UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the quarterly period ended ~~MARCH 31,~~JUNE 30, 2015

( ) 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)	52-1188014 (IRS Employer Identification No.)
Three Commercial Place Norfolk, Virginia (Address of principal executive offices)	23510-2191 (Zip Code)
(757) 629-2680 (Registrant’s telephone number, including area code)
No Change (Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 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 Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [X] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the 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]

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.



Class		Outstanding at ~~March 31,~~June 30, 2015
Common Stock ($1.00 par value per share)		~~304,849,454~~301,386,849 (excluding 20,320,777 shares held by the registrant’s consolidated subsidiaries)

TABLE OF CONTENTS

NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES (NS)



			Page
Part I.	Financial Information:
	Item 1.	Financial Statements:
		Consolidated Statements of Income Second Quarters and First ~~Quarters~~Six Months of 2015 and 2014	3
		Consolidated Statements of Comprehensive Income Second Quarters and First ~~Quarters~~Six Months of 2015 and 2014	4
		Consolidated Balance Sheets At ~~March 31,~~June 30, 2015 and December 31, 2014	5
		Consolidated Statements of Cash Flows First ~~Quarters~~Six Months of 2015 and 2014	6
		Notes to Consolidated Financial Statements	7
		Report of Independent Registered Public Accounting Firm	1620
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1721
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2429
	Item 4.	Controls and Procedures	2530
Part II.	Other Information:
	Item 1.	Legal Proceedings	2631
	Item 1A.	Risk Factors	2631
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2732
	Item 6.	Exhibits	2732
Signatures			2833

Exhibit Index			2934

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Income

(Unaudited)


	First Quarter				Second Quarter				First Six Months
	2015		2014		2015		2014		2015		2014
	($ in millions, except per share amounts)				($ in millions, except per share amounts)

Railway operating revenues	$	2,567	$	2,689	$	2,713	$	3,042	$	5,280	$	5,731

Railway operating expenses:
Compensation and benefits	783		740		724		715		1,507		1,455
Purchased services and rents	423		392		438		414		861		806
Fuel	264		432		255		408		519		840
Depreciation	245		237		247		238		492		475
Materials and other	246		221		235		248		481		469

Total railway operating expenses	1,961		2,022		1,899		2,023		3,860		4,045

Income from railway operations	606		667		814		1,019		1,420		1,686

Other income – net	21		26		19		18		40		44
Interest expense on debt	132		139		134		139		266		278

Income before income taxes	495		554		699		898		1,194		1,452

Provision for income taxes	185		186		266		336		451		522

Net income	$	310	$	368	$	433	$	562	$	743	$	930

Per share amounts:
Net income
Basic	$	1.01	$	1.18	$	1.43	$	1.81	$	2.43	$	2.99
Diluted	1.00		1.17		1.41		1.79		2.41		2.97

Dividends	0.59		0.54		0.59		0.54		1.18		1.08

See accompanying notes to consolidated financial statements.

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income

(Unaudited)


	First Quarter						Second Quarter						First Six Months
	2015			2014			2015			2014			2015			2014
	($ in millions)						($ in millions)

Net income	$	310		$	368		$	433		$	562		$	743		$	930
Other comprehensive income, before tax:
Pension and other postretirement benefits	10			299			11			7			21			306
Other comprehensive income (loss) of equity investees	(4		)	3
Other comprehensive income (loss) of
equity investees							—			7			(4		)	10

Other comprehensive income, before tax	6			302			11			14			17			316
Income tax expense related to items of other
comprehensive income	(3		)	(114		)	(5		)	(4		)	(8		)	(118		)

Other comprehensive income, net of tax	3			188			6			10			9			198

Total comprehensive income	$	313		$	556		$	439		$	572		$	752		$	1,128

See accompanying notes to consolidated financial statements.

Norfolk Southern Corporation and Subsidiaries

Consolidated Balance Sheets

(Unaudited)


	March 31, 2015			December 31, 2014			June 30, 2015			December 31, 2014
	($ in millions)						($ in millions)

Assets
Current assets:
Cash and cash equivalents	$	524		$	973		$	889		$	973
Accounts receivable – net	1,032			1,055			1,055			1,055
Materials and supplies	268			236			277			236
Deferred income taxes	118			167			125			167
Other current assets	173			347			67			347
Total current assets	2,115			2,778			2,413			2,778

Investments	2,701			2,679			2,724			2,679
Properties less accumulated depreciation of $11,020 and
Properties less accumulated depreciation of $11,188 and
$10,814, respectively	27,829			27,694			28,075			27,694
Other assets	130			90			98			49

Total assets	$	32,775		$	33,241		$	33,310		$	33,200

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	1,094		$	1,233		$	1,144		$	1,233
Short-term debt	—			100			—			100
Income and other taxes	210			217			295			217
Other current liabilities	298			228			264			228
Current maturities of long-term debt	501			2			500			2
Total current liabilities	2,103			1,780			2,203			1,780

Long-term debt	8,429			8,924			8,890			8,883
Other liabilities	1,302			1,312			1,322			1,312
Deferred income taxes	8,783			8,817			8,818			8,817

Total liabilities	20,617			20,833			21,233			20,792

Stockholders’ equity:
Common stock $1.00 per share par value, 1,350,000,000 shares
authorized; outstanding 304,849,454 and 308,240,130 shares,
authorized; outstanding 301,386,849 and 308,240,130 shares,
respectively, net of treasury shares	306			310			303			310
Additional paid-in capital	2,160			2,148			2,146			2,148
Accumulated other comprehensive loss	(395		)	(398		)	(389		)	(398		)
Retained income	10,087			10,348			10,017			10,348

Total stockholders’ equity	12,158			12,408			12,077			12,408

Total liabilities and stockholders’ equity	$	32,775		$	33,241		$	33,310		$	33,200

See accompanying notes to consolidated financial statements.

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)


		First Quarter							First Six Months
		2015			2014				2015			2014
		($ in millions)							($ in millions)

Cash flows from operating activities:	Cash flows from operating activities:							Cash flows from operating activities:
	Net income	$	310		$	368		Net income	$	743		$	930
	Reconciliation of net income to net cash provided by operating activities:							Reconciliation of net income to net cash provided by operating activities:
	Depreciation	246			238			Depreciation	494			478
	Deferred income taxes	12			(8		)	Deferred income taxes	35			17
	Gains and losses on properties and investments	(5		)	(2		)	Gains and losses on properties and investments	(18		)	(3		)
	Changes in assets and liabilities affecting operations:							Changes in assets and liabilities affecting operations:
	Accounts receivable	23			(85		)	Accounts receivable	—			(98		)
	Materials and supplies	(32		)	(17		)	Materials and supplies	(41		)	(28		)
	Other current assets	176			17			Other current assets	282			30
	Current liabilities other than debt	(97		)	86			Current liabilities other than debt	(1		)	144
	Other – net	(28		)	(9		)	Other – net	(21		)	(33		)

	Net cash provided by operating activities	605			588			Net cash provided by operating activities	1,473			1,437

Cash flows from investing activities:	Cash flows from investing activities:							Cash flows from investing activities:
	Property additions	(392		)	(381		)	Property additions	(886		)	(809		)
	Property sales and other transactions	16			22			Property sales and other transactions	32			44
	Investments, including short-term	(3		)	(3		)	Investments, including short-term	(3		)	(3		)
	Investment sales and other transactions	1			108			Investment sales and other transactions	5			121

	Net cash used in investing activities	(378		)	(254		)	Net cash used in investing activities	(852		)	(647		)

Cash flows from financing activities:	Cash flows from financing activities:							Cash flows from financing activities:
	Dividends	(181		)	(167		)	Dividends	(360		)	(335		)
	Common stock issued	21			62			Common stock issued	28			82
	Purchase and retirement of common stock	(415		)	(50		)	Purchase and retirement of common stock	(765		)	(100		)
	Debt repayments	(101		)	(100		)	Proceeds from borrowings – net	494			—
								Debt repayments	(102		)	(213		)
	Net cash used in financing activities	(676		)	(255		)
								Net cash used in financing activities	(705		)	(566		)
	Net increase (decrease) in cash and cash equivalents	(449		)	79
								Net increase (decrease) in cash and cash equivalents	(84		)	224

Cash and cash equivalents:	Cash and cash equivalents:							Cash and cash equivalents:
	At beginning of year	973			1,443			At beginning of year	973			1,443

	At end of period	$	524		$	1,522		At end of period	$	889		$	1,667

Supplemental disclosures of cash flow information:	Supplemental disclosures of cash flow information:							Supplemental disclosures of cash flow information:
	Cash paid during the period for:							Cash paid during the period for:
	Interest (net of amounts capitalized)	$	71		$	75		Interest (net of amounts capitalized)	$	249		$	255
	Income taxes (net of refunds)	12			60			Income taxes (net of refunds)	55			313

See accompanying notes to consolidated financial statements.

