TABLE OF CONTENTS

NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES (NS)

2

PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements.

NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES

Consolidated Statements of Income

 (Unaudited)

NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets

(Unaudited)

NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)

NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

In the opinion of management, the accompanying unaudited interim financial statements contain all adjustments (consisting of normal recurring accruals) necessary to present fairly Norfolk Southern Corporation (Norfolk Southern) and subsidiaries' (collectively, NS) financial condition as of March 31,June 30, 2008, and its results of operations and cash flows for the three and six months ended March 31,June 30, 2008 and 2007, in conformity with U.S. generally accepted accounting principles.

These Consolidated Financial Statements should be read in conjunction with the financial statements and notes included in NS’ latest Annual Report on Form 10‑K.

1.  Stock-BasedStock-based Compensation

In the first quarter of 2008, a committee of non-employee directors of Norfolk Southern’s Board of Directors granted stock options, restricted stock units and performance share units (PSUs) pursuant to the Long-Term Incentive Plan (LTIP) and granted stock options pursuant to the Thoroughbred Stock Option Plan (TSOP) as discussed below.  Stock-based compensation expense was $65$30 million during the firstsecond quarter of 2008, and $51$17 million during the same period of 2007.  For the first six months of 2008 and 2007, stock-based compensation expense was $95 million and $68 million, respectively.  The total tax effect recognized in income in relation to stock-based compensation was a benefitwere benefits of $22$10 million and $17$5 million for the quarters ended March 31,June 30, 2008 and 2007, respectively, and benefits of $32 million and $22 million for the first six months of 2008 and 2007, respectively.

Stock Options

In the first quarter of 2008, 1,162,600 options were granted under the LTIP and 250,000 options were granted under the TSOP.  In each case, the grant price was $50.74, which was the fair market value of Norfolk Southern Corporation common stock (Common Stock) on the date of grant, and thegrant.  The options have a term of ten years but may not be exercised prior to the third anniversary of the date of grant.  Holders of the options granted under the LTIP who remain actively employed receive cash dividend equivalent payments for five years commensurate within an amount equal to the regular quarterly dividends paid on Common Stock.

The fair value of each option award in 2008 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.  The assumptions for the 2008 LTIP grant are shown in the following table:

The grant-date fair value of the 2008 TSOP grant was $16.29 using the same assumptions as the 2008 LTIP grant, except a dividend yield of 2.29% was used because no dividend equivalentsequivalent payments are paidmade on these options and the average expected option life was 8.0 years.

For the first threesix months of 2008, options relating to 1,557,8544,391,618 shares were exercised, yielding $40$105 million of cash proceeds and $15$53 million of tax benefits recognized as additional paid-in capital.  For the first threesix months of 2007, option exercises resulted in $26$106 million of cash proceeds and $15$48 million of tax benefits.

Restricted Stock Units and Restricted Shares

There were 299,950 restricted stock units granted in 2008, with an average grant-date fair value of $50.47 and a five-year restriction period.  The restricted stock units granted in 2008 will be settled through the issuance of shares of Common Stock.  There were no restricted shares granted in 2008.

Performance Share Units

PSUs provide for awards based on achievement of certain predetermined corporate performance goals at the end of a three-year cycle.  During the first quarter of 2008, thereThere were 1,162,600 PSUs granted with a grant-date fair value of $50.47.$50.47 during the first quarter of 2008.  One-half of any PSUs earned will be paid in the form of shares of Common Stock, with the other half to be paid in cash.

DuringFor the first quartersix months of 2008, 1,013,999 PSUs were earned and paid out, one-half in shares of Common Stock, and one-half in cash.  These PSUs had a grant-date fair value of $34.10 per unit and a fair value at pay out of $50.47 per unit.  The total related tax benefit was $2 million infor the first quartersix months of 2008.

2.  Income Taxes

There have been no material changes to the balance of unrecognized tax benefits reported at DecemberDec. 31, 2007.  NS anticipates that withinDuring the next six monthssecond quarter, the IRS will completecompleted fieldwork on its examination of NS’ 2004 and 2005 federal income tax returns, in additionreturns; however, the audit remains subject to further administrative review.  NS anticipates that this review will be completed during the third quarter.  NS expects that the resolution of the 2004 and 2005 examination will not have a material effect on income tax expense.  Also, NS’ appeal of certain adjustments proposed by the IRS with respect to the 2002 and 2003 tax years.   NS does not expect thatyears was resolved in the resolution of either the examination or the appeal will havesecond quarter without a material effect on income tax expense.

