Credit Suisse Global Industrials Conference December 4, 2013 James - - PowerPoint PPT Presentation

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Credit Suisse Global Industrials Conference December 4, 2013 James - - PowerPoint PPT Presentation

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Credit Suisse Global Industrials Conference December 4, 2013 James A. Squires President 1 Norfolk Southern Update Responses to Traffic Changes Business Outlook Fourth Quarter Update General Merchandise Trends Long Term

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SLIDE 1

Credit Suisse Global Industrials Conference

James A. Squires President

December 4, 2013

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SLIDE 2

Norfolk Southern Update

  • Responses to Traffic Changes
  • Business Outlook
  • Fourth Quarter Update
  • General Merchandise Trends
  • Long Term Productivity Opportunities
  • Capital Allocation

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SLIDE 3

23% 23% 20% 19% 34% 32% 33% 33% 43% 45% 47% 48%

2010 2011 2012 YTDSep13

Coal GM Intermodal

Traffic Volume Changes

Percentage of Total Volumes

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SLIDE 4
  • 4%

2% 6% 3%

  • 9%
  • 1%

0%

  • 3%

Volume Train Starts

Operating Efficiencies

First Nine Months 2013 vs. 2012

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Coal Gen Merch Intermodal Total

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SLIDE 5

5

  • 10%
  • 10%
  • 1%

6% 1%

Train and Engine Service Overtime Re-Crews Equipment Rents (Velocity Driven) Carloads/Units per Locomotives in Service Gross Ton Miles per Gallon

Year-Over-Year Percent Improvement

Operating Efficiencies

First Nine Months 2013 vs. 2012

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SLIDE 6

Norfolk Southern Update

  • Responses to Traffic Changes
  • Business Outlook
  • Fourth Quarter Update
  • General Merchandise Trends
  • Long Term Productivity Opportunities
  • Capital Allocation

6

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SLIDE 7

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Business Outlook

  • Utility coal impacted by

reduced demand for electricity, competition from natural gas and higher stockpiles in the South

  • Soft domestic

metallurgical market to support steel production

  • Weak demand in

European market for both met and steam coal

  • Excess global supply and

weaker Australian dollar

Coal

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SLIDE 8

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Business Outlook

  • Utility coal impacted by

reduced demand for electricity, competition from natural gas and higher stockpiles in the South

  • Soft domestic

metallurgical market to support steel production

  • Weak demand in

European market for both met and steam coal

  • Excess global supply and

weaker Australian dollar

  • Continued opportunities

for highway conversion

  • New Intermodal service

lanes ahead as new corridor terminals open

  • Growth with

International shipping partners

  • Greer, SC Inland Port –

Q4

Coal Intermodal

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SLIDE 9

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Business Outlook

  • Utility coal impacted by

reduced demand for electricity, competition from natural gas and higher stockpiles in the South

  • Soft domestic

metallurgical market to support steel production

  • Weak demand in

European market for both met and steam coal

  • Excess global supply and

weaker Australian dollar

  • Continued opportunities

for highway conversion

  • New Intermodal service

lanes ahead as new corridor terminals open

  • Growth with

International shipping partners

  • Greer, SC Inland Port –

Q4

Coal Intermodal Merchandise

  • Project growth in crude
  • il, plastics for housing

and automotive and increased volume for shale related liquid petroleum gases

  • Gains in steel, frac sand
  • Continued automotive

growth

  • Favorable corn and

soybean crop for 2013- 2014 with export potential

  • Improved housing &

related construction materials market

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SLIDE 10

Norfolk Southern Update

  • Responses to Traffic Changes
  • Business Outlook
  • Fourth Quarter Update
  • General Merchandise Trends
  • Long Term Productivity Opportunities
  • Capital Allocation

10

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SLIDE 11

1,242.1 1,314.6 2012 2013 Units (000)

Current Railway Volume

Fourth Quarter through Week 48 (November 30, 2013)

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Total Volume: 1,314,600 units, up 6%

24% 14% 10% 7% 6% 2% (5%)

Change in Units 4QTD13 vs. 2012 Chemicals Automotive Agriculture Intermodal MetCon Paper Coal

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SLIDE 12

Train Speed

1Q10 – 4QTD13

19.0 20.0 21.0 22.0 23.0 24.0 25.0 Miles per Hour

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Better

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SLIDE 13

Terminal Dwell

1Q10 – 4QTD13

20.0 21.0 22.0 23.0 24.0 25.0 26.0 27.0 Hours

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Better

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SLIDE 14

Norfolk Southern Update

  • Responses to Traffic Changes
  • Business Outlook
  • Fourth Quarter Update
  • General Merchandise Trends
  • Long Term Productivity Opportunities
  • Capital Allocation

14

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SLIDE 15

Continued Strength in Automotive

  • NSC Automotive volume up 6% YTD
  • North American vehicle production

forecasted at 16.5 million units for 2013, up 4% vs. last year

  • Average vehicle age at all-time high

Source: Ward’s, Polk

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6 8 10 12 14 16 18 20 6 7 8 9 10 11 12 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 US Vehicle Sales (M) Vehicle Age (yrs.)