Norfolk Southern Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

In the opinion of management, the accompanying unaudited interim consolidated financial statements contain all adjustments (consisting of normal recurring accruals) necessary to present fairly Norfolk Southern Corporation (Norfolk Southern) and subsidiaries’ (collectively, NS, we, us, and our) financial condition at ~~March 31,~~June 30, 2015, and December 31, 2014, our results of operations and comprehensive income for the second quarters and first six months of 2015 and 2014,and our cash flows for the first ~~quarters~~six months of 2015 and 2014 in conformity with U.S. generally accepted accounting principles (GAAP).

These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in our latest Annual Report on Form 10-K.

1. Stock-Based Compensation

During the first ~~quarter~~and second quarters of 2015, a committee of non-employee members of our Board of Directors granted stock options, restricted stock units (RSUs) 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 ~~$31~~$4 million and ~~$32~~$10 million during the ~~first~~second quarters of 2015 and 2014, respectively. For the first six months of 2015 and 2014, stock-based compensation was $35 million and $42 million, respectively. The total tax effects recognized in income in relation to stock-based compensation were net benefits of ~~$10~~$1 million and $4 million for the second quarters of 2015 and 2014, respectively, and net benefits of $11 million and $14 million for the first ~~quarters both~~six months of 2015 and ~~2014.~~2014, respectively.

Stock Options

In the first quarter of 2015, 511,010 options were granted under LTIP and 181,320 options were granted under TSOP. In ~~each case,~~ the second quarter of 2015, 132,880 options were granted under LTIP. The grant ~~price was~~prices were $104.23 and $92.76 for the options granted in the first and second quarters of 2015, respectively, which was the greater of the average fair market value of Norfolk Southern common stock (Common Stock) or the closing price of Common Stock on the effective date of the grant, and the options have a term of ten years. The options granted under LTIP and TSOP may not be exercised prior to the fourth and third anniversaries of the date of grant, respectively, or if the optionee retires or dies before that anniversary date, may not be exercised before the later of one year after the grant date or the date of the optionee's retirement or death. Holders of the 2015 options granted under LTIP who remain actively employed receive cash dividend equivalent payments during the four year vesting period in an amount equal to the regular quarterly dividends paid on Common Stock. Dividend equivalent payments are not made on TSOP options.

The fair value of each option award 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, and historical volatility of, Common Stock. Historical data is used 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 all options granted are expected to be outstanding, including the branches of the model that result in options expiring unexercised. The average risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. A dividend yield of zero was used for LTIP options during the vesting period. A dividend yield of 2.27% was used for all vested LTIP options and all TSOP options.

The assumptions for the 2015 LTIP and TSOP grants are shown in the following table:



Expected volatility range	19% - 27%
Average expected volatility	25%
Average risk-free interest rate	1.83%
Average expected option term LTIP	9.3 years
Per-share grant-date fair value LTIP	$30.35
Average expected option term TSOP	9.1 years
Per-share grant-date fair value TSOP	$24.71

For the ~~first~~second quarter of 2015, options relating to ~~241,404~~90,269 shares were exercised, yielding ~~$12~~$5 million of cash proceeds and $3$1 million of tax benefit recognized as additional paid-in capital. For the second quarter of 2014, options relating to 353,327 shares were exercised, yielding $16 million of cash proceeds and $4 million of tax benefit recognized as additional paid-in capital.

For the first six months of 2015, options relating to 331,673 shares were exercised, yielding $17 million of cash proceeds and $4 million of tax benefit recognized as additional paid-in capital. For the first ~~quarter~~six months of 2014, options relating to ~~880,744~~1,234,071 shares were exercised, yielding ~~$40~~$56 million of cash proceeds and ~~$11~~$15 million of tax benefit recognized as additional paid-in capital.

Restricted Stock Units

During the first quarter of 2015, there were 101,470 RSUs granted with a grant-date fair value of $104.23 and a five-year restriction period that will be settled through the issuance of shares of Common Stock. The RSU grants include cash dividend equivalent payments during the restriction period commensurate with regular quarterly dividends paid on Common Stock.

No RSUs were earned or paid out during the second quarters of 2015 or 2014. During the first ~~quarter~~six months of 2015, 166,750 of the RSUs granted in 2010 vested, with 99,337 shares of Common Stock issued net of withholding taxes. ~~During~~For the first ~~quarter~~six months of 2014, 318,150 of the RSUs granted in 2009 vested, with 187,449 shares of Common Stock issued net of withholding taxes. The total related tax benefits recognized as additional paid-in capital were $3less than $1 million for the second quarters of both 2015 and $62014, and $4 million and $6 million for the first ~~quarters~~six months of 2015 and 2014, respectively.

Performance Share Units

PSUs provide for awards based on achievement of certain predetermined corporate performance goals at the end of a three-year cycle and are settled through the issuance of shares of Common Stock. During the first quarter of 2015, there were 413,770 PSUs granted. PSUs will earn out based on the achievement of a return on average invested capital target (a performance condition) and a total shareholder return target (a market condition). The grant-date fair values of the PSUs associated with the performance and market conditions were $97.24 and $46.08, respectively, with the market condition fair value measured on the date of grant using a Monte Carlo simulation model.

No PSUs were earned or paid out in the second quarters of 2015 and 2014. During the first ~~quarter~~six months of 2015,236,601 of the PSUs granted in 2012 were earned, with 141,386 shares of Common Stock issued net of withholding taxes. For the first ~~quarter~~six months of 2014, 374,099 of the PSUs granted in 2011 were earned, with 223,253 shares of Common Stock issued net of withholding taxes. The total related tax benefits recognized as additional paid-in capital were $3 million and $5 million for the first ~~quarter~~six monthss of 2015 and 2014, respectively.

2. Income Taxes

There have been no material changes to the balance of unrecognized tax benefits reported at December 31, 2014. IRS examinations have been completed for all years prior to 2011. Our consolidated federal income tax returns for 2011 and 2012 are currently being audited by the IRS. We anticipate that the IRS will complete its examination in 2015. We do not expect that the resolution of the examination will have a material effect on our financial position, results of operations, or liquidity.

3. Earnings Per Share

The following table sets forth the calculation of basic and diluted earnings per share:


	Basic						Diluted						Basic						Diluted
	First Quarter												Second Quarter
	2015			2014			2015			2014			2015			2014			2015			2014
	($ in millions, except per share amounts, shares in millions)												($ in millions, except per share amounts, shares in millions)

Net income	$	310		$	368		$	310		$	368		$	433		$	562		$	433		$	562
Dividend equivalent payments	(2		)	(2		)	(1		)	(1		)	(1		)	(2		)	(1		)	(1		)

Income available to common stockholders	$	308		$	366		$	309		$	367		$	432		$	560		$	432		$	561

Weighted-average shares outstanding	306.8			309.5			306.8			309.5			302.9			309.5			302.9			309.5
Dilutive effect of outstanding options
and share-settled awards							2.8			3.1									2.6			3.3

Adjusted weighted-average shares outstanding							309.6			312.6									305.5			312.8

Earnings per share	$	1.01		$	1.18		$	1.00		$	1.17		$	1.43		$	1.81		$	1.41		$	1.79



	Basic						Diluted
	First Six Months
	2015			2014			2015			2014
	($ in millions, except per share amounts, shares in millions)

Net income	$	743		$	930		$	743		$	930
Dividend equivalent payments	(3		)	(4		)	(2		)	(2		)

Income available to common stockholders	$	740		$	926		$	741		$	928

Weighted-average shares outstanding	304.8			309.5			304.8			309.5
Dilutive effect of outstanding options
and share-settled awards							2.7			3.2
Adjusted weighted-average shares outstanding							307.5			312.7

Earnings per share	$	2.43		$	2.99		$	2.41		$	2.97

During the second quarters and first ~~quarters~~six months of 2015 and 2014, dividend equivalent payments were made to holders of stock options and RSUs. For purposes of computing basic earnings per share, dividend equivalent payments made to holders of stock options and RSUs were deducted from net income to determine income available to common stockholders. For purposes of computing diluted earnings per share, we evaluate on a grant-by-grant basis those stock options and RSUs receiving dividend equivalent payments under the two-class and treasury stock methods to determine which method is the more dilutive for each grant. For those grants for which the two-class method was more dilutive, net income was reduced by dividend equivalent payments to determine income available to common stockholders. The dilution calculations exclude options having exercise prices exceeding the average market price of Common Stock as follows: none in the first quarter of 2015, ~~and~~ 0.7 million in the first quarter of 2014, 0.7 million in the second quarter of 2015, and none in the second quarter of 2014.

