes.

Exhibits

Description

Articles of Incorporation and Bylaws -

The Restated Articles of Incorporation of Norfolk Southern Corporation are

incorporated by reference to Exhibit 3(i) to Norfolk Southern Corporation’s 10-K
filed on March 5, 2001.

Exhibit
Number

3(i)

3(ii)

The Bylaws of Norfolk Southern Corporation, as amended effective

January 25, 2010, are incorporated by reference to Exhibit 3(ii) to Norfolk Southern
Corporation’s Form 8-K filed on January 29, 2010.

Page

K39
K40

K42
K43

K44

K45
K46

Page

K96

K81

Instruments Defining the Rights of Security Holders, Including Indentures:

(a)

Indenture, dated as of January 15, 1991, from Norfolk Southern Corporation to First
Trust of New York, National Association, as Trustee, is incorporated by reference
to Exhibit 4.1 to Norfolk Southern Corporation’s Registration Statement on
Form S-3 (No. 33-38595).

(b)

First Supplemental Indenture, dated May 19, 1997, between Norfolk Southern

Corporation and First Trust of New York, National Association, as Trustee, related
to the issuance of notes in the principal amount of $4.3 billion, is incorporated
herein by reference to Exhibit 1.1(d) to Norfolk Southern Corporation’s Form 8-K
filed on May 21, 1997.

(c)

Second Supplemental Indenture, dated April 26, 1999, between Norfolk Southern
Corporation and U.S. Bank Trust National Association, as Trustee, related to the
issuance of notes in the principal amount of $400 million, is incorporated herein by
reference to Exhibit 1.1(c) to Norfolk Southern Corporation’s Form 8-K filed on
April, 30, 1999.

(d)

Third Supplemental Indenture, dated May 23, 2000, between Norfolk Southern

Corporation and U.S. Bank Trust National Association, as Trustee, related to the
issuance of notes in the principal amount of $600 million, is incorporated herein by
reference to Exhibit 4.1 to Norfolk Southern Corporation’s Form 8-K filed on
May 25, 2000.

(e)

Fourth Supplemental Indenture, dated as of February 6, 2001, between Norfolk

Southern Corporation and U.S. Bank Trust National Association, as Trustee, related
to the issuance of notes in the principal amount of $1 billion, is incorporated herein
by reference to Exhibit 4.1 to Norfolk Southern Corporation’s Form 8-K filed on
February 7, 2001.

(f)

Sixth Supplemental Indenture, dated as of April 30, 2002, between Norfolk
Southern Corporation and U.S. Bank Trust National Association, as Trustee,
relating to the issuance of notes in the principal amount of $200 million, is
incorporated herein by reference to Exhibit 4.1 to Norfolk Southern Corporation’s
Form 8-K filed on May 1, 2002.

(g)

Eighth Supplemental Indenture, dated as of September 17, 2004, between Norfolk

Southern Corporation and U.S. Bank Trust National Association, as Trustee,
relating to the issuance of 5.257% Notes due 2014 (“Securities”) in the aggregate
principal amount of $441.5 million in connection with Norfolk Southern
Corporation’s offer to exchange the Securities and cash for up to $400 million of its
outstanding 7.350% Notes due 2007, is incorporated herein by reference to
Exhibit 4.1 to Norfolk Southern Corporation’s Form 8-K filed on
September 23, 2004.

(h)

Indenture, dated August 27, 2004, among PRR Newco, Inc., as Issuer, and Norfolk
Southern Railway Company, as Guarantor, and The Bank of New York, as Trustee,
is incorporated herein by reference to Exhibit 4(l) to Norfolk Southern
Corporation’s Form 10-Q filed on October 28, 2004.

K82

(i)

(j)

First Supplemental Indenture, dated August 27, 2004, among PRR Newco, Inc., as
Issuer, and Norfolk Southern Railway Company, as Guarantor, and the Bank of
New York, as Trustee, related to the issuance of notes in the principal amount of
approximately $451.8 million, is incorporated herein by reference to Exhibit 4(m)
to Norfolk Southern Corporation’s Form 10-Q filed on October 28, 2004.

Ninth Supplemental Indenture, dated as of March 11, 2005, between Norfolk
Southern Corporation and U.S. Bank Trust National Association, as Trustee,
relating to the issuance of notes in the principal amount of $300 million, is
incorporated herein by reference to Exhibit 4.1 to Norfolk Southern Corporation’s
Form 8-K filed on March 15, 2005.

(k)

Tenth Supplemental Indenture, dated as of May 17, 2005, between Norfolk

Southern Corporation and U.S. Bank Trust National Association, as Trustee,
relating to the issuance of notes in the principal amount of $366.6 million, is
incorporated herein by reference to Exhibit 99.1 to Norfolk Southern Corporation’s
Form 8-K filed on May 18, 2005.