Interest expense related to the overpayment and underpayment of income taxes, which is included in “Other income – net,” was reduced by $13 million during the quarter primarily due to the resolution of certain refund claims submitted to the IRS and the resolution of NS’ financial position, resultsappeal of operations or liquidity.the 2002 and 2003 tax years.  Depending upon the final outcome of the 2004 and 2005 examination, an adjustment to interest expense could be made during the third quarter.     

3.  Earnings Per Share

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

Income available to holders of Common Stockcommon stockholders reflects a reduction for the after-tax effect of dividend equivalent payments made to holders of vested stock options as follows:  $1 million in the first quarterssecond quarter of 2008 and 2007, respectively.and $2 million in the first six months of 2008 and 2007.

The diluted calculations exclude options having exercise prices exceeding the average market price of Common Stock as follows:  none in the second and first quarters of 2008 and 2007, respectively.2007.

4.  Stockholders’ Equity

Common stock is reported net of shares held by consolidated subsidiaries (treasury shares) of Norfolk Southern.  Treasury shares at March 31,June 30, 2008, and Dec. 31, 2007, amounted to 20,654,120totaled 20,629,383 and 20,683,686, shares, respectively, with a cost of $20 million forat both periods.June 30, 2008, and Dec. 31, 2007.

5.  Share Repurchase Program

In March 2007, Norfolk Southern’s 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.  Near-term purchases under the program are expected to be made with internally generated cash or proceeds from borrowings.  NS repurchased and retired 5.69.0 million and 8.4 million shares of its Common Stock under this program in the first threesix months of both 2008 and 2007, respectively, at a cost of $276$494 million and $427 million for each of those quarters.periods, respectively.

6.  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’ investment in Conrail was $907$915 million at March 31,June 30, 2008, and $899 million at Dec. 31, 2007.

CRC owns and operates certain properties (the Shared Assets Areas) for the joint and exclusive benefit of Norfolk Southern Railway Company (NSR) and CSX Transportation, Inc. (CSXT).  The costs of operating the Shared Assets Areas are borne by NSR and CSXT based on usage.  In addition, NSR and CSXT pay CRC a fee for access to the Shared Assets Areas.  "Purchased services and rents" includes expenses for amounts due to CRC for operation of the Shared Assets Areas of $31 million in the firstsecond quarter of 2008 and $32$29 million in the firstsecond quarter of 2007, and $62 million and $61 million, respectively, for the first six months of 2008 and 2007.  NS’ equity in the earnings of Conrail, net of amortization, included in “Other income – net” was $8$7 million and $5$6 million in the second quarters of 2008 and 2007, respectively, and $15 million and $11 million for the first quarterssix months of 2008 and 2007, respectively.

“Accounts payable” includes $70$60 million at March 31,June 30, 2008, and $78 million at Dec. 31, 2007, due to Conrail for the operation of the Shared Assets Areas.  In addition, “Other liabilities” includes $133 million at both March 31,June 30, 2008, and Dec. 31, 2007, in long-term advances from Conrail, maturing 2035, entered into in 2005, that bear interest at an average rate of 4.4%.

7.  Long-term Debt

In the firstsecond quarter of 2008, NS received $125$100 million under its accounts receivable securitization facility, at an average variable interest rate of 4.23%2.8% with a 364-day term.  At March 31,June 30, 2008, and Dec. 31, 2007, the amounts outstanding under the facility were $275$100 million and $250 million, respectively, and the amount of receivables included in “Accounts receivable – net” serving as collateral for these borrowings was $847$884 million and $778 million, respectively.  NS also issued $400During the second quarter of 2008, $200 million of commercial paper during the first quartermatured, and was refinanced as part of 2008.   At March 31, 2008, NS had commercial paper outstanding of $200 million at an average rate of 3.03%, due May 2008.   Norfolk Southern intends to refinance these borrowings by issuing long-term debt, which is supported by its $1 billion credit facility.   Accordingly, total amounts outstanding under these programs of $475 million are included in the line item “Long-term debt” in the March 31, 2008, Consolidated Balance Sheet.

In April 2008, through a private offering, under which NS issued and sold $600 million in debt securities 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.

8.  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 Cost Components

The estimated amortization of certain items from accumulated comprehensive income (loss) into periodic benefit cost is as follows:

9.  Comprehensive Income

NS' total comprehensive income was as follows:

“Other comprehensive income" in 2008 and 2007 reflects primarily, net of tax, the amortization of the actuarial net losses and prior service costs for the pension and other postretirement benefit plans and, for 2007, unrealized gains and losses on available-for-sale securities.