910

4. Stockholders’ Equity

Common Stock

Common Stock is reported net of shares held by our consolidated subsidiaries (Treasury Shares). Treasury Shares at ~~March 31,~~June 30, 2015, and December 31, 2014, amounted to 20,320,777 shares, with a cost of $19 million at both dates.

Accumulated Other Comprehensive Loss

The components of ~~"Other~~“Other comprehensive ~~income"~~income” reported in the Consolidated Statements of Comprehensive Income and changes in the cumulative balances of “Accumulated other comprehensive loss” reported in the Consolidated Balance Sheets consisted of the following:

Pensions
and Other
Postretirement
Benefits

Other
Comprehensive
Loss of Equity
Investees

Accumulated
Other
Comprehensive
Loss
($ in millions)

December 31, 2014 $ (320 ) $ (78 ) $ (398 )
Other comprehensive income (loss):

Amounts reclassified into net income 10
(1) —
10
Net loss —
(4 ) (4 )
Tax expense (3 ) —
(3 )

Other comprehensive income (loss) 7
(4 ) 3

March 31, 2015 $ (313 ) $ (82 ) $ (395 )



	Pensions and Other Postretirement Benefits				Other Comprehensive Loss of Equity Investees			Accumulated Other Comprehensive Loss
	($ in millions)
Second Quarter
March 31, 2015	$	(313	)		$	(82	)	$	(395	)
Other comprehensive income:
Amounts reclassified into net income	11			(1)	—			11
Tax expense	(5		)		—			(5		)

Other comprehensive income	6				—			6

June 30, 2015	$	(307	)		$	(82	)	$	(389	)


	Pensions and Other Postretirement Benefits				Other Comprehensive Gain (Loss) of Equity Investees			Accumulated Other Comprehensive Loss			Pensions and Other Postretirement Benefits				Other Comprehensive Loss of Equity Investees			Accumulated Other Comprehensive Loss
	($ in millions)										($ in millions)

December 31, 2013	$	(310	)		$	(71	)	$	(381	)
Second Quarter
March 31, 2014											$	(125	)		$	(68	)	$	(193	)
Other comprehensive income:
Prior service benefit	367				—			367
Amounts reclassified into net income	12			(1)	—			12			7			(1)	—			7
Net gain (loss)	(80		)		3			(77		)
Net gain											—				7			7
Tax expense	(114		)		—			(114		)	(3		)		(1		)	(4		)

Other comprehensive income	185				3			188			4				6			10

March 31, 2014	$	(125	)		$	(68	)	$	(193	)
June 30, 2014											$	(121	)		$	(62	)	$	(183	)



	Pensions and Other Postretirement Benefits				Other Comprehensive Loss of Equity Investees			Accumulated Other Comprehensive Loss
	($ in millions)
First Six Months
December 31, 2014	$	(320	)		$	(78	)	$	(398	)
Other comprehensive income (loss):
Amounts reclassified into net income	21			(1)	—			21
Net loss	—				(4		)	(4		)
Tax expense	(8		)		—			(8		)

Other comprehensive income (loss)	13				(4		)	9

June 30, 2015	$	(307	)		$	(82	)	$	(389	)



	Pensions and Other Postretirement Benefits				Other Comprehensive Loss of Equity Investees			Accumulated Other Comprehensive Loss
	($ in millions)
First Six Months
December 31, 2013	$	(310	)		$	(71	)	$	(381	)
Other comprehensive income:
Prior service benefit	367				—			367
Amounts reclassified into net income	19			(1)	—			19
Net gain (loss)	(80		)		10			(70		)
Tax expense	(117		)		(1		)	(118		)

Other comprehensive income	189				9			198

June 30, 2014	$	(121	)		$	(62	)	$	(183	)


⁽¹⁾	These items are included in the computation of net periodic pension and postretirement benefit costs. See Note 7,8, “Pensions and Other Postretirement Benefits” for additional information.

1012

5. Stock Repurchase Program

We repurchased and retired ~~3.9~~7.4 million and ~~0.5~~1.0 million shares of Common Stock under our stock repurchase program in each of the first ~~quarters~~six months of 2015 and 2014, respectively, at a cost of ~~$415~~$765 million and ~~$50~~$100 million, respectively. The timing and volume of purchases is guided by our assessment of market conditions and other pertinent factors. Any near-term share repurchases are expected to be made with internally generated cash, cash on hand, or proceeds from borrowings. Since the beginning of 2006, we have repurchased and retired ~~143.7~~147.2 million shares at a total cost of ~~$8.8~~$9.2 billion.

6. Investment in Conrail

Through a limited liability company, we and CSX Corporation (CSX) jointly own Conrail Inc. (Conrail), whose primary subsidiary is Consolidated Rail Corporation (CRC). We have a 58% economic and 50% voting interest in the jointly owned entity, and CSX has the remainder of the economic and voting interests. Our investment in Conrail was $1.1 billion at both ~~March 31,~~June 30, 2015 and December 31, 2014.

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” and “Fuel” include expenses for amounts due to CRC for the operation of the Shared Assets Areas totaling ~~$37~~$40 million and $34 million for the second quarters of 2015 and 2014, respectively, and $77 million and $68 million for the first ~~quarters~~six months of 2015 and 2014, respectively. Our equity in the earnings of Conrail, net of amortization, included in “Purchased services and rents” was $13 million and $10 million for the second quarters of 2015 and $62014, respectively, and $23 million and $16 million for the first ~~quarters~~six months of 2015 and 2014, respectively.

“Accounts payable” includes ~~$60~~$72 million at ~~March 31,~~June 30, 2015, and $56 million at December 31, 2014, due to Conrail for the operation of the Shared Assets Areas. In addition, “Other liabilities” includes $280 million at both ~~March 31,~~June 30, 2015and December 31, 2014, for long-term advances from Conrail, maturing 2044, that bear interest at an average rate of 2.9%.

7. Debt

In the first six months of 2015, NS repaid $100 million under its accounts receivable securitization facility. At June 30, 2015 and December 31, 2014, the amounts outstanding under the facility were $100 million (at an average variable interest rate of 1.29%) and $200 million (at an average variable interest rate of 1.28%), respectively. The facility has a two year term which was renewed and amended in October 2014 to run until October 2016.

During the second quarter of 2015, NS issued $500 million of 4.45% senior notes due 2045.

NS has authority from its Board of Directors to issue an additional $1.2 billion of debt or equity securities through public or private sale.

8. Pensions and Other Postretirement Benefits

We have both funded and unfunded defined benefit pension plans covering principally salaried employees. We also provide specified health care and life insurance benefits to eligible retired employees; these plans can be amended or terminated at our option. Under our self-insured retiree health care plan, for those participants who are not Medicare-eligible, a defined percentage of health care expenses is covered for retired employees and their dependents, reduced by any deductibles, coinsurance, and, in some cases, coverage provided under other group insurance policies. Those participants who are Medicare-eligible are not covered under the self-insured retiree health care plan, but instead are provided with an employer-funded health reimbursement account which can be used for reimbursement of health insurance premiums or eligible out-of-pocket medical expenses.