(l)

(m)

(n)

Eleventh Supplemental Indenture, dated as of May 17, 2005, between Norfolk
Southern Corporation and U.S. Bank Trust National Association, as Trustee,
relating to the issuance of notes in the principal amount of $350 million, is
incorporated herein by reference to Exhibit 99.2 to Norfolk Southern Corporation’s
Form 8-K filed on May 18, 2005.

Indenture, dated as of April 4, 2008, between Norfolk Southern Corporation and
U.S. Bank Trust National Association, as Trustee, relating to the issuance of notes
in the principal amount of $600 million, is incorporated herein by reference to
Exhibit 4.1 to Norfolk Southern Corporation’s Form 8-K filed on April 9, 2008.

Indenture, dated as of January 15, 2009, between Norfolk Southern Corporation and
U.S. Bank Trust National Association, as Trustee, relating to the issuance of notes
in the principal amount of $500 million, is incorporated herein by reference to
Exhibit 4.1 to Norfolk Southern Corporation’s Form 8-K filed on January 20, 2009.

(o)

Registration Rights Agreement, dated as of January 15, 2009, among Norfolk

Southern Corporation and Citigroup Global Markets Inc., J.P. Morgan Securities
Inc. and UBS Securities LLC, is incorporated herein by reference to Exhibit 4.2 to
Norfolk Southern Corporation’s Form 8-K filed on January 20, 2009.

(p)

(q)

Indenture, dated as of June 1, 2009, between Norfolk Southern Corporation and
U.S. Bank Trust National Association, as Trustee, is incorporated herein by
reference to Exhibit 4.1 to Norfolk Southern Corporation’s Form 8-K filed on
June 1, 2009.

First Supplemental Indenture, dated as of June 1, 2009, between Norfolk Southern
Corporation and U.S. Bank Trust National Association, as Trustee, related to the
issuance of notes in the principal amount of $500 million, is incorporated herein by
reference to Exhibit 4.2 to Norfolk Southern Corporation’s Form 8-K filed on
June 1, 2009.

K83

In accordance with Item 601(b)(4)(iii) of Regulation S-K, copies of other
instruments of Norfolk Southern Corporation and its subsidiaries with respect to the
rights of holders of long-term debt are not filed herewith, or incorporated by
reference, but will be furnished to the Commission upon request.

Material Contracts -

(a)

The Transaction Agreement, dated as of June 10, 1997, by and among CSX, CSX

Transportation, Inc., Registrant, Norfolk Southern Railway Company, Conrail Inc.,
Consolidated Rail Corporation, and CRR Holdings LLC, with certain schedules
thereto, previously filed, is incorporated herein by reference to Exhibit 10(a) to
Norfolk Southern Corporation’s Form 10-K filed on February 24, 2003.

(b)

Amendment No. 1, dated as of August 22, 1998, to the Transaction Agreement,

dated as of June 10, 1997, by and among CSX Corporation, CSX Transportation,
Inc., Norfolk Southern Corporation, Norfolk Southern Railway Company, Conrail,
Inc., Consolidated Rail Corporation, and CRR Holdings LLC, is incorporated herein
by reference from Exhibit 10.1 to Norfolk Southern Corporation’s Form 10-Q filed
on August 11, 1999.

(c)

Amendment No. 2, dated as of June 1, 1999, to the Transaction Agreement, dated

June 10, 1997, by and among CSX Corporation, CSX Transportation, Inc., Norfolk
Southern Corporation, Norfolk Southern Railway Company, Conrail, Inc.,
Consolidated Rail Corporation, and CRR Holdings LLC, is incorporated herein by
reference from Exhibit 10.2 to Norfolk Southern Corporation’s Form 10-Q filed on
August 11, 1999.

(d)

Amendment No. 3, dated as of June 1, 1999, and executed in April 2004, to the
Transaction Agreement, dated June 10, 1997, by and among CSX Corporation,
CSX Transportation, Inc., Norfolk Southern Corporation, Norfolk Southern
Railway Company, Conrail, Inc., Consolidated Rail Corporation, and CRR
Holdings LLC, is incorporated herein by reference from Exhibit 10(dd) to Norfolk
Southern Corporation’s Form 10-Q filed on July 30, 2004.

(e)

Amendment No. 5 to the Transaction Agreement, dated as of August 27, 2004, by

and among CSX Corporation, CSX Transportation, Inc., Norfolk Southern
Corporation, Norfolk Southern Railway Company, Conrail, Inc., Consolidated Rail
Corporation, and CRR Holdings LLC, is incorporated herein by reference to
Exhibit 10.1 to Norfolk Southern Corporation’s Form 8-K filed on
September 2, 2004.

(f)

Amendment No. 6, dated as of April 1, 2007, to the Transaction Agreement dated

June 10, 1997, by and among CSX Corporation, CSX Transportation, Inc., Norfolk
Southern Railway Company, Conrail, Inc., Consolidated Rail Corporation, and
CRR Holdings LLC, is incorporated herein by reference to Exhibit 10.5 to Norfolk
Southern Corporation’s Form 10-Q filed on July 27, 2007.

