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 endedJUNE 30, 2010

OR

[   ]            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)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.   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, 2010Virginia
		OR
[  ]		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

TABLE OF CONTENTS

NORFOLK SOUTHERN CORPORATION AND SUBSIDIARIES (NS)

PART I.   FINANCIAL INFORMATION

Item 1.   Financial Statements

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Income

(Unaudited)

See accompanying notes to consolidated financial statements.

Norfolk Southern Corporation and Subsidiaries

Consolidated Balance Sheets

(Unaudited)

See accompanying notes to consolidated financial statements.

Norfolk Southern Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

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 financial statements contain all adjustments (consisting of normal recurring accruals) necessary to present fairly Norfolk Southern Corporation (Norfolk Southern) and subsidiaries’subsidiaries' (collectively, NS) financial condition as of March 31,June 30, 2010, and December 31, 2009, and its results of operations for the three and six months ended June 30, 2010 and 2009, and its cash flows for the threesix months ended March 31,June 30, 2010 and 2009, 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’NS' latest Annual Report on Form 10‑K.10-K.

1.   Stock-BasedStock-based Compensation

In the first quarter of 2010, a committee of non-employee directors of Norfolk Southern’sSouthern'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 $40$11 million during the firstsecond quarter of 2010, and $15compared with a benefit of less than $1 million during the same period of 2009.   For the first six months of 2010 and 2009, stock-based compensation expense was $51 million and $15 million, respectively.   The total tax effectseffect recognized in income in relation to stock-based compensation were net benefitswas a benefit of $13$3 million and $3an expense of $1 million for the quarters ended March 31,June 30, 2010 and 2009, respectively, and benefits of $16 million and $2 million for the first six months of 2010 and 2009, respectively.

Stock Options

In the first quarter of 2010, 824,900 options were granted under the LTIP and 259,800 options were granted under the TSOP.   In each case, the grant price was $47.76, which was the greater of the average fair market value of Norfolk Southern common stock (Common Stock) or the closing price of the Common Stock on the effective date of the grant, and the options have a term of ten years.   The options granted under the LTIP and TSOP in 2010 may not be exercised prior to the fourth and third anniversaries of the date of grant, respectively.   Holders of the options granted under the LTIP who remain actively employed receive cash dividend equivalent payments for four years 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 in 2010 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.   A dividend yield of zero was used for LTIP options during the four-year period in which dividend equivalent payments are made.   A dividend yield of 2.89% was used for LTIP options for periods where no dividend equivalent payments are made as well as for TSOP options which do not receive dividend equivalents.   The assumptions for the 2010 LTIP and TSOP grants are shown in the following table:

ForDuring the first three monthssecond quarter of 2010, options relating to 592,110565,786 shares were exercised, yielding $12$14 million ofin cash proceeds and $7 million of tax benefitbenefits recognized as additional paid-in capital.   During the second quarter of 2009, options relating to 556,942 shares were exercised, yielding $17 million in cash proceeds and $1 million of tax benefits recognized as additional paid-in capital.

For the first six months of 2010, options relating to 1,157,896 shares were exercised, yielding $26 million of cash proceeds and $14 million of tax benefits recognized as additional paid-in capital.   For the first threesix months of 2009, options relating to 283,961840,903 shares were exercised, yielding $7$24 million of cash proceeds and $2$3 million of tax benefit.benefits recognized as additional paid-in capital.

Restricted Stock Units and Restricted Shares

There were 168,250 restricted stock units granted in 2010, with an average grant-date fair value of $47.76 and a five-year restriction period.   The restricted stock units granted in 2010 will be settled through the issuance of shares of Common Stock.   There were no restricted shares granted in 2010.

During the second quarter of 2010, there were no restricted stock units or restricted shares earned and paid out.   For the second quarter of 2009, 29,782 restricted stock units were earned and paid out in cash with a weighted-average fair value of $33.89.   Also earned and distributed were 44,673 restricted shares with a weighted-average grant-date fair value of $34.10.   The total related tax benefit recognized as additional paid-in capital was less than $1 million during the second quarter of 2009.