10.    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 claims 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 support edsupported 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 Jan. 6, 2005, derailment in Graniteville, , SC.   A portion of the settlement will not be reimbursed by insurance and is included as an expense in the first quarter.  The total liability related to the derailment which includes a current and long-term portion, represents NS’ best estimate based on current facts and circumstances.   The estimate includes amounts related to business property damage and other economic losses, personal injury and individual property damage claims as well as third-party 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.  Accordingly, theThe Consolidated Balance Sheets reflect a current and long-term receivablereceivables for estimated recoveries from NS’ insurance carriers.   OneOn July 1, 2008, NS filed a demand for arbitration against one of NS’its insurance carriers that has made assertions indicatingfailed to respond to an insurance claim submitted by NS.  Accordingly, it is likely that it may contest all or part of its coverage obligations, as such all or part of the recorded recovery attributable to such carrier ($100 million) maywill be contested.   NS believes these expenses are covered by the insurance policy and that recovery of any contested amount is probable, in that if the carrier contests payment an arbitrator would determine the settlement amounts to be reasonable and that the insurer’s refusal to consent to and to fund the settlement was a breach of contract.

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, ta ki ngtaking 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.  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 differ 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 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

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.  Claims, if any, against third parties for recovery of cleanup costs incurred by NS are reflected as receivables (when collection is probable) on the balance sheet 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 an Environmental Policy Council, composed of senior managers, to oversee and interpret its environmental policy.

NS' Consolidated Balance Sheets include liabilities for environmental exposures in the amount of $43$39 million at March 31,June 30, 2008, and $46 million at Dec. 31, 2007 (of which $12 million is classified as a current liability at the end of each period).  At March 31,June 30, 2008, the liability represents NS' estimate of the probable cleanup and remediation costs based on available information at 154152 known locations.  As of that date, 11 sites accountaccounted for $24$19 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 3130 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.

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.

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 Nov. 30, 2007, NS received notice fromApril 24, 2008, the United States Department of Justice (DOJ) that the DOJ is prepared to bringbrought 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 Jan. 6, 2005 derailment in Graniteville, SC, including claims for civil penalties as well as injunctive relief.  The notice further indicatesOn June 24, 2008, NS filed a motion to dismiss DOJ’s claims, contending that the State of South Carolina may also join in any action against NS.   NS is in discussions with the DOJ in an effortinsufficient facts have been alleged to settle the DOJ'ssupport such claims.  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.

Purchase Commitments

At March 31,June 30, 2008, NSR had outstanding purchase commitments of approximately $229$152 million primarily for coal hoppers, RoadRailer® trailers, and track material in connection with its capital programs through 2009.  Included in this amountIn July 2008, the Board of Directors authorized the addition of approximately $80 million to the 2008 capital budget, three quarters of which is $64 million added duringto acquire new locomotives and the first quarter of 2008remainder to accelerate the purchase of approximately 750 new coal cars.program track work.

Report of Independent Registered Public Accounting Firm

The Stockholders and Board of Directors

Norfolk Southern Corporation:

We have reviewed the accompanying consolidated balance sheet of Norfolk Southern Corporation and subsidiaries as of March 31,June 30, 2008, the related consolidated statements of income for the three‑month and six‑month periods ended June 30, 2008 and 2007 and the related consolidated statements of income and cash flows for the three-monthsix‑month periods ended March 31,June 30, 2008 and 2007. These consolidated financial statements are the responsibility of the Company’s management.

We conducted our reviewsreview in accordance with the standards of the Public Company Accounting Oversight Board ( United States ).(United States). A review of interim financial information consists principally of applying analytical procedures and ma ki ngmaking inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board ( United States ),(United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews,review, we are not aware of any material modifications that should be made to the consolidated financial statements referred to above for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Norfolk Southern Corporation and subsidiaries as of December 31, 2007, and the related consolidated statements of income, changes in stockholders’ equity and cash flows for the year then ended (not presented herein); and in our report dated February 15, 2008, we expressed an unqualified opinion on those consolidated financial statements.  Our report refers to Norfolk Southern Corporation’s adoption of Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes, effective January 1, 2007.  In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2007, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

/s/ KPMG LLP

Norfolk, , Virginia

April
July 22, 2008

Item 2.  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

OVERVIEW

NS’ first quartersecond-quarter 2008 net income was 2%15% higher than the prior year due to improved income from railway operations.  Railway operating revenues increased 11%16% as higher average revenue per unit (which includes fuel surcharge) more than offset a 2% reduction in traffic volume.  Railway operating expenses, driven by higher fuel costs, increased 12%16% as compared to the firstsecond quarter of 2007, and the railway operating ratio (a measure of the amount of operating revenues consumed by operating expenses) roseincreased slightly to 76.9%71.1% compared with 76.5%71.0% for the firstsecond quarter of 2007.

