Norfolk Southern Strategy

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Norfolk Southern Strategy

• Produce a higher-quality, higher-value
  product

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Norfolk Southern Strategy

• Produce a higher-quality, higher-value
  product
• Push high-value pricing

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Norfolk Southern Strategy

• Produce a higher-quality, higher-value
  product
• Push high-value pricing
• Increase volume

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Norfolk Southern Strategy

• Produce a higher-quality, higher-value
  product
• Push high-value pricing
• Increase volume
• Improve efficiency of operations and service

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Thoroughbred Operating Plan (TOP)

• An Optimum Operating Plan to
• Minimize Transit Variation
• Improve Network Efficiency
• Enhance Service Consistency and Reliability
• Reduce Car Handling and Circuitous Mileage
• Improve Asset Utilization
• Reduce Costs

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TOP Support Applications
Local Operating Plan Adherence
Operating Plan Adherence
Operating Plan Developer
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Transparency of Information

• Improve Billing Accuracy
• Eliminate Waybill Errors
• Reduce or Eliminate Customer Disputes

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Railway Operating Revenues ( Millions)
Third Quarter
Nine Months
4,792
4,689
1,598
1,598
2002 2003 2002
2003

Change vs. Prior Period --
2
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Railway Operating Expenses ( Millions)
Third Quarter
Nine Months
3,952
3,819
1,287
1,287
2002 2003
2002
2003
Change vs. Prior Period --

3
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Railway Operating Ratio (Percent)
Third Quarter
Nine Months
80.5
80.5
82.5
81.4
2002 2003
2002
2003
Change vs. Prior Period --

1
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Income From Railway Operations ( Millions)
Third Quarter
Nine Months
870
840
311
311
2002 2003
2002
2003

Change vs. Prior Period --

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Net Income ( Millions)
Third Quarter
Nine Months
359
331
137
126
2002 2003
2002
2003
Change vs. Prior Period 9
8
Excluding discontinued operations and
accounting changes
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Diluted Earnings Per Share ( Dollars)
Third Quarter
Nine Months
0.92
0.85
0.35
0.32
2002 2003
2002
2003
Change vs. Prior Period 9
8
Excluding discontinued operations and
accounting changes
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Railway Operating Revenue3rd Qtr. 2003 vs.
2002/2001
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Revenue Volume Y-T-D 2003 vs. 2002
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Railway Operating Revenues
Year Ended December 31, 1998
Year Ended December 31, 2002
1,441
1,252
961
577
692
375
1,181
555
468
603
623
492
535
769
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Railway Operating Ratio(Percent)
91.4
88.2
86.7
86.3
84.2
83.8
82.5
82.3
82.0
81.8
80.5
79.8
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Railway Operating Ratio(Percent)
85.2
84.2
81.8
80.5
80.5
79.8
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Operating Expense Headwinds
Expense Category
Environment

• ? Compensation
• ? Benefits
• Materials, Services
• And Rents
• Diesel Fuel
• Depreciation

• ?Increased pay rates
• Increased health welfare costs
• Reduced pension income
• Increased volume-related expense
• Higher haulage
• Higher fuel prices
• Plant and equipment investments

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Railway Operating Expenses Year-to-Date Ended
September 30, 2003 ( Millions)
1,592
154
142
283
1,083
314
384
Operating Expenses 3,952
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Employee Count(For December)

November Estimate after Voluntary Separations
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Efficiency and Asset Utilization Initiatives

• Remote Control Locomotive Systems
• NS 21 Efforts
• Six Sigma Tool Application
• Sharing of Health Benefits
• Favorable STB Ruling Regarding Conrail
• Carrier Interchange Improvements

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