							Other Postretirement												Other Postretirement
	Pension Benefits						Benefits						Pension Benefits						Benefits
	First Quarter												Second Quarter
	2015			2014			2015			2014			2015			2014			2015			2014
	($ in millions)												($ in millions)

Service cost	$	10		$	9		$	2		$	2		$	10		$	8		$	2		$	2
Interest cost	24			23			5			8			23			24			5			5
Expected return on plan assets	(41		)	(38		)	(5		)	(4		)	(42		)	(38		)	(5		)	(5		)
Amortization of net losses	16			14			—			—			17			13			—			—
Amortization of prior service benefit	—			—			(6		)	(2		)	—			—			(6		)	(6		)

Net cost (benefit)	$	9		$	8		$	(4	)	$	4		$	8		$	7		$	(4	)	$	(4	)



							Other Postretirement
	Pension Benefits						Benefits
	First Six Months
	2015			2014			2015			2014
	($ in millions)

Service cost	$	20		$	17		$	4		$	4
Interest cost	47			47			10			13
Expected return on plan assets	(83		)	(76		)	(10		)	(9		)
Amortization of net losses	33			27			—			—
Amortization of prior service benefit	—			—			(12		)	(8		)

Net cost (benefit)	$	17		$	15		$	(8	)	$	—

1114

8.9. Fair Value

Fair Value Measurements

The Financial Accounting Standards Board (FASB) Accounting Standards Codification (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 we have 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. Other than those assets and liabilities described below that approximate fair value, there were no assets or liabilities measured at fair value on a recurring basis at ~~March 31,~~June 30, 2015 or December 31, 2014.

Fair Values of Financial Instruments

We have 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 investments accounted for under the equity method, consisted of the following:


	March 31, 2015						December 31, 2014						June 30, 2015						December 31, 2014
	Carrying Amount			Fair Value			Carrying Amount			Fair Value			Carrying Amount			Fair Value			Carrying Amount			Fair Value
	($ in millions)												($ in millions)

Long-term investments	$	163		$	193		$	162		$	193		$	165		$	195		$	162		$	193
Long-term debt, including current maturities	(8,930		)	(11,081		)	(8,926		)	(10,962		)	(9,390		)	(10,867		)	(8,885		)	(10,962		)

Underlying net assets were used to estimate the fair value of investments with the exception of notes receivable, which are based on future discounted cash flows. The fair values of long-term 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.

1215

The following table sets forth the fair value of long-term investment and long-term debt balances disclosed above by valuation technique level, within the fair value hierarchy (there were no level 3 valued assets or liabilities).


	Level 1			Level 2			Total			Level 1			Level 2			Total
	($ in millions)									($ in millions)

March 31, 2015
June 30, 2015
Long-term investments	$	51		$	142		$	193		$	51		$	144		$	195
Long-term debt, including current maturities	(10,870		)	(211		)	(11,081		)	(10,661		)	(206		)	(10,867		)

December 31, 2014
Long-term investments	$	50		$	143		$	193		$	50		$	143		$	193
Long-term debt, including current maturities	(10,754		)	(208		)	(10,962		)	(10,754		)	(208		)	(10,962		)

9.10. Commitments and Contingencies

Lawsuits

We and/or certain subsidiaries are defendants in numerous lawsuits and other claims relating principally to railroad operations. When we conclude 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 our 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 become known.

Two of our customers, DuPont and Sunbelt Chlor ~~Alkai~~Alkali Partnership (Sunbelt), filed rate reasonableness complaints before the Surface Transportation Board (STB) alleging that our tariff rates for transportation of regulated movements are unreasonable. Since June 1, 2009, in the case of DuPont, and April 1, 2011, in the case of Sunbelt, we have been billing and collecting amounts based on the challenged tariff rates. In 2014, the STB resolved both rate reasonableness complaints in our favor. The STB’s findings in both cases remain subject to technical corrections, requests for reconsideration, and appeal. We believe the estimate of any reasonably possible loss will not have a material effect on our financial position, results of operations, or liquidity. With regard to rate cases, we record adjustments to revenues in the periods if and when such adjustments are probable and estimable.

On November 6, 2007, various antitrust class actions filed against us 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. On June 21, 2012, the court certified the case as a class action. The defendant railroads appealed this certification, and the Court of Appeals for the District of Columbia vacated the District Court’s decision and remanded the case for further consideration. We believe the allegations in the complaints are without merit and intend to vigorously defend the cases. We do not believe the outcome of these proceedings will have a material effect on our financial position, results of operations, or liquidity. A lawsuit containing similar allegations against us 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, and most recently extended in August 2013.

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 our personal injury liability and determining the amount to accrue with respect to such claims during the year, we utilize 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

1316

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 our 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, we record a liability when the expected loss for the claim is both probable and estimable.

Employee personal injury claims – The largest component of casualties and other claims expense is employee personal injury costs. The independent actuarial firm engaged by us provides quarterly studies to aid in valuing our employee personal injury liability and estimating personal injury expense. The actuarial firm studies our historical patterns of reserving for claims and subsequent settlements, taking into account relevant outside influences. The actuarial firm uses the results of these analyses to estimate the ultimate amount of liability, which includes amounts for incurred but unasserted claims. We adjust the liability quarterly based upon our assessment and the results of the study. Our 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 our history of claim filings, severity, payments, and other pertinent facts. The liability is dependent upon judgments we make as to the specific case reserves as well as judgments of the actuarial firm in the quarterly 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 our experience into the future as far as can be reasonably determined. We adjust the liability quarterly based upon our 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 – We record a liability for third-party claims including those for highway crossing accidents, trespasser and other injuries, automobile liability, property damage, and lading damage. The actuarial firm assists us with the calculation of potential liability for third-party claims, except lading damage, based upon our experience including the 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 not reported. We adjust the liability quarterly based upon our 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

We are subject to various jurisdictions’ environmental laws and regulations. We 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 we have incurred are reflected as receivables (when collection is probable) in the Consolidated Balance Sheets and are not netted against the associated liability. Environmental engineers regularly participate in ongoing evaluations of all known sites and in determining any necessary adjustments to liability estimates. We have an Environmental Policy Council, composed of senior managers, to oversee and interpret our environmental policy.

Our Consolidated Balance Sheets include liabilities for environmental exposures of ~~$69~~$70 million at ~~March 31,~~June 30, 2015, and $66 million at December 31, 2014 (of which $15 million is classified as a current liability at ~~the end of each period)~~both June 30, 2015 and December 31, 2014). At ~~March 31,~~June 30, 2015, the liability represents our estimates of the probable cleanup, ~~investigation, and~~

1417

investigation, and remediation costs based on available information at ~~145~~144 known locations and projects compared with 146 locations and projects at December 31, 2014. At ~~March 31,~~June 30, 2015, 1516 sites accounted for $43 million of the liability, and no individual site was considered to be material. We anticipate that much of this liability will be paid out over five years; however, some costs will be paid out over a longer period.

At 11 locations, one or more of our subsidiaries in conjunction with a number of other parties have been identified as potentially responsible parties under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 or comparable state statutes that impose joint and several liability for cleanup costs. We calculate our estimated liability for these sites based on facts and legal defenses applicable to each site and not solely on the basis of the potential for joint liability.

With respect to known environmental sites (whether identified by us or by the Environmental Protection Agency (EPA) or comparable state authorities), estimates of our ultimate potential financial exposure for a given site or in the aggregate for all such sites can change over time because of the widely varying costs of currently available cleanup techniques, unpredictable contaminant recovery and reduction rates associated with available cleanup technologies, 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 we transport, particularly those classified as hazardous materials, pose special risks that we work diligently to reduce. In addition, several of our 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 that are latent or undisclosed may exist on these properties, there can be no assurance that we 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 our financial position, results of operations, or liquidity in a particular year or quarter.

Based on our assessment of the facts and circumstances now known, we believe we have recorded the probable and reasonably estimable costs for dealing with those environmental matters of which we are aware. Further, we believe that it is unlikely that any known matters, either individually or in the aggregate, will have a material adverse effect on our financial position, results of operations, or liquidity.

Insurance

We obtain on behalf of ourself and our subsidiaries insurance for potential losses for third-party liability and first-party property damages. We are currently self-insured up to $50 million and above $1.2 billion per occurrence and/or policy year for bodily injury and property damage to third parties and up to $25 million and above $200 million per occurrence and/or policy year for property owned by us or in our care, custody, or control.

Purchase Commitments

At ~~March 31,~~June 30, 2015, we had outstanding purchase commitments totaling approximately ~~$1.2~~$1.0 billion for locomotives, freight cars and containers, ~~locomotives,~~ track material, and track and yard expansion projects in connection with our capital programs as well as long-term service contracts through 2018.