During the first quartersix months of 2010, 286,709 restricted stock units were earned and paid out in cash with a weighted average fair value of $48.88.   Also earned and distributed were 433,236 restricted shares with a weighted-average grant-date fair value of $34.10.   The total related tax benefit recognized as additional paid-in capital was $2 million infor the first quartersix months of 2010.

During the first quartersix months of 2009, 318,950348,732 restricted stock units were earned and paid out in cash with a weighted averageweighted-average fair value of $36.50.$36.28.   Also earned and distributed were 318,950363,623 restricted shares with a weighted-average grant-date fair value of $49.61.$47.70.   The total related tax expense recognized as a reduction to additional paid-in capital was $1 million infor the first quartersix months of 2009.

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 2010, there were 824,900 PSUs granted with a grant-date fair value of $47.76.   The PSUs granted in 2010 and 2009 will be paid in the form of shares;shares of Common Stock; however, one-half of the 2008 PSU grants earned will be paid in the form of shares of Common Stock, with the other half to be paid in cash.

During the first quartersix months of 2010, 851,893 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 $49.56 per unit and a fair value at payout of $47.76 per unit.   The total related tax expense recognized as a reduction to additional paid-in capital was less than $1 million for the first quartersix months of 2010.

DuringFor the first quartersix months of 2009, 983,965 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 $49.43 per unit and a fair value at payout of $38.71 per unit.   The total related tax benefitexpense recognized inas a reduction to additional paid-in capital was $2 million infor the first quartersix months of 2009.

2.   Income Taxes

During the first quarter of 2010, the Patient Protection and Affordable Care Act, and the Health Care and Education Reconciliation Act of 2010 were signed into law.   Provisions of the Acts eliminate, after 2012, the tax deduction available for reimbursed prescription drug expenses under the Medicare Part D retiree drug subsidy program.  As required by ASCthe Financial Accounting Standards Board Accounting Standards Codification (ASC) 740, “Income"Income Taxes,”" NS recorded a $27 million charge to deferred tax expense.

There have been no material changes to the balance of unrecognized tax benefits reported at December 31, 2009.

3.   Earnings Per Share

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

As required under the provisions of ASC 260-10, “Earnings"Earnings Per Share,”" income available to common stockholders for the three months ended March 31, 2010 and 2009 reflects a $2 million reductionreductions from net income for the effect of dividend equivalent payments made to holders of stock options.

As required under the provisions of ASC 260-10, diluted earnings per share for the three and six months ended March 31,June 30, 2010 and 2009, waswere calculated under the more dilutive two-class method (as compared to the treasury stock method) and accordingly, income available to common stockholders for bothall periods reflects a $2 million reductionreflect reductions from net income for dividend equivalent payments.   The diluted calculations exclude options having exercise prices exceeding the average market price of Common Stock as follows:   zero in 2010, and in 2009, 5.6 million in 2009.for both periods.

4.   Stockholders’Stockholders' Equity

Common stock is reported net of shares held by consolidated subsidiaries of Norfolk Southern, which at March 31,June 30, 2010, and December 31, 2009, amounted to 20,414,38820,388,515 and 20,443,337 shares, respectively, with a cost of $19 million foras of both periods.dates.

5 ..5.   Stock Repurchase Program

In March 2007, NS’NS' Board of Directors amended NS’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.   On July 27, 2010, NS' Board of Directors authorized the repurchase of up to an additional 50 million shares of Common Stock through December 31, 2014.   The timing and volume of purchases is guided by management’smanagement's assessment of market conditions and other pertinent facts.   Any near-term purchases under the program are expected to be made with internally generated cash or proceeds from borrowings.cash.   NS repurchased and retired 2.0 million shares in the first six months of 2010, at a cost of $114 million.   There were no shares repurchased under this program in the first quartersix months of 2010 and 2009.   Since inception of this program, in 2006, NS has repurchased and retired 64.766.7 million shares of Common Stock at a total cost of $3.3$3.4 billion.

