9th Annual Norfolk Southern

Short Line Marketing MeetingJuly 12, 2010

Donald W. Seale

Executive Vice President

and Chief Marketing Officer

Economic Overview(AKA)

•Hopes

•Wishes

•Aspirations

•Guesses

The ISM index indicates the economy is still expanding, but at a more moderate pace than recent months

• Production indicates expansion – showing increases in plastics, printing, computers, and chemicals

• New Orders and Supplier Deliveries were down this month, but they are still in expansion mode

• Prices Paid fell in June – with metals and plastics showing price increases

Source: Institute for Supply Management

Auto production is forecasted to increase for year, despite recent downturn

--

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2008 2009 2010 2011

8,558,226 11,741,232 12,977,798

+37% +11%

Source: Wards Auto Forecast

12,922,326

Steel demand has been increasing as the world has been recovering from the recession

1,4

68

1,5

25

1,5

64

1,5

87

1,5

95

1,6

05

1,6

45

1,6

60

1,6

68

1,6

83

1,7

15

1,7

20

1,7

34

1,7

12

1,7

31

1,7

55

1,7

64

1,7

54

1,7

76

1,7

97

1,7

87

1,7

66

1,7

85

1,8

03

1,8

08

1,7

63

1,7

52 61

.5 63

.9

64

.7

65

.6

66

.9

67

.3

68 68

.6

69

69

.2 70

.9

71

.1

71

.7

70

.8

71

.6

72

.6

72

.9

72

.5

73

.4

74

.3

73

.9

73 73

.8

74

.6

74

.8

72

.9

72

.4

10

20

30

40

50

60

70

80

90

100

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2,200

2,400

1/2

/2010

1/1

6/2

010

1/3

0/2

010

2/1

3/2

010

2/2

7/2

010

3/1

3/2

010

3/2

7/2

010

4/1

0/2

010

4/2

4/2

010

5/8

/2010

5/2

2/2

010

6/5

/2010

6/1

9/2

010

7/3

/2010

7/1

7/2

010

7/3

1/2

010

8/1

4/2

010

8/2

8/2

010

9/1

1/2

010

9/2

5/2

010

10/9

/2010

10/2

3/2

010

11/6

/2010

11/2

0/2

010

12/4

/2010

12/1

8/2

010

Weekly U.S. Domestic Raw Steel Production

2008 2009 2010 2010 Capacity

) Tons000(

Source: Global Insight, American Iron and Steel Institute

) Tons000(

IHS Global Insight 2010 forecast as of May 10: 89.9 M Tons

Adjusted YTD Production thru 7/3/2010: 44.87 M tons

YTD Production\Consumption Rate : 70.6%, up 64.5% vs. Last Year

Capacity%

Housing starts plunge in wake of expiration of homebuyers’ tax credit

0

200

400

600

800

1,000

1,200

1,400

2008

2009

2010

Source: Census.gov

Employment data continues to be discouraging

-1000

-800

-600

-400

-200

0

200

400

600

0%

2%

4%

6%

8%

10%

12%

Tho

usa

nd

s

Pe

rce

nt

Nonfarm Payrolls Unemployment Source: BLS

Key indicators indicate second-half moderation, as seen in the GDP forecasts

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

YOY

% C

han

ge

Perc

ent

GD

P

Real GDP Y-O-Y % Change

2008 2009 2010 2011

Source: Wells Fargo Economic Forecast

Rail volumes have outpaced truck tonnage in the economic recovery

-40%

-30%

-20%

-10%

0%

10%

20%

30%

May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10

YOY

% C

han

ge

Truck tonnage Rail carloadings + intermodal units NS Volume

Source: ATA MTTR and AAR Weekly Marketshare

NS

Norfolk Southern Carload Percentage Changes for Second Quarter and Year-to-Date 2010