At June 30, 2008, cash and short-term investment balances totaled $454 million.  Cash provided by operating activities for the first quartersix months was $604 million$1.1 billion and, along with proceeds from borrowings, provided funding for capital expenditures debt maturities,and dividends, as well as share repurchases and dividends.repurchases.  In the firstsecond quarter of 2008, 5.63.4 million shares of Norfolk Southern Corporation common stock (Common Stock) were repurchased at a total cost of $276$218 million.  At March 31, 2008, cashSince inception of the stock repurchase program in 2006, NS has repurchased and short-term investment balances totaled $364 million.retired 54.4 million shares of Common Stock at a total cost of $2.7 billion.

SUMMARIZED RESULTS OF OPERATIONS

First-quarterSecond-quarter 2008 net income was $291$453 million, up $6$59 million, or 2%15%, compared with the same period last year.  The increaseimprovement primarily resulted from a $50$109 million increase in income from railway operations and a $6$25 million reductionincrease in interest expense.   First quarterother income.  Second-quarter net income was reduced by a $50$74 million increase in income taxes, reflecting both higher pretax income and the absence of benefits associated with synthetic fuel tax credits that expired in 20072007.

For the first six months of 2008, net income was $744 million, up $65 million, or 10%, compared with the same period last year.  Increases of $159 million in income from railway operations and higher pretax income.$25 million in other income were offset in part by a $124 million increase in income taxes.

DETAILED RESULTS OF OPERATIONS

Railway Operating Revenues

First-quarterSecond-quarter 2008 railway operating revenues were $2.5$2.8 billion, up $253$387 million, or 11%16%, compared with the firstsecond quarter of 2007.  As shown in the following table, the increases were the result of higher average revenue per unit, andincluding increased fuel surcharges, (up $144 million) that were offset in part by lower traffic volume.  Fuel surcharges amounted to $410 million in the second quarter (up $231 million) and $729 million for the first six months (up $375 million).

Revenues, units and average revenue per unit for NS’ market groups were as follows:

Coal

Coal revenues increased $105$196 million, or 19%34%, in the second quarter and $301 million, or 26%, in the first quartersix months, compared with the same periodperiods last year.  The increaseBoth increases reflected a 17% increase in average revenue per unithigher rates, including fuel surcharges, and aincreased traffic volume (up 3% for the quarter and 2% increase in carloads.   Forfor the first quarter,six months).  The higher rates were comprised of pricing increases, contract escalators and the effect of increased longer-haul export coal traffic.  For both periods, tonnage handled increased, reflecting improved export volume.  Coal tonnage by market was as follows:

Utility coal tonnage increased modestly in the second quarter but declined 2%1% in the first quartersix months as higher export demand and June flooding in the temporary closure of a major coal mineMidwest tightened coal availability for domestic customers.  Export coal tonnage increased 63% for the second quarter and 64% for the first quarter,six months, reflecting increased global demand coupled with weather-related supply constraints in Australia and reduced export volume from China ..China.  D omestic metallurgical coal, coke and iron ore tonnage declined 3%6% in the second quarter and 5% in the first quartersix months due to constrained coal supply.  Industrial coal tonnage decreased 20%15% for the second quarter and 18% in the first quartersix months compared with 2007, principally due to a temporary mine shutdown and production problems that affected coal availability.supply constraints.

NS is currently 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.   In 2007, the Virginia Supreme Court issued a decision that remanded the case to the trial court on the grounds that neither of its prior decisions constituted a final order.   On April 17, 2008, the trial court entered a final order granting NS monetary damages, including interest, and prescribing the methodology for determining future rates.  Virginia Power is expected to appeal this order to the Virginia Supreme Court.filed its Notice of Appeal on May 7, 2008.   Future developments and the ultimate resolution of this matter could result in NS recognizing additional revenues related to this dispute, which could have a favorable impact on results of operations in a particular year or quarter.

Coal revenues for the remainder of the year are expected to be up compared to prior year levels, due to higher average revenue per unit and continued strength in the export market.