6.   Investments

Short-Term Investments

As of March 31, 2010 and December 31, 2009, with average maturities is presented below:

Investment in Conrail, Inc.

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’NS' investment in Conrail was $930$937 million at March 31,June 30, 2010, and $924 million at December 31, 2009.

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"Purchased services and rents”rents" and “Fuel”"Fuel" include expenses for the use of the Shared Assets Areas totaling $29 million in the first quartersecond quarters of 2010 and $312009, and $58 million inand $60 million for the first quartersix months of 2009.   NS’2010 and 2009, respectively.   NS' equity in the earnings of Conrail, net of amortization, included in “Other"Other income – net”- net" was $6$7 million and $9$8 million in the firstsecond quarters of 2010 and 2009, respectively, and $13 million and $17 million for the first six months of 2010 and 2009, respectively.

“"Accounts payable”payable" includes $124$116 million at March 31,June 30, 2010, and $104 million at December 31, 2009, due to Conrail for the operation of the Shared Assets Areas.   In addition, “Other liabilities”"Other liabilities" includes $133 million at both March 31,June 30, 2010, and December 31, 2009, for long-term advances from Conrail, maturing 2035, that bear interest at an average rate of 4.4%.

Investment in Pan Am Southern LLC

During the second quarter of 2009, NS and Pan Am Railways, Inc. (Pan Am) formed a joint venture, Pan Am Southern LLC (PAS), a railroad company in which each has a 50% equity interest.   As of March 31,June 30, 2010, NS had contributed cash and other property with a combined value of approximately $85$106 million and has committed to contribute an additional $55$34 million in cash over the next two years.   A significant portion of NS’NS' contributions has and will continue to be used for capital improvements to the PAS Lines and the related construction of new intermodal and automotive terminals.

7.   Debt

In the first quartersix months of 2010, NS repaid $100 million under its accounts receivable securitization facility.   At March 31,June 30, 2010, and December 31, 2009, the amounts outstanding under the facility were $100 million (at an average variable interest rate of 1.89%2.04%) and $200 million (at an average variable interest rate of 2.22%), respectively.

NS has authority from its Board of Directors to issue an additional $500 million of debt or equity securities through public or private sale.

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’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

9.   Comprehensive Income

NS’ total comprehensive income was as follows:

“"Other comprehensive income" in 2010 and 2009 reflects primarily, net of tax, the amortization of the actuarial net losses and prior service costs (benefits) for the pension and other postretirement benefit plans.

10.   Fair Value

Fair Value Measurements

ASC 820-10, “Fair"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:  

The asset’sasset's or liability’sliability'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.   At March 31,June 30, 2010, and December 31, 2009, for assets measured at fair value on a recurring basis, there were $225$205 million and $90 million of available-for-sale securities as valued under level 2 of the fair value hierarchy, respectively.   There were no such assets valued under level 1 or level 3 valuation techniques.

Fair Values of Financial Instruments

In accordance with ASC 825, “Financial"Financial Instruments,”" NS has evaluated the fair values of financial instruments and methods used to determine those fair values.   The fair values of “Cash"Cash and cash equivalents,” “Short-term" "Short-term investments,” “Accounts" "Accounts receivable,” “Accounts" "Accounts payable,”" and “Short-term debt”"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 derivatives and investments accounted for under the equity method, consisted of the following at March 31, 2010, and December 31, 2009:following:

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 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.

Carrying amounts of available-for-sale securities reflect immaterial unrealized holding losses of less than $1 million on March 31,June 30, 2010, and December 31, 2009.   Sales of “available-for-sale”"available-for-sale" securities were $20$40 million and zeroimmaterial for the threesix months ended March 31,June 30, 2010 and 2009, respectively.

11.   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’smanagement'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’NS' management utilizes studies prepared by an independent consulting actuarial firm.   Job-related accidental injury and occupational claims are subject to the Federal Employers’Employers' Liability Act (FELA), which is applicable only to railroads.   FELA’sFELA's fault-based system produces results that are unpredictable and inconsistent as compared with a no-fault workers’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’smanagement's 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, NS records a liability when the expected loss for the claim is both probable and estimable.