(g)

Shared Assets Area Operating Agreement for North Jersey, dated as of

June 1, 1999, by and among Consolidated Rail Corporation, CSX Transportation,
Inc., and Norfolk Southern Railway Company, with exhibit thereto, is incorporated
herein by reference from Exhibit 10.4 to Norfolk Southern Corporation’s
Form 10-Q filed on August 11, 1999.

K84

(h)

(i)

(j)

Shared Assets Area Operating Agreement for Detroit, dated as of June 1, 1999, by
and among Consolidated Rail Corporation, CSX Transportation, Inc., and Norfolk
Southern Railway Company, with exhibit thereto, is incorporated herein by
reference from Exhibit 10.6 to Norfolk Southern Corporation’s Form 10-Q filed on
August 11, 1999.

Shared Assets Area Operating Agreement for South Jersey/Philadelphia, dated as of
June 1, 1999, by and among Consolidated Rail Corporation, CSX Transportation,
Inc., and Norfolk Southern Railway Company, with exhibit thereto, is incorporated
herein by reference from Exhibit 10.5 to Norfolk Southern Corporation’s
Form 10-Q filed on August 11, 1999.

Amendment No. 1, dated as of June 1, 2000, to the Shared Assets Area Operating
Agreements for North Jersey, South Jersey/Philadelphia, and Detroit, dated as of
June 1, 1999, by and among Consolidated Rail Corporation, CSX
Transportation, Inc., and Norfolk Southern Railway Company, with exhibits
thereto, is incorporated herein by reference to Exhibit 10(h) to Norfolk Southern
Corporation’s Form 10-K filed on March 5, 2001.

(k)

Amendment No. 2, dated as of January 1, 2001, to the Shared Assets Area

Operating Agreements for North Jersey, South Jersey/Philadelphia, and Detroit,
dated as of June 1, 1999, by and among Consolidated Rail Corporation, CSX
Transportation, Inc., and Norfolk Southern Railway Company, with exhibits
thereto, is incorporated herein by reference to Exhibit 10(j) to Norfolk Southern
Corporation’s Form 10-K filed on February 21, 2002.

(l)

Amendment No. 3, dated as of June 1, 2001, and executed in May of 2002, to the

Shared Assets Area Operating Agreements for North Jersey, South
Jersey/Philadelphia, and Detroit, dated as of June 1, 1999, by and among
Consolidated Rail Corporation, CSX Transportation, Inc., and Norfolk Southern
Railway Company, with exhibits thereto, is incorporated herein by reference to
Exhibit 10(k) to Norfolk Southern Corporation’s Form 10-K filed on
February 24, 2003.

(m)

Amendment No. 4, dated as of June 1, 2005, and executed in late June 2005, to the

Shared Assets Area Operating Agreements for North Jersey, South
Jersey/Philadelphia, and Detroit, dated as of June 1, 1999, by and among
Consolidated Rail Corporation, CSX Transportation, Inc., and Norfolk Southern
Railway Company, with exhibits thereto, is incorporated herein by reference to
Exhibit 99 to Norfolk Southern Corporation’s Form 8-K filed on July 1, 2005.

(n)

(o)

Monongahela Usage Agreement, dated as of June 1, 1999, by and among CSX
Transportation, Inc., Norfolk Southern Railway Company, Pennsylvania Lines
LLC, and New York Central Lines LLC, with exhibit thereto, is incorporated herein
by reference from Exhibit 10.7 to Norfolk Southern Corporation’s Form 10-Q filed
on August 11, 1999.

The Agreement, entered into as of July 27, 1999, between North Carolina Railroad
Company and Norfolk Southern Railway Company, is incorporated herein by
reference from Exhibit 10(i) to Norfolk Southern Corporation’s Form 10-K filed on
March 6, 2000.

K85

(p)

First Amendment, dated March 19, 2007, to the Master Agreement dated

July 27, 1999, by and between North Carolina Railroad Company and Norfolk
Southern Railway Company, is incorporated herein by reference to Exhibit 10.3 to
Norfolk Southern Corporation’s Form 10-Q filed on July 27, 2007.

(q)**

Second Amendment, dated December 28, 2009, to the Master Agreement dated
July 27, 1999, by and between North Carolina Railroad Company and Norfolk
Southern Railway Company (Exhibits, annexes and schedules omitted. The
Registrant will furnish supplementary copies of such materials to the SEC upon
request).

(r)

The Supplementary Agreement, entered into as of January 1, 1987, between the

Trustees of the Cincinnati Southern Railway and The Cincinnati, New Orleans and
Texas Pacific Railway Company (the latter a wholly owned subsidiary of Norfolk
Southern Railway Company) – extending and amending a Lease, dated as of
October 11, 1881 – is incorporated by reference to Exhibit 10(k) to Norfolk
Southern Corporation’s Form 10-K filed on March 5, 2001.