General Merchandise

General merchandise revenues increased $124$138 million, or 10%, in the second quarter and $262 million, or 10%, in the first quarter,six months, compared with the same periodperiods last year, reflecting a 13% increase inresult of higher average revenue per unit, which was partially offset by a 3% decline in traffic volume.unit.  The improvement in average revenue per unit reflected continued market-based pricing in all groups and higher fuel surcharges ..  Traffic volume declined 5% for the quarter and 4% for the first six months, driven by lower automotive volumes.  Chemicals traffic volume decreased 3%5% for the second quarter and 4% for the first quarter,six months, reflecting continued weakness in plastics and petroleum-based products linked to housing and roadway construction declines.declines, respectively.  Metals and construction volume was up slightly as increased carloads from metals machinery and aggregate markets offset declines in housing-related markets.  A griculture, consumer products and government volume increased 5% for the second quarter and 4%, for the first six months, reflecting increases in ethanol, corn and feed shipments.  Automotive volumes decreased 10%21% for the second quarter and 16% for the first quarter,six months, reflecting reduced North American sales and production.  Automotive manufacturers, especially the domestic producers, continue to experience sales declines as Ford, General Motors and Chrysler reduced production.consumers are opting for more fuel efficient vehicles.  Ford, General Motors and Chrysler combined operate 17 of 27 assembly plants served by NS.  Two of these assembly plants implemented shift reductions during the first half of 2008, and two other plants have announced plans to reduce shifts in the third quarter.  In addition, one manufacturer has announced plans to close an assembly plant later in the year.   P aper, clay and forest traffic volume was down 8%6% for the second quarter and 7% for the first quarter,six months, reflecting lower volumes related to the housing slowdown and continued decline in conventional paper markets. 

General merchandise revenues are expected to trend somewhatbe higher for the remainder of the year as improved year-over-year pricing should continue to offset modestly lower traffic volume.

Intermodal

Intermodal revenues increased $24$53 million, or 5%11%, in the second quarter and $77 million, or 8%, for the first quarter,six months, compared with the same periodperiods last year, primarily due to higher average revenue per unit (up 10%).including fuel surcharges.  Intermodal volume declined 3% in the second quarter and first six months.  Domestic volume (which includes truckload and intermodal marketing companies’ [IMC] volumes) increased 7% for the second quarter, and was down 4%up slightly for the first quarter.   Truckload volume decreased 13%six months, reflecting the soft economy.relative efficiency of intermodal versus over-the-road transportation in a high fuel cost environment.  International traffic volume declined 5%,8% for the second quarter and 7% for the first six months, primarily driven by a soft economy and less inland rail movement of West Coast port traffic that offset East Coast port volume growth.  The Premium business, which includes parcel and less-than-truckload (LTL) carriers, decreased 2%,6% for the second quarter and 4% for the first six months, as LTL conversions partially offsetreduced private empty movements and soft parcel business.business offset LTL conversions.  Triple Crown Services Company volume was up 2%.   Intermodal marketing companies volumes grew 2%, reflectingdown 1% for the relative efficiency of intermodal versus over-the-road transportation in a high fuel cost environment.second quarter, but improved slightly for the first six months.

Intermodal revenues for the remainder of the year are expected to reflect modest growth due primarily to modestly higher traffic volume and increased revenue per unit.

Railway Operating Expenses

First-quarterSecond-quarter railway operating expenses were $1.9$2.0 billion in 2008, up $203$278 million, or 12%16%, compared with the same period last year.  For the first six months, railway operating expenses were $3.9 billion, up $481 million, or 14%, compared with the same period last year.

Compensation and benefits expenses increased $24$33 million, or 5%, in the second quarter and $57 million, or 4%, in the first quarter 2008,six months, compared with the same periodperiods last year.  The increase was primarilychanges reflected increased incentive compensation due to a higher projected payout (up $19 million for the result of higherquarter and $22 million for the first six months), increased stock-based compensation primarily due to a stock price increase (up $14 million)$13 million for the quarter and $27 million for the first six months), increased wagepay rates (up $10 million)million for the quarter and $20 million for the first six months) and the absence of a second-quarter 2007 settlement of a $9 million payroll tax refund claim that were offset in part by lower health and welfare benefits expenses (down $10 million for the quarter and $14 million for the first six months).

Purchased services and rents decreased $9increased $20 million, or 2%5%, in the second quarter and $11 million, or 1%, in the first quarter,six months, compared with the same periodperiods last year, reflectingyear.  The increases were driven by higher intermodal operational costs, higher roadway repair expenses and increased professional and legal services that were offset in part by lower equipment rents as a result of lower traffic volume (down $3 million) and fewer third-party freight car repairs (down $4 million).rents.

Fuel expense, which includes the cost of locomotive fuel as well as other fuel used in railway operations, increased $156$212 million, or 63%76%, for the second quarter and $368 million, or 70%, for the first quarter,six months, compared with the same periodperiods last year.   The increase reflected a 65% increase in the price per gallon of locomotiveyear, reflecting sharply higher fuel and a 1% increase in consumption.prices.