17%

10%

6%

17%

16%

26%

32%

15%

13%

15%

19%

19%

20%

32%

50%

22%

Agriculture

Paper & Forest

Coal

Automotive

Intermodal

Chemicals

Metals & Construction

Total Carloads

Second Quarter Year-to-Date Source NS Accrual

2010 Year-Over-Year Volume Changes

0%

5%

10%

15%

20%

25%

Year-to-Date

• Merchandise +21%

• Intermodal +16%

• Coal + 6%

• Total NS +15%

Source: Carload Data from June 2010 Accounting Accrual

Merchandise VolumeFirst Quarter 2007 – Second Quarter 2010

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

1Q 2007

2Q 2007

3Q 2007

4Q 2007

1Q 2008

2Q 2008

3Q 2008

4Q 2008

1Q 2009

2Q 2009

3Q 2009

4Q 2009

1Q 2010

2Q 2010

Merchandise Carloads

+27%

2010 Year-Over-Year Volume Changes

0%

5%

10%

15%

20%

25%

Year-to-Date

• Merchandise +21%

• Intermodal +16%

• Coal + 6%

• Total NS +15%

Source: Carload Data from June 2010 Accounting Accrual

NS Volume 2009 vs. 2001

Ag9% Metcon

8%

Paper5%

Chem6%

Auto5%Imdl

43%

Coal24%

2009

Ag8%

Metcon11%

Paper7%

Chem7%

Auto9%

Imdl32%

Coal26%

2001

Total Volume – 6,624,966 UnitsTotal Volume – 5,957,257 Units

Outlook – Business Portfolio

• Manufacturing recovery & project growthChemicals

• Build out of ethanol networkAgriculture

• Truckload conversionsDomestic Intermodal

• Improving imports/exportsInternational Intermodal &

Export Coal

• Recovery in global steel productionDomestic Met Coal & Steel

• Falling stockpiles and increased electricity generation

Utility Coal

• Impact of Ford vehicle network redesignAutomotive

• Uncertainty in housing, but improving paper markets

Forest Products

Outlook Summary

Gradual growth in core markets

Strong project growth and new business

Continued pricing improvement

Healthy capital budget supports service & growth

1Q 2009 – 2Q 2010 Units

1,455,5671,412,342

1,522,2151,567,133 1,582,861

1,719,809

1Q2009

2Q 2009

3Q 2009

4Q 2009

1Q 2010

2Q 2010

Source: NS Accounting

Capital Expenditures ($ Millions)

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

2006 2007 2008 2009 2010 budget

2010 Capital Improvement BudgetReplacement/Core vs. Growth/Productivity

75%

25%

Replacement/Core Growth/Productivity

Total Spending = $1.442 billion

2010 Capital Improvement Budget($ Millions)

$706

$184

$140

$110

$81

$221

Roadway

Facilities/Terminals

Technology

Infrastructure

Rolling Stock

Other Projects

Total Spending = $1.442 billion

Our Short Line Partners

U.S. Short Line route miles have seen continued growth since Staggers

• Miles have grown from approximately 8,800 to over 51,584 in

2009

– Growth of more than 486%

– Account for nearly 30% of the nation’s total rail mileage

• 172 Short Lines created (31% increase)

– Currently 572 short lines in 49 states

• Short Lines employ nearly 20,000 people

• Serve over 13,000 facilities

– Haul over 14 million carloads per year

– Routes are typically 500 miles or less

• NS connects with 258 Short LinesSource: ASLRRA

Over 300 Short Line Railroads have more than one Class I connection

239

164

5837

74

0

50

100

150

200

250

300

1 2 3 4 5+

Nu

mb

er

of

Sho

rtlin

es

Number of Class I Connections

Source: ASLRRA

Short Lines pick up and deliver one out of every four rail cars moving on the national rail network

Rail Industry Carloads 2008 - 2009

Class I’s – Short Line Traffic Only

2008 2009 Variance

BNSF 1,247,000 1,060,000 -15.0%

CN 518,783 406,163 -21.7%

CSX 955,325 800,391 -16.2%

KCS 202,682 147,468 -27.2%

NS 983,959 800,292 -18.7%

UP 986,166 795,133 -19.4%

Source: ASLRRA

Norfolk Southern Short Line Carloadings are up 25% YTD in 2010

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

2002 2003 2004 2005 2006 2007 2008 2009 Y-T-D 2010

2010 goal is an increase of 54,670 carloads (6.3% increase) to a total of 866,379 carloads

Source: NS Short Line Department

Short Line Successes

• BPRR, RJCP – Export coal

• INRD – Utility coal

• AVR , BPRR, RBMN, LRWY, LVRR, OHRY, WCOR, WSOR,

WW – Marcellus Shale

• GFRR, RJCP – Corn/Ethanol

• ACW, FEC, ESPN, LS, LVRR, MNBR, NPB, WE – Ethanol

• CUOH, NYA, NJRC – Municipal Solid Waste

• BPRR, LRWY, NBER, RBMN, RSR, VTR, WNYP, YRC – Salt

Marketing Agenda with Short Lines

• Growth opportunities in key markets

– Emphasis on projects

• Continued emphasis on Industrial Development

• Realize the value of our product

• Market reach multiplier

• WORK TOGETHER AS A TEAM

THANK YOU