The Consolidated Balance Sheets reflect long-term receivables for estimated recoveries from NS’NS' insurance carriers for claims associated with the January 6, 2005, derailment in Graniteville, SC.   NS is currently engaged in arbitration with one of its insurance carriers that failed to respond to an insurance claim submitted by NS.   NS believes these expenses are covered by the insurance policy and that recovery of the contested portion ($43 million) of the recorded recoveries is probable.   During the first quarter of 2010, NS settled an arbitration claim with another insurance carrier with no adverse effect on NS’NS' financial position, results of operations, or liquidity.

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’NS' historical patterns of reserving for claims and subsequent settlements, taking 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’smanagement's assessment and the results of the study.   Recent actuarial studies have reflected favorable claims development and accordingly, those changes in estimates have reduced the firstsecond quarter costliability related to personal injuries to $16casualty claims by $8 million in 2010 from $20and $19 million in 2009.2009, and by $17 million and $27 million for the first six months of 2010 and 2009, respectively.   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 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 NS’NS' history of claim filings, severity, payments, and other pertinent facts.   The liability is dependent upon management’smanagement'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’sfirm'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’NS' experience into the future as far as can be reasonably determined.   NS adjusts its liability quarterly based upon management’smanagement'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’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’smanagement'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’jurisdictions' environmental laws and regulations.   It is NS’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’

NS' Consolidated Balance Sheets include liabilities for environmental exposures in the amount of $37$36 million at March 31,June 30, 2010, and $32 million at December 31, 2009 (of which $12 million is classified as a current liability at the end of each period).   At March 31,June 30, 2010, the liability represents NS’NS' estimate of the probable cleanup and remediation costs based on available information at 144148 known locations.   As of that date, 1211 sites accounted for $19$18 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 3031 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’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’sparticipant's share of any estimated loss (and that participant’sparticipant'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’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 NS’NS' financial position, results of operations, or liquidity in a particular year or quarter.

On April 24, 2008, the United States Department of Justice (DOJ) brought 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 January 6, 2005, derailment in Graniteville, SC, including claims for civil penalties as well as injunctive relief.   Although NS’ motion to dismiss for failure to allege sufficient facts was granted, DOJ was given leave to, and did, amend its complaint.   On January 22, 2010, NS reached an agreement with the DOJ on a Consent Decree and on March 31, 2010, the Consent Decree was published with a 30-day public comment period.   The Consent Decree has been approved by the District Court and the claims brought by the United States have been resolved.   Under the Consent Decree, NS does not believe thatpaid $4 million in civil fines, agreed to undertake training of key NS personnel in incident command, and agreed to the resolutionplanting of these claims will have a material adverse effect on its financial position, results of operations, or liquidity.vegetation and fish stocking in the Horse Creek Watershed.

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 environmental matters, either individually or in the aggregate, will have a material adverse effect on NS’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’NS' care, custody or control.

Purchase Commitments

At March 31,June 30, 2010, NS had outstanding purchase commitments of approximately $229$202 million primarily for long-term service contracts through 2019, as well as freight cars, track material, RoadRailer® units, and RoadRailer® trailersfreight cars in connection with its capital programs through 2012.

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, 2010, the related consolidated statements of income for the three‑month and six‑month periods ended June 30, 2010 and 2009 and the related consolidated statements of income and cash flows for the three‑six‑month periods ended March 31,June 30, 2010 and 2009. These consolidated financial statements are the responsibility of the Company’sCompany'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.

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, 2009, and the related consolidated statements of income, changes in stockholders’stockholders' equity and cash flows for the year then ended (not presented herein); and in our report dated February 17, 2010, we expressed an unqualified opinion on those consolidated financial statements.   In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2009, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived ..derived.