Materials and other expenses (including the estimates of costs related to personal injury, property damage and environmental matters) increased $26$6 million, or 12%3%, in the second quarter and $32 million, or 8%, for the first quarter,six months, compared with the same periodperiods last year.  The quarterly increase reflected higher expenses associated with derailments and increased materials costs for locomotive and freight car repairs that were offset in part by $12 million of favorable personal injury claims and $4 million of environmental costs development.  The year-to-date increase also reflected the above as well as costs associated with the Avondale Mills settlement related to the Graniteville accident (see additional discussion below) as well as higher locomotive and freight car material costs.   These increases were partially offset by lower personal injury and environmental claims development..  The following table shows the components of materials and other expenses:expenses.

In April 2008, NS settled the lawsuit brought by Avondale Mills for claims associated with the Jan. 6, 2005, derailment in Graniteville, , SC.  A portion of the settlement will not be reimbursed by insurance and iswas included as an expense in the first quarter.first-quarter 2008 expenses.  The total liability related to the derailment which includes a current and long-term portion, represents NS’ best estimate based on current facts and circumstances.   The estimate includes amounts related to business property damage and other economic losses, personal injury and individual property damage claims as well as third-party 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.  Accordingly, theThe Consolidated Balance Sheets reflect a current and long-term receivablereceivables for estimated recoveries from NS’ insurance carriers.   OneOn July 1, 2008, NS filed a demand for arbitration against one of NS’its insurance carriers that has made assertions indicatingfailed to respond to an insurance claim submitted by NS.  Accordingly, it is likely that it may contest all or part of its coverage obligations, as such all or part of the recorded recovery attributable to such carrier ($100 million) maywill be contested.   NS believes these expenses are covered by the insurance policy and that recovery of any contested amount is probable, in that if the carrier contests payment an arbitrator would determine the settlement amounts to be reasonable and that the insurer’s refusal to consent to and to fund the settlement was a breach of contract.

Other income -– net

Other income -– net was flatincreased $25 million in both the second quarter and the first quartersix months of 2008, compared with the same periodperiods in 2007 as2007.  The increases reflect the absence of expenses related to synthetic fuel investments (down $26 million for the quarter and $46 million for the first six months), reduced interest expense (down $9 million for the quarter and $10 million for the first six months) due to a second-quarter adjustment to reflect the expected outcome of certain tax examinations, and more gains on the sale of property (up $5 million for the quarter and $8 million for the first six months).  These benefits were offset in part by lower returns fromand higher borrowing costs on corporate-owned life insurance (down $21 million) were offset by decreased expenses associated with tax credit investments$11 million for the quarter and $32 million for the first six months) and lower interest income (down $20 million)$7 million for the quarter and $17 million for the first six months).

Provision for Income Taxes

The first-quartersecond-quarter and year-to-date effective income tax rate was 38.9%rates were 38.2% and 38.5% in 2008, compared with 32.1%34.3% and 33.4% for the same periods last year.  The increase for the quarter wasincreases were largely due to the absence of synthetic fuel-related credits which expired at the end of 2007.

NS’ consolidated federal income tax returns for 2004 and 2005 are being audited by the Internal Revenue Service and arethe audit is expected to be completed withinduring the next six months.

third quarter (see Note 2).

FINANCIAL CONDITION AND LIQUIDITY

Cash provided by operating activities, NS' principal source of liquidity, was $604 million in$1.1 billion for the first threesix months of 2008 compared with $586 million in the first three months of 2007 reflecting higher income from railway operations.and 2007.  NS had a wor ki ngworking capital deficit of $191$102 million at March 31,June 30, 2008, compared with a wor ki ngworking capital deficit of $273 million at Dec. 31, 2007; the change was largely the result of increased proceeds from borrowings that were partially used to repurchase shares of Common Stock.  The payment of the Avondale Mills settlement affected working capital because the amount subject to arbitration is classified as a long-term receivable.  NS’ cash, cash equivalents and short-term investment balances totaled $364$454 million at March 31,June 30, 2008.  NS expects that cash on hand combined with cash flows from operations will be sufficient to meet its ongoing obligations.  Except for the purchase of additional coal cars, discussed below, there have been no material changesIn addition to the contractual obligation amounts orand information relating to NS’ future obligations related to certain tax positions contained in NS’ Form 10-K as of Dec. 31, 2007.2007, NS made additional purchase commitments for capital assets, discussed below, and through a private offering issued and sold $600 million in debt securities during the second quarter of 2008.

Cash used for investing activities was $247$393 million infor the first quartersix months of 2008, compared with $256$385 million in the same period last year, reflecting lowerhigher property additions offset in part by increased investment sales net of purchases and higher property additions.purchases.  In Marchthe first quarter of 2008, Norfolk Southern’s Board of Directors approved the addition of $64 million to its 2008 capital expenditures budget to accelerate the purchase of approximately 750 new coal cars.  In July 2008, the Board of Directors authorized the addition of approximately $80 million to the 2008 capital budget, three quarters of which is to acquire new locomotives and the remainder to accelerate program track work.