(s)*

(t)*

The Norfolk Southern Corporation Executive Management Incentive Plan, effective
January 25, 2005, is incorporated by reference herein from Exhibit 99 to Norfolk
Southern Corporation’s Form 8-K filed on May 13, 2005.

The Norfolk Southern Corporation Officers’ Deferred Compensation Plan, as
amended effective September 26, 2000, is incorporated herein by reference to
Exhibit 10(n) to Norfolk Southern Corporation’s Form 10-K filed on
March 5, 2001.

(u)*

The Norfolk Southern Corporation Directors’ Restricted Stock Plan, effective

January 1, 1994, as restated November 24, 1998, is incorporated herein by reference
from Exhibit 10(h) to Norfolk Southern Corporation’s Form 10-K filed on
March 24, 1999.

(v)*

Form of Severance Agreement, dated as of June 1, 1996, between Norfolk Southern

Corporation and certain executive officers (including those defined as “named
executive officers” and identified in the Corporation’s Proxy Statement for the 1997
through 2001 Annual Meetings of Stockholders) is incorporated herein by reference
to Exhibit 10(t) to Norfolk Southern Corporation’s Form 10-K filed on
February 21, 2002.

(w)*

(x)*

Supplemental Benefit Plan of Norfolk Southern Corporation and Participating
Subsidiary Companies, as amended effective January 1, 2009, is incorporated
herein by reference to Exhibit 10.06 to Norfolk Southern Corporation’s Form 8-K
filed on July 24, 2008.

Amendment to the Supplemental Benefit Plan of Norfolk Southern Corporation and
Participating Subsidiary Companies, effective as of January 1, 2009, is incorporated
herein by reference to Exhibit 10(x) to Norfolk Southern Corporation’s Form 10-K
filed on February 18, 2009.

K86

(y)*

The Norfolk Southern Corporation Directors’ Charitable Award Program, as

amended effective July 2007, is incorporated herein by reference to Exhibit 10.6 to
Norfolk Southern Corporation’s Form 10-Q filed on July 27, 2007.

(z)*

The Norfolk Southern Corporation Outside Directors’ Deferred Stock Unit
Program, as amended effective January 22, 2008, is incorporated herein by
reference to Exhibit 10.1 to Norfolk Southern Corporation’s Form 8-K filed on
January 25, 2008.

(aa)*

Form of Agreement, dated as of October 1, 2001, providing enhanced pension

benefits to three officers in exchange for their continued employment with Norfolk
Southern Corporation for two years, is incorporated herein by reference to
Exhibit 10(w) to Norfolk Southern Corporation’s Form 10-Q filed on
November 9, 2001. The agreement was entered into with L. Ike Prillaman, former
Vice Chairman and Chief Marketing Officer; Stephen C. Tobias, former Vice
Chairman and Chief Operating Officer; and Henry C. Wolf, former Vice Chairman
and Chief Financial Officer.

(bb)

The Norfolk Southern Corporation Thoroughbred Stock Option Plan, as amended
effective January 28, 2003, is incorporated herein by reference to Exhibit 10(z) to
Norfolk Southern Corporation’s Form 10-K filed on February 24, 2003.

(cc)*,**

The Norfolk Southern Corporation Executive Life Insurance Plan, as amended and

restated effective November 1, 2009.

(dd)

Distribution Agreement, dated as of July 26, 2004, by and among CSX Corporation,
CSX Transportation, Inc., CSX Rail Holding Corporation, CSX Northeast Holdings
Corporation, Norfolk Southern Corporation, Norfolk Southern Railway Company,
CRR Holdings LLC, Green Acquisition Corp., Conrail Inc., Consolidated Rail
Corporation, New York Central Lines LLC, Pennsylvania Lines LLC, NYC Newco,
Inc., and PRR Newco, Inc., is incorporated herein by reference to Exhibit 2.1 to
Norfolk Southern Corporation’s Form 8-K filed on September 2, 2004.

(ee)

Tax Agreement, dated as of August 27, 2004, by and among Green Acquisition

Corp., Conrail Inc., Consolidated Rail Corporation, New York Central Lines LLC,
and Pennsylvania Lines LLC, is incorporated herein by reference to Exhibit 10.2 to
Norfolk Southern Corporation’s Form 8-K filed on September 2, 2004.

(ff)

Amended and Restated Credit Agreement dated as of June 26, 2007, with respect to
the Registrant’s $1 billion unsecured revolving credit facility, is incorporated herein
by reference to Exhibit 99 to Norfolk Southern Corporation’s Form 8-K filed on
June 27, 2007.

(gg)*

The description of Norfolk Southern Corporation’s executive physical

reimbursement for non-employee directors and certain executives is incorporated
herein by reference to Norfolk Southern Corporation’s Form 8-K filed on
July 28, 2005.

(hh)*

Form of 2005 Incentive Stock Option and Non-Qualified Stock Option Agreement
under the Norfolk Southern Long-Term Incentive Plan, is incorporated herein by
reference to Exhibit 99 to Norfolk Southern Corporation’s Form 8-K filed on
January 7, 2005.