1518

11. New Accounting Pronouncement

In April 2015, the FASB issued Accounting Standards Update (ASU) No. 2015-03, “Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs.” This update requires that debt issuance costs be presented in the balance sheet as a reduction from the related debt liability rather than as an asset, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this update. We early adopted the provisions of this ASU during the second quarter of 2015 and applied it retrospectively. The adoption of ASU 2015-03 resulted in the presentation of $43 million of debt issuance costs as a reduction of “Long-term debt” at June 30, 2015. We retrospectively adjusted the December 31, 2014 consolidated balance sheet and related disclosures to reflect the reclassification of $41 million of debt issuance costs from “Other assets” to “Long-term debt.” There was no other impact on our consolidated financial statements from the adoption of ASU 2015-03.

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Norfolk Southern Corporation:

We have reviewed the accompanying consolidated balance sheet of Norfolk Southern Corporation and subsidiaries as of ~~March 31,~~June 30, 2015, the related consolidated statements of income and comprehensive income for the three-month and six-month periods ended June 30, 2015 and 2014 and the related consolidated statements of ~~income, comprehensive income and~~ cash flows for the ~~three-month~~six-month periods ended ~~March 31,~~June 30, 2015 and 2014. These consolidated financial statements are the responsibility of the Company’s management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making 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), 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 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.

/s/ KPMG LLP

KPMG LLP

Norfolk, Virginia

~~April 29,~~July 27, 2015

1620

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Norfolk Southern Corporation and Subsidiaries

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

OVERVIEW

We are one of the nation’s premier transportation companies. Our Norfolk Southern Railway Company subsidiary operates approximately 20,000 miles of road 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. We operate the most extensive intermodal network in the East and are a major transporter of coal, automotive, and industrial products.

~~Our net~~Net income for the ~~first~~second quarter of 2015 ~~was $310~~declined $129 million, or ~~$1.00~~$0.38 per diluted share, ~~(down $58 million, or $0.17 per diluted share)~~as compared to the record-setting results of second-quarter 2014. Depressed oil prices that significantly reduced fuel surcharge revenues coupled with external constraints in the coal markets, which negatively impacted our coal volumes, drove declines in operating revenues. While operating expenses for the second quarter of 2015 improved as compared to the prior year (driven by lower fuel prices), ~~and~~they did not offset the decline in operating revenues, resulting in an increase in our operating ratio ~~rose 1.2~~of 3.5 percentage points to ~~76.4%~~70.0%. The reduction in earnings was primarily due to a 9% decline in income from railway operations. First-quarter operating results were negatively impacted by continued weakness in coal markets, lower average revenue per unit related to the mix of traffic, and additional costs attributable to harsh weather and service recovery efforts. These factors more than offset the effects of volume increases and lower fuel prices.

~~Our network~~Network fluidity ~~is improving,~~improved in the second quarter, and we expect ~~our metrics (train speed and terminal dwell)~~this trend to ~~approach 2012-2013 performance during~~continue in the second half of the year.

Cash provided by operating activities for the first ~~quarter~~six months of 2015 totaled ~~$605 million,~~$1.5 billion, which along with cash on hand allowed for property additions, share repurchases, ~~property additions,~~ dividends, and debt repayments. In the first ~~quarter~~six months of 2015, we repurchased ~~3.9~~7.4 million shares of Common Stock at a total cost of ~~$415~~$765 million. Since inception of our stock repurchase program in 2006, we have repurchased and retired ~~143.7~~147.2 million shares of Common Stock at a total cost of ~~$8.8~~$9.2 billion. At ~~March 31,~~June 30, 2015, cash and cash equivalents totaled ~~$524~~$889 million.

SUMMARIZED RESULTS OF OPERATIONS

~~First~~Second quarter 2015 net income was ~~$310~~$433 million, down ~~16%~~$129 million, or 23%, compared with the same period last year. The decrease in net income for the quarter reflected lower income from railway operations, down ~~$61~~$205 million, or 9%20%, primarily due to a ~~$122~~$329 million, or 5%11%, decline in railway operating revenues as a result of lower average revenue per unit (driven primarily by ~~the decline in~~reduced fuel surcharge ~~revenue)~~revenues) and ~~lower~~depressed coal volumes. This ~~decline~~decrease was offset in part by lower operating expenses (down ~~$61~~$124 million, or 3%6%) resulting from the drop in oil prices, which significantly reduced fuel expense for the quarter. ~~Higher costs associated with increased intermodal and merchandise volumes and additional resources aimed at improving our service partially offset the reduction in fuel costs.~~ The railway operating ratio (a measure of the amount of operating revenues consumed by operating expenses) rose to ~~76.4%~~70.0%, compared with 66.5% for the ~~first~~second quarter of 2014.

For the first six months of 2015 net income was $743 million, down $187 million, or 20%, compared with ~~75.2% for~~ the ~~first quarter~~same period last year. The decrease was driven by lower railway operating revenues (down $451 million, or 8%), largely a result of ~~2014.~~lower fuel surcharge revenues and coal volumes, offset in part by reduced fuel expense (down $321 million, or 38%), and higher intermodal and general merchandise volumes.

1721

DETAILED RESULTS OF OPERATIONS

Railway Operating Revenues

~~First~~Second quarter railway operating revenues were ~~$2.6~~$2.7 billion in 2015, down ~~$122~~$329 million, or 5%11%, compared with the ~~first~~second quarter of 2014. For the first six months, railway operating revenues were $5.3 billion, down $451 million, or 8%, compared with the same period last year. As shown in the following table, the decline in revenue resulted from lower average revenue per unit (primarily a result of lower fuel ~~surcharges as well as changes~~surcharge revenues) and lower volumes (primarily driven by continued weakness in the ~~mix of traffic) offset in part by higher volumes.~~coal markets).


	First Quarter 2015 vs. 2014			Decrease
	Increase (Decrease)			Second Quarter 2015 vs. 2014			First Six Months 2015 vs. 2014
	($ in millions)			($ in millions)

Volume (units)	$	60		$	(71	)	$	(10	)
Revenue per unit	(182		)	(258		)	(441		)

Total	$	(122	)	$	(329	)	$	(451	)

Over 85% of our revenue base is covered by negotiated fuel surcharges, and revenues associated with these surcharges totaled ~~$163~~$119 million and ~~$295~~$358 million in the second quarters of 2015 and 2014, respectively, and $282 million and $653 million for the first ~~quarters~~six months of 2015 and 2014, respectively. Fuel surcharge revenues are typically tied to either West Texas Intermediate Crude Oil (WTI) or On-Highway Diesel (OHD). Although the revenue base covered by each program is split about evenly, because WTI price levels ~~are~~have been below most of our surcharge trigger points, in the second quarter and first ~~quarter~~six months of 2015, about ~~three-quarters~~85% of fuel surcharge revenues were generated by OHD-based surcharges. Surcharges tied to WTI 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 revenues by $5 million for the second quarter but increased fuel surcharge ~~revenue~~revenues by ~~approximately $24~~$19 million for the first six months of 2015. For 2014, this lag decreased fuel surcharge revenues by $11 million for the second quarter ~~of 2015, but decreased it by approximately $17~~and $28 million for the first ~~quarter of 2014.~~six months. Should the current fuel price environment persist for the remainder of the year, ~~total~~we expect fuel ~~surcharges~~surcharge revenues for the remainder of 2015 ~~could~~to be less than half of the amount ingenerated during the last six months of 2014.