/s/KPMG LLP

KPMG LLP
Norfolk,Virginia
AprilJuly 30, 2010

Item 2 ..   Management’s2.   Management's Discussion and Analysis of Financial Condition and Results of Operations

Norfolk Southern Corporation and Subsidiaries

Management’sManagement's Discussion and Analysis of

Financial Condition and Results of Operations

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

OVERVIEW

AmidReflecting an improved economic landscape, NS’ firstimproving economy, NS' second quarter 2010 net income was up 45%, compared with59% higher than the same period lastprior year as higherdue to increased income from railway operations more than offset increased income taxes that included a deferred tax charge due to the recent enactment of health care legislation.operations.   The railway operating ratio (a measure of the amount of operating revenues consumed by operating expenses) improved to 75.2%69.8%, compared with 80.3%74.8% for the firstsecond quarter of 2009.

Cash provided by operating activities for the first quartersix months of 2010 was $758 million,$1.4 billion, which allowed for capital expenditures, investment purchases, debt maturities, dividends, and dividends.share repurchases.   In the second quarter of 2010, 2.0 million shares of Norfolk Southern Corporation common stock (Common Stock) were repurchased at a total cost of $114 million.   Since inception of the stock repurchase program in 2006, NS has repurchased and retired 66.7 million shares of Common Stock at a total cost of $3.4 billion.   At March 31,June 30, 2010, cash, cash equivalents, and short-term investment balancesinvestments totaled $1.4$1.1 billion.

SUMMARIZED RESULTS OF OPERATIONS

FirstSecond quarter 2010 net income was $257$392 million, up $80$145 million, or 45%59%, compared with the same period last year.   The increase primarily resulted from a $172$265 million increase in income from railway operations that reflected a $295$573 million, or 15%31%, improvement in railway operating revenues, partially offset in part by a $123$308 million, or 8%22%, increase in railway operating expenses as well as highera $99 million, or 69%, rise in income taxes.

For the first six months of 2010, net income was $649 million, up $225 million, or 53%, compared with the same period last year.   Income from railway operations increased $437 million, as an $868 million improvement in railway operating revenues was partially offset by a $431 million rise in railway operating expenses and a $192 million increase in income taxes.

Oil prices affect NS’NS' results of operations in a variety of ways and can have an overall favorable or unfavorable impact in any particular period.   In addition to the impact of oil prices on general economic conditions, traffic volume, and supplier costs, oil prices directly affect NS’NS' revenues through market-based fuel surcharges and contract escalators (see “Railway"Railway Operating Revenues”Revenues") and also affect fuel costs (see “Railway"Railway Operating Expenses”Expenses").   For the second quarter and first quartersix months of 2010, excluding the impacteffect of increased consumption, the increase in fuel expensesurcharge revenue was moregreater than the increase in fuel surcharge revenue.expense.   Future changes in oil prices may cause volatility in operating results that could be material to a particular period.

DETAILED RESULTS OF OPERATIONS

Railway Operating Revenues

First-quarterSecond quarter 2010 railway operating revenues were $2.2$2.4 billion, in 2010, up $295$573 million, or 15%31%, compared with the firstsecond quarter of 2009.   For the first six months of 2010, railway operating revenues were $4.7 billion, up $868 million, or 23%, compared with the same period last year.   As shown in the following table, the increases were the result of higher traffic volumevolumes and higherimproved average revenue per unit includingwhich was driven by higher fuel surcharges that were up $65 million (and whichand rate increases.   Fuel surcharges amounted to $159$199 million in the second quarter (up $137 million) and $358 million for the first six months (up $202 million).

Many of Norfolk Southern’sSouthern's negotiated fuel surcharges for coal and general merchandise traffic are based on the monthly average price of West Texas Intermediate Crude Oilcrude oil (WTI Average Price).   These surcharges are reset the first day of each calendar month based on the WTI Average Price for the second preceding calendar month.   This two-monthtwo month lag in computing WTI Average Price coupled with the change in fuel prices increased fuel surcharge revenue by approximately $12 million for the quarter and did not have a material impact on fuel surcharge revenue infor the first quarter.six months.

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