K87

(ii)*

(jj)

Form of 2006 Incentive Stock Option and Non-Qualified Stock Option Agreement
under the Norfolk Southern Long-Term Incentive Plan, is incorporated herein by
reference to Exhibit 99 to Norfolk Southern Corporation’s Form 8-K/A filed on
December 7, 2005.

The Transaction Agreement, dated as of December 1, 2005, by and among Norfolk
Southern Corporation, The Alabama Great Southern Railroad Company, Kansas
City Southern, and The Kansas City Southern Railway Company, is incorporated
herein by reference to Exhibit 10(ll) to Norfolk Southern Corporation’s Form 10-K
filed on February 23, 2006 (Exhibits, annexes and schedules omitted. The
Registrant will furnish supplementary copies of such materials to the SEC upon
request).

(kk)

Amendment No. 1, dated as of January 17, 2006, by and among Norfolk Southern

Corporation, The Alabama Great Southern Railroad Company, Kansas City
Southern, and The Kansas City Southern Railroad, is incorporated herein by
reference to Exhibit 10(mm) to Norfolk Southern Corporation’s Form 10-K filed on
February 23, 2006.

(ll)

Amendment No. 2, dated as of May 1, 2006, to the Transaction Agreement, dated as
of December 1, 2005, by and among Norfolk Southern Corporation, The Alabama
Great Southern Railroad Company, Kansas City Southern, and The Kansas City
Southern Railway Company is incorporated herein by reference to Exhibit 10.1 to
Norfolk Southern Corporation’s Form 8-K filed on May 4, 2006.

(mm)*

The retirement agreement, dated January 27, 2006, between Norfolk Southern

Corporation and David R. Goode, is incorporated herein by reference to
Exhibit 10.1 to Norfolk Southern Corporation’s Form 8-K filed on
January 27, 2006.

(nn)*

Revised fees for outside directors are incorporated herein by reference to Norfolk

Southern Corporation’s Form 8-K filed on January 27, 2006.

(oo)*

(pp)

The retirement agreement, dated March 28, 2006, between Norfolk Southern
Corporation and L. Ike Prillaman, is incorporated herein by reference to
Exhibit 10.1 to Norfolk Southern Corporation’s Form 8-K filed on March 31, 2006.

Limited Liability Agreement of Meridian Speedway, LLC, dated as of May 1, 2006,
by and among The Alabama Great Southern Railroad Company and Kansas City
Southern, is incorporated herein by reference to Exhibit 10.2 to Norfolk Southern
Corporation’s Form 8-K filed on May 4, 2006.

(qq)*

Form of Norfolk Southern Corporation Long-Term Incentive Plan, 2007 Award

Agreement is incorporated herein by reference to Exhibit 10.1 to Norfolk Southern
Corporation’s Form 8-K filed on January 11, 2007.

(rr)*,**

Retirement Plan of Norfolk Southern Corporation and Participating Subsidiary

Companies effective June 1, 1982, amended effective January 1, 2010.

K88

(ss)*

(tt)

The retirement agreement between Norfolk Southern Corporation and Henry C.
Wolf is incorporated herein by reference to Exhibit 10.1 to Norfolk Southern
Corporation’s Form 8-K filed on May 11 2007.

Transfer and Administration Agreement dated as of November 8, 2007, with respect
to the Registrant’s $500 million receivables securitization facility is incorporated
herein by reference to Exhibit 99 to Norfolk Southern Corporation’s Form 8-K filed
on November 14, 2007.

(uu)

Amendment No. 2, dated as of May 19, 2009, to Transfer and Administration

Agreement dated as of November 8, 2007, is incorporated herein by reference to
Exhibit 10.1 to Norfolk Southern Corporation’s Form 10-Q filed on July 31, 2009.

(vv)

(ww)

Amendment No. 3, dated as of August 21, 2009, to Transfer and Administration
Agreement dated as of November 8, 2007, is incorporated herein by reference to
Exhibit 10.1 to Norfolk Southern Corporation’s Form 10-Q filed on
October 30, 2009.

Amendment No. 4, dated as of October 22, 2009, to Transfer and Administration
Agreement dated as of November 8, 2007, is incorporated herein by reference to
Exhibit 99 to Norfolk Southern Corporation’s Form 8-K filed on October 22, 2009.

(xx)**

Amendment No. 5, dated as of December 23, 2009, to Transfer and Administration

Agreement dated as of November 8, 2007.

(yy)*

(zz)

Form of Norfolk Southern Corporation Long-Term Incentive Plan, 2008 Award
Agreement is incorporated herein by reference to Exhibit 99 to Norfolk Southern
Corporation’s Form 8-K filed on November 20, 2007.