1822

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


	First Quarter										Second Quarter
	Revenues				Units		Revenue per Unit				Revenues				Units		Revenue per Unit
	2015		2014		2015	2014	2015		2014		2015		2014		2015	2014	2015		2014
	($ in millions)				(in thousands)		($ per unit)				($ in millions)				(in thousands)		($ per unit)

Coal	$	455	$	541	277.4	299.7	$	1,642	$	1,805	$	453	$	672	275.7	350.5	$	1,644	$	1,916

General merchandise:
Chemicals	432		443		127.3	116.1	3,390		3,820		454		455		137.3	121.8	3,312		3,730
Metals and construction	310		331		152.5	149.9	2,031		2,207		344		410		182.1	193.6	1,889		2,118
Agriculture/consumer/gov’t	374		361		150.0	147.1	2,495		2,457		379		386		153.7	155.6	2,463		2,479
Automotive	219		227		95.7	92.3	2,291		2,455		254		270		111.2	109.5	2,278		2,469
Paper/clay/forest	185		190		72.5	72.4	2,552		2,620		196		199		77.2	76.0	2,545		2,628

General merchandise	1,520		1,552		598.0	577.8	2,541		2,686		1,627		1,720		661.5	656.5	2,459		2,620

Intermodal	592		596		926.7	885.1	639		673		633		650		999.9	976.1	633		666

Total	$	2,567	$	2,689	1,802.1	1,762.6	1,425		1,525		$	2,713	$	3,042	1,937.1	1,983.1	1,401		1,534



	First Six Months
	Revenues				Units		Revenue per Unit
	2015		2014		2015	2014	2015		2014
	($ in millions)				(in thousands)		($ per unit)

Coal	$	908	$	1,213	553.1	650.2	$	1,643	$	1,865

General merchandise:
Chemicals	886		898		264.6	237.9	3,349		3,774
Metals and construction	654		741		334.6	343.5	1,954		2,157
Agriculture/consumer/gov’t	753		747		303.7	302.7	2,479		2,468
Automotive	473		497		206.9	201.8	2,284		2,462
Paper/clay/forest	381		389		149.7	148.4	2,548		2,624

General merchandise	3,147		3,272		1,259.5	1,234.3	2,498		2,651

Intermodal	1,225		1,246		1,926.6	1,861.2	636		670

Total	$	5,280	$	5,731	3,739.2	3,745.7	1,412		1,530

Coal

Coal revenues decreased ~~$86~~$219 million, or ~~16%~~33%, in the second quarter and decreased $305 million, or 25%, for the first ~~quarter,~~six months compared with the same ~~period~~periods last ~~year, reflecting a 9% decrease in~~year. Both declines reflected lower carload volumes, down 21% and 15%, respectively, as well as lower average revenue per unit, ~~(including~~down 14% and 12%, respectively (largely due to lower fuel ~~surcharges) and a 7% decline in carload volume.~~ surcharge revenues).

Coal tonnage by market was as follows:


	First Quarter		Second Quarter		First Six Months
	2015	2014	2015	2014	2015	2014
	(tons in thousands)		(tons in thousands)

Utility	20,114	21,196	20,189	25,968	40,303	47,164
Export	5,311	6,503	4,066	6,443	9,377	12,946
Domestic metallurgical	3,145	3,186	4,059	4,121	7,204	7,307
Industrial	1,983	1,971	2,192	2,260	4,175	4,231

Total	30,553	32,856	30,506	38,792	61,059	71,648

Utility coal tonnage decreased 5%22% in the second quarter and 15% for the first ~~quarter as~~six months driven by reduced coal burn due to significantly lower natural gas ~~prices and the impact of new environmental regulations reduced coal burn for electrical generation.~~prices. Export coal tonnage declined ~~18%~~37% in the second quarter and 28% for the first ~~quarter of 2015,~~six months, driven by strong competition that U.S. coal suppliers faced due to excess coal supply, depressed coal prices, and an Australian currency advantage.

Coal revenues for the remainder of the year are expected to be lower compared to last year due to ~~lower~~a decrease in volumes and ~~lower~~a decline in average revenue per unit (largely a result of lower fuel surcharge ~~revenue)~~revenues).

General Merchandise

General merchandise revenues decreased ~~$32~~$93 million, or 2%5%, in the ~~first~~second quarter, compared with the same period last year, reflecting a 5%6% decline in average revenue per unit, the result of lower fuel surcharge revenues, offset in part by a 1% rise in volume. For the first six months, general merchandise revenues decreased $125 million, or 4%, reflecting a 6% decrease in average revenue per unit ~~(primarily driven by~~(largely due to lower fuel surcharge ~~revenue)~~revenues), ~~offset in part by~~but a ~~3% rise~~2% increase in volume.

Chemicals volume rose ~~10%~~13% in the second quarter and 11% for the first ~~quarter,~~six months, largely driven by increased shipments of crude oil originated from the Bakken ~~and Canadian~~ oil fields and higher volumes of liquefied petroleum gas.

Metals and construction volume ~~rose 2%~~decreased 6% in the second quarter and 3% for the first ~~quarter,~~six months, reflecting ~~higher~~declines in iron and steel shipments as a result of declining steel production due to global over-supply as well as lower energy prices which reduced demand for materials used in the construction of pipelines for drilling activity. The decreases were offset by increased shipments of aggregates as a result of improved demand in the Southeast in the second quarter and ~~increased~~first six months. Fewer shipments of fractionating sand ~~for~~and ceramic proppant used in natural gas ~~drilling. These increases were offset in part by fewer shipments of iron and steel as lower crude oil prices reduced demand for materials used~~drilling also negatively impacted volumes in the ~~construction of pipelines.~~second quarter.

Agriculture, consumer products, and government volume ~~improved 2%~~decreased 1% in the second quarter and was flat for the first ~~quarter,~~six months, reflecting fewer revenue shipments of empty railcars as part of the conclusion of a hopper re-body program. These declines were offset in part by higher volumes of corn and feed products driven by increased demand from poultry and beef producers. ~~These improvements were partially offset by fewer shipments~~Additionally, lower volumes of ~~soybeans~~fertilizer due to ~~strong~~a plant curtailment, and a reduction in wheat shipments due to increased competition in the global ~~market.~~market, offset in part by increases in ethanol shipments due to greater gasoline consumption, impacted the second quarter.

Automotive volume grew 4%2% in the second quarter and 3% for the first ~~quarter,~~six months, primarily driven by increased production of North American light vehicles.

Paper, clay, and forest products volume ~~was flat~~grew 2% for the second quarter and 1% for the first ~~quarter~~,six months, reflecting higher carloads of pulpboard, pulp, and lumber as demand ~~for housing materials~~ grew, offset in part by lower kaolin, wood chip, and graphic paper volumes as a result of softened demand and customer sourcing changes.

General merchandise revenues for the remainder of the year are expected to decrease compared to last year due to lower average revenue per unit ~~resulting~~(resulting from lower fuel surcharge ~~revenue,~~revenues) which is expected to be offset in part by higher volumes.

Intermodal

Intermodal revenues declined $4$17 million, or 1%3%, in the second quarter and decreased $21 million, or 2%, for the first ~~quarter,~~six months compared with the same ~~period~~periods last ~~year as a 5% decline in average~~year. Both declines reflected decreased revenue per unit ~~the~~of 5% in each period (the result of lower fuel ~~surcharges, was mostly~~surcharge revenues), partially offset by ~~a 5% improvement~~improvements in ~~volume.~~volume, up 2% and 4%, respectively.

Domestic volume ~~improved 3%~~was flat in the second quarter and improved 1% for the first ~~quarter,~~six months. Increases for the first six months were a result of ~~growth in strategic corridors,~~ continued highway conversions and higher demand for rail service from existing customers. International volume increased 8% in both the second quarter and first six months due to new business and increased demand from existing customers.

Intermodal revenues for the remainder of the year are expected to be higher compared to last year due to volume increases, offset in part by lower average revenue per unit (driven by lower fuel surcharge ~~revenue)~~revenues).

Railway Operating Expenses

~~First-quarter~~Second-quarter railway operating expenses were $2$1.9 billion in ~~2015.~~2015, down $124 million, or 6%, compared with the same period last year. For the first six months, expenses were $3.9 billion, down $185 million, or 5%. We estimate severe winter weather and ~~a slower network~~service recovery efforts added approximately ~~$42~~$67 million of operating expenses ~~to our~~in the first ~~quarter 2015 results. For~~six months, including $25 million in the ~~remainder of the year, in~~second quarter. In connection with the ~~recently~~ announced closure of the Roanoke, VA office and subsequent relocation of employees, we ~~expect to incur~~incurred approximately ~~$35~~$5 million in operating expenses ~~beginning~~ in the ~~second quarter,~~first six months and expect to incur an additional $30 million in operating expenses, with most of the costs impacting the third quarter.