Cash used for financing activities was $199$417 million infor the first quartersix months of 2008, compared with $387$880 million infor the first quartersame period of 2007.  The change reflected highernet debt issuances of $118 million in 2008 compared with debt repayments and increased dividend payments, whichof $433 million in 2007.  Additionally, NS share repurchases for the first six months of 2008 were more$67 million higher than offset by more proceeds from borrowings and higher exercisesfor the first six months of employee stock options.2007.  The timing and volume of future share repurchases will be guided by management’s assessment of market conditions and other factors.  Near-term purchases under the share repurchase program are expected to be made with internally generated cash and proceeds from financings.  NS’ debt-to-total capitalization ratio was 40.0%39.4% at March 31,June 30, 2008, compared with 39.6% at Dec. 31, 2007.

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 financial covenants.  There were no amounts outstanding under this facility at March 31,June 30, 2008, and NS is in compliance with all of the financial covenants.  Through February 2009, NS is ineligible to utilize its March 2001 and September 2004 Form S-3 registration statements due to a late filing of a Form 8-K which was unrelated to its financial condition or results of operations.  However, this is not expected to have an impact on financial liquidity.  Through a private offering, NS issued and sold $600 million in debt securities in April 2008 (see Note 7)., and subsequently exchanged substantially all of these unregistered securities with essentially identical securities registered under the Securities Act of 1933.

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 revenues 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 change them.  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.  There have been no significant changes to the Application of Critical Accounting Estimates disclosure contained in NS’ Form 10‑K as of Dec. 31, 2007.

OTHER MATTERS

Labor Agreements

Approximately 26,000, or about 85%, 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 in concert with other major railroads.  Moratorium provisions in the labor agreements govern when the railroads and the unions may propose changes.

The most recent bargaining round began in late 2004.  Since that time, the railroads have reached agreements that extend through 2009 with all of the major rail unions except the United Transportation Union (UTU) and the International Association of Machinists (IAM).  The unions with which the railroads have reached agreement represent about two-thirds95% of NS’ unionized employees.  A tentative agreement with UTU is currently subject to ratification by the employees; a tentative agreement with IAM failed ratification and the parties remain in mediation.

Because NS previously reached separate agreements with the Brotherhood of Locomotive Engineers and Trainmen (BLET) and the American Train Dispatchers Association (ATDA), only the health and welfare provisions from the national agreements will apply to NS’ locomotive engineers and ATDA-represented dispatchers.  NS also had reached a further tentative agreement that would have extended its contract with BLET through 2014; however, the tentative agreement failed ratification by the employees.

Negotiations with the unions that have not settledIAM are being mediated by the National Mediation Board (NMB), a federal agency.  The status quo is preserved during mediation (that is, the unionsunion may not strike and management may not change the labor agreements)agreement) while the NMB assists the parties in their efforts to reach agreement.  If the NMB were to terminate mediation, it would, at that time, propose that the parties arbitrate their differences.  A strike could occur 30 days thereafter if the parties did not accept arbitration.  However, the President of the United States of America could then appoint an Emergency Board, which would delay any strike for a further 60 days while the Board made recommendations and the parties engaged in further negotiations.  The outcome of the negotiations cannot be determined at this time.

Market Risks and Hedging Activities

NS uses derivative financial instruments to manage its overall exposure to fluctuations in interest rates.  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 March 31,June 30, 2008, NS' debt subject to interest rate fluctuations totaled $532$124 million.  A 1% increase in interest rates would increase NS' total annual interest expense related to all its variable debt by approximately $5$1 million.  Management considers it unlikely that interest rate fluctuations applicable to these instruments will result in a material adverse effect on NS' financial condition, 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 March 31,June 30, 2008, the average pay rate under these agreements was 5%4%, and the average receive rate was 7%.  The effect of the swaps was to reduce interest expense by less than $1 million in the firstsecond quarters of 2008 and 2007, respectively.2007.  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 ..Japan.  Counterparties to the interest rate swaps and Japanese banks holding yen deposits are major financial institutions believed by management to be creditworthy.

Environmental Matters

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.  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 an Environmental Policy Council, composed of senior managers, to oversee and interpret its environmental policy.

NS' Consolidated Balance Sheets include liabilities for environmental exposures in the amount of $43$39 million at March 31,June 30, 2008, and $46 million at Dec. 31, 2007 (of which $12 million is classified as a current liability at the end of each period).  At March 31,June 30, 2008, the liability represents NS' estimate of the probable cleanup and remediation costs based on available information at 154152 known locations.  As of that date, 11 sites account for $24$19 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 3130 locations, one or more subsidiaries of NS, 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.