Dealer Agreement dated as of January 23, 2008, between the Registrant and J.P.
Morgan Securities Inc. is incorporated herein by reference to Exhibit 10.1 to
Norfolk Southern Corporation’s Form 8-K filed on January 25, 2008.

(aaa)

Dealer Agreement dated as of January 23, 2008, between the Registrant and

Goldman, Sachs & Co., is incorporated herein by reference to Exhibit 10.2 to
Norfolk Southern Corporation’s Form 8-K filed on January 25, 2008.

(bbb)*

2008 Award Agreement between Norfolk Southern Corporation and Gerald L.

Baliles, dated January 24, 2008, is incorporated herein by reference to Exhibit 10.2
to Norfolk Southern Corporation’s Form 8-K filed on January 25, 2008.

(ccc)*

2008 Award Agreement between Norfolk Southern Corporation and Daniel A.

Carp, dated January 24, 2008, is incorporated herein by reference to Exhibit 10.3 to
Norfolk Southern Corporation’s Form 8-K filed on January 25, 2008.

(ddd)*

2008 Award Agreement between Norfolk Southern Corporation and Gene R.

Carter, dated January 24, 2008, is incorporated herein by reference to Exhibit 10.4
to Norfolk Southern Corporation’s Form 8-K filed on January 25, 2008.

(eee)*

2008 Award Agreement between Norfolk Southern Corporation and Alston D.

Correll, dated January 24, 2008, is incorporated herein by reference to Exhibit 10.5
to Norfolk Southern Corporation’s Form 8-K filed on January 25, 2008.

K89

(fff)*

2008 Award Agreement between Norfolk Southern Corporation and Landon

Hilliard, dated January 24, 2008, is incorporated herein by reference to Exhibit 10.6
to Norfolk Southern Corporation’s Form 8-K filed on January 25, 2008.

(ggg)*

2008 Award Agreement between Norfolk Southern Corporation and Burton M.

Joyce, dated January 24, 2008, is incorporated herein by reference to Exhibit 10.7 to
Norfolk Southern Corporation’s Form 8-K filed on January 25, 2008.

(hhh)*

2008 Award Agreement between Norfolk Southern Corporation and Steven F. Leer,

dated January 24, 2008, is incorporated herein by reference to Exhibit 10.8 to
Norfolk Southern Corporation’s Form 8-K filed on January 25, 2008.

(iii)*

2008 Award Agreement between Norfolk Southern Corporation and Jane M.

O’Brien, dated January 24, 2008, is incorporated herein by reference to Exhibit 10.9
to Norfolk Southern Corporation’s Form 8-K filed on January 25, 2008.

(jjj)*

2008 Award Agreement between Norfolk Southern Corporation and J. Paul Reason,
dated January 24, 2008, is incorporated herein by reference to Exhibit 10.10 to
Norfolk Southern Corporation’s Form 8-K filed on January 25, 2008.

(kkk)

Omnibus Amendment, dated As of March 18, 2008, to the Transfer and

Administration Agreement dated as of November 8, 2007, is incorporated herein by
reference to Exhibit 10.1 to Norfolk Southern Corporation’s Form 10-Q filed on
April 23, 2008.

(lll)

Transaction Agreement (the “Pan Am Transaction Agreement”), dated

May 15, 2008, by and among Norfolk Southern Railway Company, Pan Am
Railways, Inc., Boston and Maine Corporation, and Springfield Terminal Railway
Company, is incorporated herein by reference to Exhibit 10.1 to Norfolk Southern
Corporation’s Form 10-Q filed on July 24, 2008 (Exhibits, annexes and schedules
omitted. The Registrant will furnish supplementary copies of such materials to the
SEC upon request).

(mmm)

Letter Agreement, dated October 21, 2008, by and among Norfolk Southern

Railway Company, Pan Am Railways, Inc., Boston and Maine Corporation, and
Springfield Terminal Railway Company amending certain terms of the Pan Am
Transaction Agreement, is incorporated herein by reference to Exhibit 10(rrr) to
Norfolk Southern Corporation’s Form 10-K filed on February 18, 2009.

(nnn)*

Directors’ Deferred Fee Plan of Norfolk Southern Corporation, as amended

effective January 1, 2009, is incorporated herein by reference to Exhibit 10.01 to
Norfolk Southern Corporation’s Form 8-K filed on July 24, 2008.

(ooo)*

Norfolk Southern Corporation Executives’ Deferred Compensation Plan, as
amended effective January 1, 2009, is incorporated herein by reference to
Exhibit 10.02 to Norfolk Southern Corporation’s Form 8-K filed on July 24, 2008.

(ppp)*

Amendment to Norfolk Southern Corporation Officers’ Deferred Compensation

Plan, effective January 1, 2008, is incorporated herein by reference to Exhibit 10.03
to Norfolk Southern Corporation’s Form 8-K filed on July 24, 2008.

K90

(qqq)*

(rrr)*

Norfolk Southern Corporation Long-Term Incentive Plan, as amended effective
January 1, 2009, is incorporated herein by reference to Exhibit 10.04 to Norfolk
Southern Corporation’s Form 8-K filed on July 24, 2008.