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


				Increase (Decrease)
	Operating Expense Variances Increase (Decrease)			Second Quarter			First Six Months
	2015 vs. 2014			2015 vs. 2014			2015 vs. 2014
	($ in millions)			($ in millions)

Fuel	$	(168	)	$	(153	)	$	(321	)
Materials and other				(13		)	12
Purchased services and rents				24			55
Compensation and benefits	43			9			52
Purchased services and rents	31
Materials and other	25
Depreciation	8			9			17
				��
Total	$	(61	)	$	(124	)	$	(185	)

Fuel expense, which includes the cost of locomotive fuel as well as other fuel used in railway operations, decreased ~~$168~~$153 million, or ~~39%~~38%, in the second quarter and $321 million, or 38%, for the first six months, primarily the result of ~~a 41% drop in~~lower locomotive fuel ~~prices.~~prices, down 36% and 39%, respectively.

~~Compensation~~25

Materials and ~~benefits expense increased $43~~other expenses declined $13 million, or 6%5%, in the second quarter, but increased $12 million, or 3%, in the first ~~quarter, reflecting:~~six months as follows:

~~pay rates, up $26 million,~~

~~payroll taxes, up $14 million,~~



	Second Quarter				First Six Months
	2015		2014		2015		2014
	($ in millions)

Materials	$	117	$	124	$	239	$	232
Casualties and other claims	26		42		62		72
Other	92		82		180		165

Total	$	235	$	248	$	481	$	469

Material usage costs, largely associated with locomotives, declined for the second quarter but increased for the first six months. Casualties and other claims expenses include the estimates of costs related to personal injury, property damage, and environmental remediation matters. Costs associated with personal injury and environmental decreased as a result of favorable experience with respect to our personal injury reserves and less unfavorable development for our environmental liabilities. Increased travel costs, primarily for train service employees, and employee ~~levels, including increased overtime, up $14 million,~~

~~a labor agreement signing bonus, $11 million, and~~

~~incentive and stock-based compensation, down $12 million.~~relocation costs for the Roanoke, VA office closure contributed to the increase in other expense.

Purchased services and rents includes the costs of services provided by outside contractors, the net costs of operating joint (or leased) facilities with other railroads and the net cost of equipment rentals. This category of expenses grew ~~$31~~$24 million, or 8%6%, in the second quarter and $55 million, or 7%, for the first ~~quarter,~~six months, reflecting higher intermodal operations, ~~and~~ equipment rents, and joint facilities costs resulting from increased intermodal volumes and ~~slower network velocity.~~service recovery efforts, in addition to higher information technology costs.

The following table shows the components of purchased services and rents expenses:

First Quarter
2015 2014
($ in millions)

Purchased services $ 341
$ 324
Equipment rents 82
68

Total $ 423
$ 392



	Second Quarter				First Six Months
	2015		2014		2015		2014
	($ in millions)

Purchased services	$	363	$	342	$	704	$	666
Equipment rents	75		72		157		140

Total	$	438	$	414	$	861	$	806

~~Materials~~Compensation and ~~other expenses~~benefits expense increased ~~$25~~$9 million, or ~~11%~~1% in the second quarter and $52 million, or 4% for the first six months, reflecting changes in:

pay rates (up $27 million for the quarter and $53 million for the first six months),

payroll taxes (up $13 million for the quarter and $27 million for the first six months),

employee levels, including increased trainees and overtime (up $13 million for the quarter and $27 million for the first six months),

a labor agreement signing bonus in the first quarter ~~as follows:~~ ($11 million), and

First Quarter
2015 2014
($ in millions)

Materials $ 122
$ 108

Casualties and other claims 36
30

Other 88
83

Total $ 246
$ 221

~~Volume growth resulted in increased locomotive maintenance~~incentive and ~~repair costs. Casualties~~stock-based compensation (down $47 million for the quarter and ~~other claims expenses include~~$59 million for the estimates of costs related to personal injury, property damage, and environmental remediation matters. Costs associated with environmental and personal injury rose as a result of more unfavorable development with respect to our environmental liabilities, and lower favorable development for our personal injury reserves. Additionally, increased travel costs, primarily for train service employees, contributed to the increase in other expense.first six months).

Depreciation expense increased $8$9 million, or 3%4%, in the second quarter and $17 million, or 4%, in the first ~~quarter~~six months due to the effects of a larger capital base.

~~Other Income – Net~~

~~Other income –~~26

We are currently reviewing our intermodal traffic that moves using RoadRailer® trailers and considering whether to continue to use them or transition to conventional containers and trailers. Should we decide to phase out the RoadRailer® trailers, the remaining useful lives would be greatly reduced. The current net ~~decreased $5~~book value of these and related assets is approximately $65 million ~~in the first quarter~~net of ~~2015, driven primarily by reduced coal royalties.~~salvage.

Provision for Income Taxes

The ~~first~~second quarter and year-to-date effective income tax ~~rate was 37.4%~~rates were 38.1% and 37.8%, compared with ~~33.6%~~37.4% and 36.0%, respectively, for the same ~~period~~periods last year. The increase for the second quarter reflects higher state taxes and lower net returns from corporate-owned life insurance. The year-to-date effective tax rate ~~this year~~ reflects the absence of a $20 million favorable reduction in deferred tax expense for state tax law ~~changes (which reduced the effective tax rate by three and a half percentage points) in the first quarter of 2014.~~changes.

Fifty-percent bonus depreciation was allowed for federal income taxes in 2014, but has not been extended to 2015. While bonus depreciation does not affect our total provision for income taxes or effective rate, the absence of bonus depreciation will increase current income tax expense and the related cash outflows for the payment of income taxes in subsequent years.

Our consolidated federal income tax returns for 2011 and 2012 are currently being audited by the IRS. We anticipate the IRS will complete its examination in 2015. We do not expect that the resolution of the examination will have a material effect on our financial position, results of operations, or liquidity.

FINANCIAL CONDITION AND LIQUIDITY

Cash provided by operating activities, our principal source of liquidity, was ~~$605 million~~$1.5 billion for the first ~~quarter~~six months of 2015, compared with ~~$588 million~~$1.4 billion for the same period of 2014, primarily reflecting ~~reduced receivable balances and~~ lower tax payments, offset in part by lower operating ~~results and increased purchases of materials and supplies.~~results.

We had working capital of ~~$12~~$210 million at ~~March 31,~~June 30, 2015, compared with $998 million at December 31, 2014, reflecting an increase in the current portion of long-term debt and ~~lower cash and cash equivalent balances resulting from higher share repurchase activity~~a reduction in ~~the first quarter.~~prepaid income taxes. Cash and cash equivalents totaled ~~$524~~$889 million at ~~March 31,~~June 30, 2015, and were invested in accordance with our corporate investment policy as approved by the Finance Committee of our Board of Directors. The portfolio contains securities that are subject to market risk. There are no

limits or restrictions on our access to the assets. We expect cash on hand combined with cash provided by operating activities will be sufficient to meet our ongoing obligations. During the first ~~quarter~~six months of 2015, we committed to purchase approximately ~~$160~~$150 million of freight cars and ~~containers. There~~containers, and we issued $500 million of 4.45% senior notes due 2045. Other than these items, there have been no other material changes to the information on our future obligations contained in our Form 10-K for the year ended December 31, 2014.

Cash used in investing activities was ~~$378~~$852 million for the first ~~quarter~~six months of 2015, compared with ~~$254~~$647 million in the same period last year, primarily reflecting the absence of short-term investment ~~maturities.~~maturities, and higher property additions. Property additions for 2015 are expected to total $2.3 billion. Additionally, we expect post-2015 PTC-related property additions to total over $800 million, based on increased scope of work and updated cost estimates.

Cash used in financing activities was ~~$676~~$705 million in the first ~~quarter~~six months of 2015, compared with ~~$255~~$566 million in the same period last year driven primarily by higher share repurchase ~~activity.~~activity, offset in part by proceeds received from the debt issuance during the second quarter, and lower debt repayments. We repurchased ~~3.9~~7.4 million shares of Common Stock, totaling ~~$415~~$765 million, in the first ~~quarter~~six months of 2015, compared to ~~0.5~~1.0 million shares, totaling ~~$50~~$100 million, in the same period last year. The timing and volume of future share repurchases will be guided by our assessment of market conditions and other pertinent factors. Any near-term purchases under the program are expected to be made with internally generated cash, cash on hand, or proceeds from borrowings.

Our total debt-to-total capitalization ratio was ~~42.3%~~43.7% at ~~March 31,~~June 30, 2015, and ~~42.1%~~42.0% at December 31, ~~2014.~~2014 (Note 11).

