Thoroughbred Annual Report Norfolk Southern Financial Highlights System Map Norfolk Southern Corporation & Subsidiaries Waterville Rouses Point ($ in millions, except per-share amounts) 2007 2006 2005 Grand For the Year Rapids Buffalo Railway operating revenues $ 9,432 $ 9,407 $ 8,527 Albany Ayer Detroit Income from railway operations $ 2,585 $ 2,557 $ 2,117 Binghamton 1 Chicago Corning Net income $ 1,464 $ 1,481 $ 1,281 Elkhart Cleveland Des Moines 1 Toledo Per share — basic $ 3.74 $ 3.63 $ 3.17 Youngstown Bellevue 1 Ft. Wayne Allentown New York/ Per share — diluted $ 3.68 $ 3.57 $ 3.11 Peoria Harrisburg Northern New Jersey Dividends per share $ .96 $ .68 $ .48 Decatur Columbus Pittsburgh Wilmington Philadelphia/ Southern New Jersey Dividend pay-out ratio 26% 19% 15% Moberly Baltimore Cash provided by operating activities $ 2,333 $ 2,206 $ 2,105 Indianapolis Cincinnati Kansas City Washington, D.C. Property additions $ 1,341 $ 1,178 $ 1,025 St. Louis Lexington Louisville Free cash flow2 $ 992 $ 1,028 $ 1,080 Richmond Roanoke Bluefield Lynchburg Norfolk Winston- At Year End Fulton Greensboro Knoxville Salem Raleigh Total assets $ 26,144 $ 26,028 $ 25,859 Asheville Chattanooga Total debt $ 6,368 $ 6,600 $ 6,930 Memphis Spartanburg Charlotte Morehead City Huntsville Stockholders’ equity $ 9,727 $ 9,615 $ 9,276 Columbia Shares outstanding 379,297,891 397,419,601 409,885,788 Birmingham Stockholders’ equity per share $ 25.64 $ 24.19 $ 22.63 Atlanta Augusta Macon Charleston Dallas Meridian Columbus Norfolk Southern System Financial Ratios (%) Savannah Albany Trackage/Haulage Rights Operating ratio 72.6% 72.8% 75.2% Brunswick Debt to total capitalization 39.6% 40.7% 42.8% Mobile Gateway Cities to New Western Railroads Orleans Lake City Jacksonville (1) Results in 2005 include a $96 million reduction of NS’ deferred income tax liabilities resulting from tax legislation enacted by Ohio, which increased net income by $96 million, or 23 cents per diluted share. (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. Total Stockholder Returns Railway Operating Income from Railway Free Cash Flow2 (dollars) Revenue (in millions) Operations (in millions) (in millions) $350 $9,407 $9,432 $2,557 $2,585 $1,080 $1,028 $8,527 $992 Miami $300 $2,117 $250 Description of Business $200 Norfolk Southern Corporation (NYSE: NSC) is one of the nation’s premier transportation companies. Its $150 Norfolk Southern Railway subsidiary operates approximately 21,000 route miles in 22 states and the District $100 $ 50 of Columbia, serving every major port in the eastern United States and providing superior connections $ 0 to western rail carriers. Norfolk Southern operates the most extensive intermodal network in the East Dec. 02 Dec. 03 Dec. 04 Dec. 05 Dec. 06 Dec. 07 05 06 07 05 06 07 05 06 07 and is North America’s largest rail carrier of metals and automotive products. Norfolk Southern Corp. Common Stock S&P Railroad Stock Price Index S&P Composite-500 Stock Price Index On the cover: Heavy machinery drills through layers of rock as a railroad tunnel near Cowan, Va., gets its roof raised to *Assumes that the value of the investment in Norfolk Southern Corporation common stock and each index was $100 on Dec. 31, 2002, and that all accommodate double-stacked containers. dividends were reinvested. Data furnished by Bloomberg Financial Markets. 2 1 Norfolk Southern Financial Highlights System Map Norfolk Southern Corporation & Subsidiaries Waterville Rouses Point ($ in millions, except per-share amounts) 2007 2006 2005 Grand For the Year Rapids Buffalo Railway operating revenues $ 9,432 $ 9,407 $ 8,527 Albany Ayer Detroit Income from railway operations $ 2,585 $ 2,557 $ 2,117 Binghamton 1 Chicago Corning Net income $ 1,464 $ 1,481 $ 1,281 Elkhart Cleveland Des Moines 1 Toledo Per share — basic $ 3.74 $ 3.63 $ 3.17 Youngstown Bellevue 1 Ft. Wayne Allentown New York/ Per share — diluted $ 3.68 $ 3.57 $ 3.11 Peoria Harrisburg Northern New Jersey Dividends per share $ .96 $ .68 $ .48 Decatur Columbus Pittsburgh Wilmington Philadelphia/ Southern New Jersey Dividend pay-out ratio 26% 19% 15% Moberly Baltimore Cash provided by operating activities $ 2,333 $ 2,206 $ 2,105 Indianapolis Cincinnati Kansas City Washington, D.C. Property additions $ 1,341 $ 1,178 $ 1,025 St. Louis Lexington Louisville Free cash flow2 $ 992 $ 1,028 $ 1,080 Richmond Roanoke Bluefield Lynchburg Norfolk Winston- At Year End Fulton Greensboro Knoxville Salem Raleigh Total assets $ 26,144 $ 26,028 $ 25,859 Asheville Chattanooga Total debt $ 6,368 $ 6,600 $ 6,930 Memphis Spartanburg Charlotte Morehead City Huntsville Stockholders’ equity $ 9,727 $ 9,615 $ 9,276 Columbia Shares outstanding 