Norfolk Southern Corporation Restricted Stock Unit Plan, as amended effective
January 1, 2009, is incorporated herein by reference to Exhibit 10.05 to Norfolk
Southern Corporation’s Form 8-K filed on July 24, 2008.

(sss)

Amendment No. 1 to Transfer and Administration Agreement dated as of

October 22, 2008, and effective as of October 23, 2008, with respect to the
Registrant’s $500 million receivable securitization facility, is incorporated herein by
reference to Exhibit 99 to Norfolk Southern Corporation’s Form 8-K filed on
October 23, 2006.

(ttt)*

(uuu)*

(vvv)*

Stock Unit Plan of Norfolk Southern Corporation dated as of July 24, 2001, as
amended on August 21, 2008, with an effective date of January 1, 2009, is
incorporated herein by reference to Exhibit 10.1 to Norfolk Southern Corporation’s
Form 10-Q filed on October 24, 2008.

Form of Norfolk Southern Corporation Long-Term Incentive Plan, 2009 Award
Agreement is incorporated herein by reference to Exhibit 99 to Norfolk Southern
Corporation’s Form 8-K/A filed on December 17, 2008.

Form of Amended and Restated Change in Control Agreement between Norfolk
Southern Corporation and certain executive officers (including those defined as
“named executive officers” and identified in the Corporation’s Proxy Statement for
the 2008 annual Meetings of Stockholders), is incorporated herein by reference to
Exhibit 10(aaaa) to Norfolk Southern Corporation’s Form 10-K filed on
February 18, 2009.

(www)*

2009 Award Agreement between Norfolk Southern Corporation and Gerald L.

Baliles, dated January 29, 2009, is incorporated herein by reference to Exhibit 10.1
to Norfolk Southern Corporation’s Form 8-K filed on January 30, 2009.

(xxx)*

2009 Award Agreement between Norfolk Southern Corporation and Daniel A.

Carp, dated January 29, 2009, is incorporated herein by reference to Exhibit 10.2 to
Norfolk Southern Corporation’s Form 8-K filed on January 30, 2009.

(yyy)*

2009 Award Agreement between Norfolk Southern Corporation and Gene R.

Carter, dated January 29, 2009, is incorporated herein by reference to Exhibit 10.3
to Norfolk Southern Corporation’s Form 8-K filed on January 30, 2009.

(zzz)*

2009 Award Agreement between Norfolk Southern Corporation and Alston D.

Correll, dated January 29, 2009, is incorporated herein by reference to Exhibit 10.4
to Norfolk Southern Corporation’s Form 8-K filed on January 30, 2009.

(aaaa)*

2009 Award Agreement between Norfolk Southern Corporation and Landon

Hilliard, dated January 29, 2009, is incorporated herein by reference to Exhibit 10.5
to Norfolk Southern Corporation’s Form 8-K filed on January 30, 2009.

K91

(bbbb)*

2009 Award Agreement between Norfolk Southern Corporation and Karen N. Horn,

dated January 29, 2009, is incorporated herein by reference to Exhibit 10.6 to
Norfolk Southern Corporation’s Form 8-K filed on January 30, 2009.

(cccc)*

2009 Award Agreement between Norfolk Southern Corporation and Burton M.

Joyce, dated January 29, 2009, is incorporated herein by reference to Exhibit 10.7 to
Norfolk Southern Corporation’s Form 8-K filed on January 30, 2009.

(dddd)*

2009 Award Agreement between Norfolk Southern Corporation and Steven F. Leer,

dated January 29, 2009, is incorporated herein by reference to Exhibit 10.8 to
Norfolk Southern Corporation’s Form 8-K filed on January 30, 2009.

(eeee)*

2009 Award Agreement between Norfolk Southern Corporation and Michael D.

Lockhart, dated January 29, 2009, is incorporated herein by reference to
Exhibit 10.9 to Norfolk Southern Corporation’s Form 8-K filed on
January 30, 2009.

(ffff)*

(gggg)

2009 Award Agreement between Norfolk Southern Corporation and J. Paul Reason,
dated January 29, 2009, is incorporated herein by reference to Exhibit 10.10 to
Norfolk Southern Corporation’s Form 8-K filed on January 30, 2009.

Limited Liability Company Agreement of Pan Am Southern LLC, dated as of
April 9, 2009, is incorporated herein by reference to Exhibit 10.1 to Norfolk
Southern Corporation’s Form 8-K filed on April 9, 2009 (exhibits, annexes, and
schedules omitted – the Registrant will furnish supplementary copies of such
materials to the SEC upon request).

(hhhh)*

Form of Norfolk Southern Corporation Long-Term Incentive Plan, 2010 Award

Agreement for Outside Directors is incorporated herein by reference to Exhibit 99,
Item 10.1 to Norfolk Southern Corporation’s Form 8-K/A filed on
January 29, 2010.