We have authority from our Board of Directors to issue an additional ~~$800 million~~$1.2 billion of debt or equity securities through public or private sale. We have on file with the Securities and Exchange Commission a Form S-3 automatic shelf registration statement for well-known seasoned issuers under which securities may be issued pursuant to this authority.

We also have in place and available a $750 million, five-year credit agreement expiring in 2016, which provides for borrowings at prevailing rates and includes covenants. We had no amounts outstanding under this facility at ~~March 31,~~June 30, 2015, and are in compliance with all of its covenants. ~~In October 2014, we renewed our~~We have a $350 million accounts receivable securitization program with a two-year term ~~to run~~that runs until October 2016. There was $100 million and $200 million outstanding under this program at ~~March 31,~~June 30, 2015 and December 31, 2014, respectively. Other than this, we have no other floating-rate debt instruments outstanding subject to market risk.

APPLICATION OF CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements in accordance with U.S. Generally Accepted Accounting Principles (GAAP) requires us 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 us to make changes to these estimates and assumptions. Accordingly, we regularly review these estimates and assumptions based on historical experience, changes in the business environment, and other factors we believe to be reasonable under the circumstances. We regularly discuss the development, selection, and disclosures concerning critical accounting estimates with the Audit Committee of our Board of Directors. There have been no significant changes to the application of critical accounting estimates disclosure contained in our Form 10-K at December 31, 2014.

OTHER MATTERS

Labor Agreements

More than 80% of our 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. We largely bargain nationally in concert with other major railroads, represented by the National Carriers Conference Committee (NCCC). Moratorium provisions in the labor agreements govern when the railroads and the unions may propose changes to the agreements. The moratorium provisions of the current agreements have now expired, formal

proposals to change the agreements have been made, and negotiations with the various labor unions have begun. Separately, in January 2015 we reached an agreement covering wages and work rules through 2019 with the Brotherhood of Locomotive Engineers and Trainmen (BLET), which represents approximately 4,600 of our locomotive engineers. Any changes to BLET benefits will be bargained nationally through the NCCC.

New Accounting ~~Pronouncement~~Pronouncements

In May 2014, the FASB issued ~~Accounting Standards Update (ASU)~~ASU No. 2014-09, “Revenue from Contracts with Customers.” This update will replace most existing revenue recognition guidance in GAAP and requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. In ~~April~~July 2015, the FASB ~~voted for~~approved a one-year deferral of the effective date of the new ~~standard. If approved, the new~~ standard, ~~will become~~making it effective for our annual and interim reporting periods beginning January 1, 2018. Early application ~~would be~~is permitted, but not before the original effective date for public business entities (annual reporting periods beginning after December 15, 2016). The ASU permits the use of either the retrospective or cumulative effect transition method. We are evaluating the effect that ASU 2014-09 will have on our consolidated financial statements and related disclosures.

Inflation

In preparing financial statements, GAAP requires the use of historical cost that disregards the effects of inflation on the replacement cost of property. As a capital-intensive company, most of our capital is invested in long-lived 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-looking statements that may be identified by the use of words like “believe,” “expect,” “anticipate,” “estimate,” “plan,” “consider,” “project,” and similar references to the future. Forward-looking statements reflect our 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 we have little or no control, including: transportation of hazardous materials as a common carrier by rail; acts of terrorism or war; general economic conditions including, but not limited to, fluctuation and competition within the industries of our customers; competition and consolidation within the transportation industry; the operations of carriers with which we interchange; disruptions to our technology infrastructure, including computer systems; labor difficulties, including strikes and work stoppages; commercial, operating, environmental, and climate change legislative and regulatory developments; results of litigation; natural events such as severe weather, hurricanes, and floods; unpredictable demand for rail services; fluctuation in supplies and prices of key materials, in particular diesel fuel; volatility in energy prices; and changes in securities and capital markets. For additional discussion of significant risk factors applicable to our business, see Part II, 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. We undertake no obligation to update or revise forward-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 “Financial Condition and Liquidity.”

2429

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer, with the assistance of management, evaluated the effectiveness of our 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 (Exchange Act)) at ~~March 31,~~June 30, 2015. Based on such evaluation, our officers have concluded that, at ~~March 31,~~June 30, 2015, our disclosure controls and procedures are effective in alerting them on a timely basis to material information required to be included in our periodic filings under the Exchange Act.

Changes in Internal Control Over Financial Reporting

During the ~~first~~second quarter of 2015, we have not identified any changes in internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

2530

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

In 2012, we received a Notice of Violation (NOV) issued by the Tennessee Department of Environmental Conservation concerning soil runoff in connection with construction of the Memphis Regional Intermodal Facility in Rossville, Tennessee. Although we will contest liability and the imposition of any penalties - which could exceed $100,000 - this matter is described here consistent with SEC rules and requirements concerning governmental proceedings with respect to environmental laws and regulations. We do not believe that the outcome of this proceeding will have a material effect on our financial position, results of operations, or liquidity.

Item 1A. Risk Factors.

The risk factors included in our 2014 Form 10-K remain unchanged and are incorporated herein by reference.

2631

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

(a) Total
Number
of Shares
(or Units)

(b) Average
Price Paid
per Share

(c) Total
Number of
Shares
(or Units)
Purchased
as Part of
Publicly
Announced
Plans or

(d) Maximum
Number (or
Approximate
Dollar Value)
of Shares (or Units)
that may yet be
purchased under
the Plans or

Period
Purchased⁽¹⁾
(or Unit)
Programs ⁽²⁾

Programs ⁽²⁾

January 1-31, 2015 1,160,291
103.06
1,160,291
34,043,546

February 1-28, 2015 1,151,558
108.94
1,149,496
32,894,050

March 1-31, 2015 1,586,688
107.89
1,581,933
31,312,117

Total 3,898,537

3,891,720



	(a) Total Number of Shares (or Units)	(b) Average Price Paid per Share	(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or	(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that may yet be purchased under the Plans or
Period	Purchased⁽¹⁾	(or Unit)	Programs ⁽²⁾	Programs ⁽²⁾

April 1-30, 2015	1,600,467	102.29	1,600,467	29,711,650
May 1-31, 2015	1,163,324	98.44	1,163,324	28,548,326
June 1-30, 2015	789,083	91.05	788,000	27,760,326

Total	3,552,874		3,551,791


⁽¹⁾	Of this amount, ~~6,817~~1,083 represent shares tendered by employees in connection with the exercise of options under the stockholder-approved Long-Term Incentive Plan.


⁽²⁾	Our 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, 2017.

Item 6. Exhibits.

See Exhibit Index beginning on page 2934 for a description of the exhibits filed as part of this report.

2732

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		NORFOLK SOUTHERN CORPORATION Registrant



Date:	~~April 29,~~July 27, 2015	/s/ Thomas E. Hurlbut Thomas E. Hurlbut Vice President and Controller (Principal Accounting Officer) (Signature)



Date:	~~April 29,~~July 27, 2015	/s/ Denise W. Hutson Denise W. Hutson Corporate Secretary (Signature)

2833

EXHIBIT INDEX



10-A	The Norfolk Southern Corporation Executive Management Incentive Plan, effective May 14, 2015, is incorporated by reference herein from Exhibit 10.1 to Norfolk Southern Corporation's Form 8-K filed on May 19, 2015.

10-B*	The Norfolk Southern Corporation Long-Term Incentive Plan, effective May 14, 2015.

15*	Letter regarding unaudited interim financial information.

31-A*	Rule 13a-14(a)/15d-014(a) CEO Certifications.

31-B*	Rule 13a-14(a)/15d-014(a) CFO Certifications.

32*	Section 1350 Certifications.

101*	The following financial information from Norfolk Southern Corporation’s Quarterly Report on Form 10-Q for the ~~first~~second quarter of 2015, formatted in Extensible Business Reporting Language (XBRL) includes (i) the Consolidated Statements of Income for the second quarters and first ~~quarters~~six months of 2015 and 2014; (ii) the Consolidated Statements of Comprehensive Income for the second quarters and first ~~quarters~~six months of 2015 and 2014; (iii) the Consolidated Balance Sheets at ~~March 31,~~June 30, 2015, and December 31, 2014; (iv) the Consolidated Statements of Cash Flows for the first ~~quarters~~six months of 2015 and 2014; and (v) the Notes to Consolidated Financial Statements.

* Filed herewith.

2934