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.

Based on an assessment of known facts and circumstances, 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 condition, results of operations or liquidity.

New Accounting Pronouncement

In September 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements.”  This statement, effective for interim or annual reporting periods beginning after Nov. 15, 2007, establishes a framework for measuring fair value in U.S. generally accepted accounting principles and expands disclosures about fair value measurements.  NS adopted the statement Jan. 1, 2008, related to financial instrument assets and liabilities with no material effect on NS’ consolidated financial statements.

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 assets.  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.

FORWARD-LOOKING STATEMENTS

This Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-loo ki ngforward-looking statements that may be identified by the use of words like "believe," "expect," "anticipate" and "project."  Forward-loo ki ngForward-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; fluctuation in prices or availability 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 our technology infrastructure, including our 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” in NS’ Form 10-K as of Dec. 31, 2007, and any updates contained herein.  Forward-loo ki ngForward-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-loo ki ngforward-looking statements.  NS undertakes no obligation to update or revise forward-loo ki ngforward-looking statements.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

The information required by this item is included in Part I, Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations" under the heading "Market Risks and Hedging Activities."

Item 4.  Controls and Procedures.

(a) Evaluation of Disclosure Controls and Procedures

Norfolk Southern’s Chief Executive Officer and Chief Financial Officer have 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 March 31,June 30, 2008.  Based on such evaluation, such officers have concluded that, as of March 31,June 30, 2008, NS' disclosure controls and procedures are effective in alerting them on a timely basis to material information relating to NS (including its consolidated subsidiaries) required to be included in NS' periodic filings under the Exchange Act.

(b) Changes in Internal Control Over Financial Reporting

During the firstsecond quarter of 2008, management did not identify any changes in NS' internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, NS’ internal control over financial reporting.

PART II.  OTHER INFORMATION

Item 1.  Legal Proceedings.

With respect to the antitrust class actions consolidated on November 6, 2007, in the U.S. District Court for the District of Columbia by the Judicial Panel on Multidistrict Litigation, consolidated amended class action complaints were filed against NS and three other railroads on April 15, 2008.  The complaints allege violations of Federal antitrust laws and other laws with regard to the railroads’ fuel surcharge programs.  Motions to dismiss the consolidated complaints were filed by the railroads on May 30, 2008, and discovery has been stayed pending resolution of such motions.  On March 25, 2008, a lawsuit containing similar allegations against NS and four other major railroads was filed in the U.S. District Court for the District of Minnesota by a customer on behalf of itself, although NS has not yet received service of process.  NS believes the allegations in the complaints are without merit and intends to vigorously defend these actions.  In addition, NS received a subpoena from a state grand jury on July 13, 2007, requesting documents and materials relating to the setting of fuel surcharges.  NS is cooperating with the state in its investigation.  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 30,With respect to the state investigation into the setting of fuel surcharges and the related grand jury subpoena received by NS in July 2007, NS received notice fromwas notified by the state that the state has decided not to move forward with its investigation at this time, while reserving its right to re-open the matter in the future if it decides that circumstances so dictate. 

On April 24, 2008, the United States Department of Justice (DOJ) that the DOJ is prepared to bringbrought 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 Jan. 6, 2005 derailment in Graniteville, SC, including claims for civil penalties as well as injunctive relief.  The notice further indicatesOn June 24, 2008, NS filed a motion to dismiss DOJ’s claims, contending that the State of South Carolina may also join in any action against NS.   NS is in discussions with the DOJ in an effortinsufficient facts have been alleged to settle the DOJ'ssupport such claims.  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 1A.   Risk Factors.

The following risk factor, which was included in NS’ 2007 Form 10-K, is amended in its entirety to read as follows.  The remaining risk factors included in NS’ 2007 Form 10-K remain unchanged and are incorporated herein by reference.

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.  Legislation introduced in Congress would give federal regulators increased authority to conduct investigations and levy substantial fines and penalties in connection with railroad accidents.  In April 2008, federal regulators prescribed new regulations governing railroads’ transportation of hazardous materials, including annual routing analyses, security risk assessments and employee security training.  Regulations proposed in late 2006 by DHS mandating chain of custody and security measures likely will cause service degradation and higher costs for the transportation of toxic inhalation hazard materials.  Further, certain local governments have sought to enact ordinances banning hazardous materials moving by rail within their borders.  Some legislators have contemplated pre-notification requirements for hazardous materials shipments.  If promulgated such ordinances could require the re-routing of hazardous materials shipments, with the potential for significant additional costs and network inefficiencies.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds.

ISSUER REPURCHASES OF EQUITY SECURITIES