(iiii)*

Form of Norfolk Southern Corporation Long-Term Incentive Plan, 2010 Award

Agreement is incorporated herein by reference to Exhibit 99, Item 10.2 to Norfolk
Southern Corporation’s Form 8-K/A filed on January 29, 2010.

12**

21**

23**

31**

32**

99**

Statement re: Computation of Ratio of Earnings to Fixed Charges.

Subsidiaries of the Registrant.

Consent of Independent Registered Public Accounting Firm.

Rule 13a-14(a)/15d-14(a) Certifications.

Section 1350 Certifications.

Annual CEO Certification pursuant to NYSE Rule 303A.12(a).

* Management contract or compensatory arrangement.
** Filed herewith.

K92

(B)

(C)

Exhibits.

The Exhibits required by Item 601 of Regulation S-K as listed in Item 15(A)3 are

filed herewith or incorporated herein by reference.

Financial Statement Schedules.

Financial statement schedules and separate financial statements specified by this

Item are included in Item 15(A)2 or are otherwise not required or are not applicable.

Exhibits 23, 31, 32, and 99 are included in copies assembled for public

dissemination. All exhibits are included in the 2009 Form 10-K posted on our
website at www.nscorp.com under “Investors” and “SEC Filings” or you may
request copies by writing to:

Office of Corporate Secretary
Norfolk Southern Corporation
Three Commercial Place
Norfolk, Virginia 23510-9219

K93

POWER OF ATTORNEY

Each person whose signature appears below under “SIGNATURES” hereby authorizes James A. Hixon and James
A. Squires or one of them, to execute in the name of each such person, and to file, any amendment to this report and
hereby appoints James A. Hixon and James A. Squires or any one of them, as attorneys-in-fact to sign on his or her
behalf, individually and in each capacity stated below, and to file, any and all amendments to this report.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Norfolk Southern
Corporation has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized,
on this 17th day of February, 2010.

/s/ Charles W. Moorman
By: Charles W. Moorman
(Chairman, President and Chief Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on this
17th day of February, 2010, by the following persons on behalf of Norfolk Southern Corporation and in the
capacities indicated.

Signature

Title

/s/ Charles W. Moorman Chairman, President and Chief Executive Officer and Director
(Charles W. Moorman)

(Principal Executive Officer)

/s/ James A. Squires Executive Vice President Finance and Chief Financial Officer
(James A. Squires)

(Principal Financial Officer)

/s/ Clyde H. Allison, Jr. Vice President and Controller
(Principal Accounting Officer)
(Clyde H. Allison, Jr.)

/s/ Gerald L. Baliles Director
(Gerald L. Baliles)

/s/ Thomas D. Bell, Jr. Director
(Thomas D. Bell, Jr.)

/s/ Daniel A. Carp Director
(Daniel A. Carp)

K94

/s/ Gene R. Carter Director
(Gene R. Carter)

/s/ Alston D. Correll Director
(Alston D. Correll)

/s/ Landon Hilliard Director
(Landon Hilliard)

/s/ Karen N. Horn Director
(Karen N. Horn)

/s/ Burton M. Joyce Director
(Burton M. Joyce)

/s/ Steven F. Leer Director
(Steven F. Leer)

/s/ Michael D. Lockhart Director
(Michael D. Lockhart)

/s/ J. Paul Reason Director
(J. Paul Reason)

K95

Schedule II

Norfolk Southern Corporation and Subsidiaries
Valuation and Qualifying Accounts
Years Ended December 31, 2007, 2008, and 2009
($ in millions)

Additions charged to:

Beginning
Balance

Expenses

Other
Accounts

Deductions

Ending
Balance

Year ended December 31, 2007
Valuation allowance (included net in
deferred tax liability) for deferred
tax assets
Casualty and other claims
included in other liabilities
Current portion of casualty and
other claims included in
accounts payable

Year ended December 31, 2008
Valuation allowance (included net in
deferred tax liability) for deferred
tax assets
Casualty and other claims
included in other liabilities
Current portion of casualty and
other claims included in
accounts payable

Year ended December 31, 2009
Valuation allowance (included net in
deferred tax liability) for deferred
tax assets
Casualty and other claims
included in other liabilities
Current portion of casualty and
other claims included in
accounts payable

9 $

1 $

-- $

471 $

113 $

162 2,3 $

158 2 $

301 $

17 $

122 1 $

181 3 $

10 $

1 $

-- $

588 $

84 $

80 2,3 $

432 2 $

259 $

28 $

127 1 $

166 3 $

11 $

3 $

-- $

320 $

58 $

4 2,3 $

117 2 $

248 $

3 $

115 1 $

133 3 $

588

259

320

248

265

233

1 Includes revenue refunds and overcharges provided through deductions from operating revenues and transfers
from other accounts.

2 Payments and reclassifications to/from accounts payable.

3 Payments and reclassifications to/from other liabilities.

K96