Baird Industrial Conference November 9, 2011 James A. Squires - - PowerPoint PPT Presentation

Baird Industrial Conference

James A. Squires Executive Vice President Finance and Chief Financial Officer

November 9, 2011

Norfolk Southern System

Norfolk Southern Update

• Recent Results
• 3rd Qtr Financial Highlights
• 3rd Qtr Revenues
• Nine Months Summary
• Current Status
• 4th Qtr-to-date Volumes
• 4th Qtr-to-date Service Performance
• Business Outlook
• Traffic Volumes
• Service Performance
• Corridors and Terminals
• Shareholder Returns

Third Quarter Financial Highlights

($ in millions, except per share)

3Q11 vs. 3Q10 Change Revenues $433 18% Income From Ops $192 26% Net Income $109 24% Earnings per Share $0.40 34%

Railway Volume

Third Quarter

8% 8% 7% 1%

• 5%
• 7%
• 11%

Automotive Intermodal MetCon Coal Paper Agriculture Chemicals 1,522 1,753 1,810 3Q09 3Q10 3Q11

Units (000) Change in Units 3Q11 vs. 3Q10

15% 3%

Revenue Per Unit

Third Quarter

26% 21% 16% 16% 13% 10% 8% Coal * MetCon* Agriculture * Chemicals* Paper* Intermodal Automotive* $1,355 $1,401 $1,596 3Q09 3Q10 3Q11

RPU Change in RPU 3Q11 vs. 3Q10

3% 14%

* Record RPU

Total Railway Revenues

Third Quarter

29% 27% 19% 17% 7% 7% 4% MetCon Coal Intermodal Automotive Agriculture Paper Chemicals $2,063 $2,456 $2,889 3Q09 3Q10 3Q11

Revenue in $ Mill. Change in Revenue 3Q11 vs. 3Q10

19% 18%

Export volume of 61,844 carloads, up 11,688 or 23%

• Tightened global supply
• Global steel production up 11%
• Lamberts Point up 39%
• Baltimore down (2%)

Export Carloads 1Q 2008 - 3Q 2011

Export Coal Market

8 1Q 2008 2Q 2008 3Q 2008 4Q 2008 1Q 2009 2Q 2009 3Q 2009 4Q 2009 1Q 2010 2Q 2010 3Q 2010 4Q 2010 1Q 2011 2Q 2011 3Q 2011 55,121 59,078 59,663 45,873 40,995 22,238 45,107 59,933 56,863 61,557 50,156 49,234 70,851 75,786 61,844

Utility volume of 265,148 carloads, down (10,369) or (4%)

• Utility North down (5%), South down

(3%)

• Competition from gas/lower

electricity demand

• 50% of Northern utilities, and 36% of

Southern utilities are below targeted inventory levels

1Q 2008 2Q 2008 3Q 2008 4Q 2008 1Q 2009 2Q 2009 3Q 2009 4Q 2009 1Q 2010 2Q 2010 3Q 2010 4Q 2010 1Q 2011 2Q 2011 3Q 2011

315,508 317,619 314,890 324,644 294,169 267,045 254,070 237,117 245,240 257,349 275,517 275,243 276,685 256,548 265,148

Utility Carloads 1Q 2008 - 3Q 2011

Utility Coal Market

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Nine Months Financial Summary

Change vs. Prior Year ($ in millions, except per share)

Sep YTD

Revenues $1,251 18% Income From Ops $379 19% Net Income $342 31% Earnings per Share $1.12 38%

Fuel Price Comparison

Price per Barrel

$70 $80 $90 $100 $110 $120 $130 $140 $150 NS Diesel Brent WTI

Current Railway Volume

Fourth Quarter through Week 44 (November 5, 2011)

15% 11% 9% 0%

• 4%
• 9%
• 12%

Automotive Intermodal MetCon Coal Paper Agriculture Chemicals 624 686 718 2009 2010 2011

Units (000) Change in Units 2011 vs. 2010

10% 5%

Source: AAR carloadings, which are reported weekly and may not equal NS’ reported volumes.

Fourth Quarter – Primary Volume Drivers

Increase in Units Intermodal 32,916 Continued strong domestic demand Metals and Construction 5,449 Increased steel production Automotive 4,924 US production, VW plant

Train Speed

Year-to-Date through October 28, 2011

19.0 19.5 20.0 20.5 21.0 21.5 22.0 22.5

NS Train Speed (miles per hour) Better

Source: As reported publicly to the AAR

Terminal Dwell

Year-to-Date through October 28, 2011

Source: As reported publicly to the AAR

21 23 25 27 29 31 33

NS Terminal Dwell (hours) Better

Outlook – Business Portfolio

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Chemicals Metals & Construction Agriculture Export Coal Domestic Metallurgical Coal Utility Coal Automotive Domestic & Premium Intermodal International Intermodal Paper

Improving volumes through project growth in crude oil and waste products, and long-term improved feedstock prices Increased domestic steel production and growth in shipments for natural gas drilling Growth in ethanol, offset by later harvest impact Continued European, Asian and South American demand for met coal Increased domestic steel production – low domestic met stockpiles Sequential growth to replenish below target stockpiles – tempered by lower electrical demand & competition from gas New business, increased North American auto production Increasing demand and highway conversions Favorable global trade Challenged housing market, modest growth in paper

Chicago Cincinnati Columbus Pritchard Roanoke Norfolk Detroit Philadelphia Ayer Atlanta

Charlotte

Lynchburg Corinth Shreveport Meridian New Orleans

Memphis

NY/NJ Bethlehem

NS Corridor Strategy

Greencastle Mechanicville Birmingham

Intermodal Terminal Expansion Update

Ground Breaking Date Completion Date Annual Volume Capability (Lifts) Mechanicville, NY July 2010 Spring 2012 70,000 Memphis, TN January 2011 Fall 2012 200,000 Greencastle, PA June 2011 Fall 2012 85,000 Birmingham, AL June 2011 Fall 2012 100,000 Charlotte, NC Summer 2011 Summer 2013 200,000

2011 Capital Program

($ millions)

$763 $489 $244 $212 $146 $96 $79 $194

Roadway Freight Cars Facilities & Terminals Locomotives PTC Technology Infrastructure Other Projects

Total Projected Spending = $2.2 billion

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2006 2007 2008 2009 2010 YTD 2011 $1,028 $992 $1,157 $561 $1,244 $1,331

* Free Cash Flow is defined as cash provided by operations less property additions. Please see reconciliation to GAAP on our website, www.nscorp.com.

Free Cash Flow Generation*

($ millions)

Capital Structure as of September 30, 2011

Equity 60% Debt 40%

Investment Grade Rating

• BBB+ (Standard & Poor’s)
• Baa1 (Moody’s)

Recent Capital Markets Transactions

• May Debt Issuance
• 100-year bond
• $400 million at 6.00%
• September Debt Exchange
• Waterfall exchange
• $600 million - 30-year notes at 4.837%
• $159 million in cash

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Debt Maturities as of September 30, 2011

($ millions)

$51 $47 $447 $3 $500 $550 $600$585 $314 $83 $367 $440 $350 $473 $133 $295 $596 $138 $273 $550 $404

'12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '25 '27 '29 '31 '35 '37 '41 '43 '97 2105 2111

Balanced Cash Flow Utilization

2006 through Third Quarter 2011

Dividends (CGR 20%) Share Repurchases Capital Expenditures

$8.3 Billion* $8.3 Billion

$5.8 Billion $2.5 Billion

* See reconciliation to GAAP of Total Shareholder Distributions posted on our website, www.nscorp.com.

Thank You