379,297,891 397,419,601 409,885,788 Birmingham Stockholders’ equity per share $ 25.64 $ 24.19 $ 22.63 Atlanta Augusta Macon Charleston Dallas Meridian Columbus Norfolk Southern System Financial Ratios (%) Savannah Albany Trackage/Haulage Rights Operating ratio 72.6% 72.8% 75.2% Brunswick Debt to total capitalization 39.6% 40.7% 42.8% Mobile Gateway Cities to New Western Railroads Orleans Lake City Jacksonville (1) Results in 2005 include a $96 million reduction of NS’ deferred income tax liabilities resulting from tax legislation enacted by Ohio, which increased net income by $96 million, or 23 cents per diluted share. (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. Total Stockholder Returns Railway Operating Income from Railway Free Cash Flow2 (dollars) Revenue (in millions) Operations (in millions) (in millions) $350 $9,407 $9,432 $2,557 $2,585 $1,080 $1,028 $8,527 $992 Miami $300 $2,117 $250 Description of Business $200 Norfolk Southern Corporation (NYSE: NSC) is one of the nation’s premier transportation companies. Its $150 Norfolk Southern Railway subsidiary operates approximately 21,000 route miles in 22 states and the District $100 $ 50 of Columbia, serving every major port in the eastern United States and providing superior connections $ 0 to western rail carriers. Norfolk Southern operates the most extensive intermodal network in the East Dec. 02 Dec. 03 Dec. 04 Dec. 05 Dec. 06 Dec. 07 05 06 07 05 06 07 05 06 07 and is North America’s largest rail carrier of metals and automotive products. Norfolk Southern Corp. Common Stock S&P Railroad Stock Price Index S&P Composite-500 Stock Price Index On the cover: Heavy machinery drills through layers of rock as a railroad tunnel near Cowan, Va., gets its roof raised to *Assumes that the value of the investment in Norfolk Southern Corporation common stock and each index was $100 on Dec. 31, 2002, and that all accommodate double-stacked containers. dividends were reinvested. Data furnished by Bloomberg Financial Markets. 2 1 Dear Fellow Stockholders In the past few years, Norfolk Southern and the rest of the rail industry saw an unprecedented period of both traffic and revenue growth, resulting in a very strong financial performance and superior shareholder returns. These years of growth were driven by a strong economy and fundamental changes in the transportation marketplace — among them higher fuel costs, increased highway congestion, and continued shortages of long-distance truck drivers — that played to the strengths of our industry. 2007 was, in my opinion, a watershed year for us in that it answered the question of how real and long-lasting our improved performance would be in the face of an economic downturn. The answer was a strong affirmation that our prospects remain very bright. Railway operating revenues, income from railway operations, and diluted earnings per share set records, even as the downturn in housing, softness in the automotive sector, and increased motor carrier capacity made for a year in which our volumes were down 4 percent and our net income was essentially flat. Earnings per share increased 3 percent, driven by our re-purchase of 24 million shares. For most of the year and for the beginning of 2008 as well, we believed our shares were trading at a price that made re-purchasing a good way to return The keys to this success, along with all of our other Like every year, 2008 will have its challenges and money to investors while providing a superior return for our remaining shareholders. successes, are the people of Norfolk Southern. No opportunities, but the demand for high-quality rail We also increased our dividend for the sixth consecutive year, this time by an better or more important illustration of that is the fact transportation will continue to be strong. It is telling aggregate 41 percent, a clear sign of our confidence in Norfolk Southern’s future. that for the 18th consecutive year they earned the E. H. that more and more public leaders are recognizing Harriman Gold Medal Award for Employee Safety. While the benefits that we offer in keeping the economy There was a lot of other good news in 2007. Our overall service metrics improved, it’s good to win awards, our objective every year is to competitive while reducing highway congestion and and we continued to be recognized as a leading service provider in the industry. have zero injuries or accidents, and we won’t rest until environmental degradation. But while it’s nice to be recognized, we know how much more we can still do to we achieve it. improve service, and we remain dedicated to the idea that superior service is the The future remains bright for our company.