U.S. Vehicle Age vs. Sales

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Merchandise Network

Automotive Facilities

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Atlanta Charlotte Chicago Columbus Detroit Savannah Miami Cincinnati Harrisburg Norfolk New Orleans Memphis Dallas Jacksonville Charleston Lexington Kansas City St Louis Louisville Baltimore Toledo Cleveland Pittsburgh Ayer Albany Buffalo Titusville NY/NJ Philadelphia Birmingham Meridian Chattanooga

NS Automotive Network

NS Automotive Network and Haulage 26 Assembly Plants Assembly Plants on Short Line connecting with NS

  • Ft. Wayne
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SLIDE 17

Source: EIA, Bentek, Industry Sources, Bloomberg

Permian

Current: 1.3M Projected: 1.9M-2.3M

$84 Williston $101 WTI $69 WCS $109 Brent Prices represent October 2013 averages ($/bbl) Projected 2020 daily production levels (bbl)

Oil Sands

Current: 1.8M Projected: 3.2M-4.8M

Williston Basin

Current: 980K Projected: 1.3M-2.1M

Niobrara

Current: 280K Projected: 330K-765K

Eagle Ford

Current: 1.3M Projected: 1.4M-1.8M

Utica

Current: 35K Projected: 100K-118K

$103 LLS $105 ANS

Crude Oil Market Dynamics

Domestic Production Growth Driving Interior Oil to Coasts

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SLIDE 18

North American Crude Oil Pipelines

NS Markets Politically and Topographically Isolated from Pipeline Connectivity

US Rail Network

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SLIDE 19

Supply Chain Routing

East Coast Options Include NS “Crude Corridor”

  • NS has the shortest, most direct route to East Coast
  • Proven transit times of 36-40 hours on NS Crude Corridor
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SLIDE 20

NS Chicago to the East Coast

Ample Corridor Capacity to Destination

87% of the Crude Corridor Operates Below 80% Capacity

NS Capacity Factor Across Crude Corridor by Miles

< 80%

< 85%

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SLIDE 21

Norfolk Southern Update

  • Responses to Traffic Changes
  • Business Outlook
  • Fourth Quarter Update
  • General Merchandise Trends
  • Long Term Productivity Opportunities
  • Capital Allocation

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SLIDE 22

Roanoke Hump Closure

Roanoke

Atlanta Norfolk Charleston Philadelphia Columbus

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SLIDE 23

Sheffield, AL

Bellevue Yard Expansion

Bellevue, OH Allentown, PA Macon, GA Birmingham, AL Enola, PA Elkhart, IN Conway, PA Linwood, NC Chattanooga, TN Knoxville, TN

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SLIDE 24

Bellevue Yard Expansion

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SLIDE 25

UTCS - Movement Planner

  • 10 of 11 Divisions on

Base System

  • 4 of 11 Divisions on

Movement Planner with remaining in 2013-14

  • Realizing benefits in

velocity, productivity, and schedule adherence

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SLIDE 26
  • Right-sizing the workforce
  • Enabled by technology
  • Enabled by better coordination
  • Maintain high network velocity and customer service
  • Expect to exceed $100M in productivity gains in 2013

Productivity Initiatives

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SLIDE 27

Norfolk Southern Update

  • Responses to Traffic Changes
  • Business Outlook
  • Fourth Quarter Update
  • General Merchandise Trends
  • Long Term Productivity Opportunities
  • Capital Allocation

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SLIDE 28

2008 2009 2010 2011 2012 2013 Budget

$1,558 $1,299 $1,470 $2,160 $2,241 $2,008

Capital Expenditures

($ millions)

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SLIDE 29

2008 2009 2010 2011 2012 2013YTD

$2,715 $1,860 $2,714 $3,227 $3,065 $2,404 $1,558 $1,299 $1,470 $2,160 $2,241 $1,470

Cash from Operations Capital Expenditures

Cash From Ops and Capital Expenditures

($ millions)

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2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

$0.30 $0.36 $0.48 $0.68 $0.96 $1.22 $1.36 $1.40 $1.66 $1.94 $2.04

Annual Dividend Per Share

Compound annual growth rate of 21% for 2003 through 2013

+15% +20% +33% +42% +41% +27% +11% +3% +19% +5%

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SLIDE 31

Balanced Cash Flow Utilization

2006 through 3Q 2013

Dividends Share Repurchases Capital Expenditures

$12.5 Billion $11.9 Billion*

$8.1 Billion $3.8 Billion

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

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SLIDE 32

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Thank You