An Overview of 1999:
Expanding the System

The big story for Norfolk Southern in 1999 was growth.

Two years of planning and regulatory review for the most comprehensive restructuring of the eastern transportation network in history culminated on June 1. That's the day NS began operating its new Northern Region, restoring competition to the Northeast for the first time in more than two decades.

Overnight, NS increased by nearly 50% both the size of its rail system - to approximately 21,800 miles of road - and its number of employees - to some 35,600 people.

NS now reaches customers in 22 states. The new NS serves virtually the entire eastern United States, with interchange partners offering connections to the West Coast.

The assets and reach of the new system make it second to none in routes and service opportunities. NS has the best double-stack routes in the East. It offers greater geographic reach to New England and the West and South. Expanded steel and automotive markets make NS the rail industry leader in those commodity groups.

For the first time, NS offers customers single-system access to the major East Coast ports of Baltimore, Philadelphia and New York. NS now is a competitive presence in all major ports and markets east of the Mississippi River, linking customers to the world's economy.

The larger NS connects with some 220 short-line and regional railroad service partners that feed traffic for movement across the NS system.

NS also offers seven new, expanded service routes linking the Northeast, Midwest and Southeast. The larger transportation network gives NS the opportunity to serve more customer facilities than ever before.

With such greater market opportunity, the NS focus remains constant: to operate safely, achieve greater customer satisfaction and offer more consistent and reliable service.

Safety Remains on Top

Cited for its industry-leading employee safety performance for 10 consecutive years, NS again posted the safest record for 1999, according to preliminary figures as of Feb. 10, 2000.

Employee commitment to safety prevailed at NS throughout 1999.

In May, NS took top honors in the E.H. Harriman Memorial Safety Awards for having the safest employees among major railroads in 1998 - 1.06 reportable injuries for every 200,000 employee-hours worked. This was the tenth consecutive year, an unprecedented accomplishment, that NS employees earned this distinction.

The rail industry's top individual safety award, the Harold F. Hammond Award, was presented to NS employee Doug Wylie, a locomotive engineer from Fort Wayne, Ind.

Executing the Transition

Expanding the NS system involved dividing the routes and assets of Conrail between two rail competitors, NS and CSXT. Splitting a functioning rail network between two large transportation systems had never before been attempted.

In the early stages of the transition, NS experienced service and operational issues that affected customers in all commodity groups.

Assisted by other railroads and with the cooperation of its customers, NS responded aggressively on many fronts to address those issues. By year end, operations had shown measurable improvement, and NS was serving customers better and was ready to grow its transportation business.

Systems Enhance Service

Improved data quality translates into more efficient railroad operations that enhance customer service.

By December, NS finished an accelerated rollout of its Thoroughbred Yard Enterprise System (TYES) in all transportation field locations in the Northern Region. TYES is a centralized yard inventory system that provides accurate, timely reports on car and train movements. From the beginning, it was designed to be the most integrated application ever developed by NS.

Originally scheduled for a 30-week phase-in extending to February 2000, installation of TYES on the Northern Region was accomplished in 18 weeks. This helped to reduce transition-related car-tracking problems.

By the end of December, some 60% of the NS rail system was equipped with TYES. Installation over the entire network, which also includes the Eastern and Western regions, is scheduled to be completed in 2000.

NS also accelerated implementation of its data management system for intermodal operations. The Strategic Intermodal Management System was installed at 13 intermodal terminals in about two months, instead of four to six months as originally planned.

E-commerce Initiatives

The Internet presents many new opportunities for railroads and their customers.

NS has established a cross-functional team of senior people in Transportation, Marketing, Finance and Information Technology to implement its corporate electronic commerce strategy.

NS, which long has practiced electronic transfer of information, now is engaged in Internet-based applications. Key opportunities for further Internet-based e-commerce development in 2000 lie in enhanced customer service, improved efficiency and cost reduction.

Internet applications being developed include the cars-due reports. These will enable NS to provide timely, large-scale, low-cost access to traffic information and support data such as waybills and customer profiles.

Web-enabled bills of lading and car orders also are being developed.

In an innovative e-commerce undertaking, NS is testing an application designed specifically for Internet deployment. The Coal Transportation Management System will facilitate all aspects of the coal business - from initiating a shipment, to scheduling, tracing and capturing vital information.

Reaching a Milestone at Pier 6

NS loaded the billionth ton of coal at its Lamberts Point Pier 6 transload facility in Norfolk, Va., on Sept. 4, 1999. Lamberts Point, the largest coal transload terminal in the Northern Hemisphere, is the only facility of its kind to reach this milestone.

Coal moving through Lamberts Point originates primarily in Virginia, West Virginia and Kentucky and is exported to 22 countries.

2000 and Beyond

NS preparations for Jan. 1, 2000, began in October 1995, with 100 people assigned to the task of ensuring a smooth transition to a new century of service.

With the commitment of that initial group and many others, including the NS people who monitored key systems during the New Year holiday, NS experienced no Y2K-related problems in its operations.

The Y2K project worked for important business partners of NS as well. Amtrak, which operates passenger service over certain NS routes, commended NS for its coordinated Y2K planning and noted that Amtrak trains were operated safely over NS during the transition.