Fourth Quarter 2010 Results Fourth Quarter 2010 Results Fourth - - PowerPoint PPT Presentation

Fourth Quarter 2010 Results Fourth Quarter 2010 Results Fourth Quarter 2010 Results Fourth Quarter 2010 Results

Executive Vice President

Norfolk Southern Corporation

Fourth Quarter 2010 Results Fourth Quarter 2010 Results Fourth Quarter 2010 Results Fourth Quarter 2010 Results

Donald W. Seale Executive Vice President Executive Vice President and Chief Marketing Officer

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Corridor Volume Increases 4Q 2010

• vs. 2009

2010 vs. 2009 Premier Route 13% 18% PanAm Southern 21% 32% Crescent Corridor 33% 31% Meridian Speedway 27% 36% Titusville 78% 146% >' '

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Corridor Strategy Yield Management Profitability Improvement Long Term Revenue & Volume Growth New Business Development Improve Customer Satisfaction

Fourth Quarter 2010 Results

Mark Manion Executive Vice President And Chief Operating Officer

Quarterly Safety Performance

2010 Preliminary

(Injury Ratio per 200,000 Employee-Hours)

1st Qtr 2nd Qtr 3rd Qtr 4th Qtr

1.10 0.89 0.85 0.68

50% 60% 70% 80% 90% 100%

Composite Performance January 2008 - Ending December 2010

2008 2009

Composite Performance

2010

Train & Engine Employees

By Quarters 2008 - 2010

1st Qtr 2nd Qtr 3rd Qtr 4th Qtr 12,283 12,102 12,078 12,050 11,348 10,372 10,422 10,582 10,582 10,700 10,923 11,212

2008 2009 2010

• 6.8%

4.8% 3.2% 6.0%

T&E Employment Count

Net of Furloughs, Trainees, and Projected Attrition

10,500 10,750 11,000 11,250 11,500 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11

Carload Volume Crew Starts Railroad Employees GTMs per Employee GTMs per Gallon GTMs per Train Hour

Productivity Scorecard

4th Quarter - 2010 vs. 2009

+9% +5% +5% +4%

• 4%

+1%

Fo Four urth th Qua uarter ter 20 2010 10 Re Resul ults ts

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

Operating Results

Fourth Quarter 2010 vs. 2009 ($ Millions)

Fourth Qtr Fourth Qtr Favorable (Unfavorable) 2010 2009 $ % Railway operating revenues $ 2,392 $ 2,106 $ 286 14%

Operating Results

Fourth Quarter 2010 vs. 2009 ($ Millions)

Fourth Qtr Fourth Qtr Favorable (Unfavorable) 2010 2009 $ % Railway operating revenues $ 2,392 $ 2,106 $ 286 14% Railway operating expenses 1,750 1,557 (193) (12%) Income from railway operations $ 642 $ 549 $ 93 17% Railway operating ratio 73.2 73.9 0.7 1%

Railway Operating Expense Analysis

Fourth Quarter 2010 vs. 2009 ($ Millions)

Net Increase $193 Million / 12%

• $6

+ $46 + $87 Depreciation + $29 + $37 Materials and other Purchased services and rents Compensation and benefits Fuel

Fuel Expense Analysis

Fourth Quarter 2010 vs. 2009 ($ Millions)

Fourth Qtr 2009 Fourth Qtr 2010 Increased Consumption Higher Prices $308 + $29 + $58 $221

6

Locomotive Diesel Fuel Average Prices

2009-2010 $1.39 $1.55 $1.85 $1.98 $2.13 $2.24 $2.19 $2.46 $0.00 $1.00 $2.00 $3.00

Railway Operating Expense Analysis

Fourth Quarter 2010 vs. 2009 ($ Millions)

Net Increase $193 Million / 12%

• $6

+ $46 + $87 Depreciation + $29 + $37 Materials and other Purchased services and rents Fuel Compensation and benefits

Compensation and Benefits Analysis

Fourth Quarter 2010 vs. 2009 ($ Millions) Decrease (Increase)

Volume-related payroll $ (28) Medical benefits (active and retiree) (19) Pensions (8) Payroll taxes (8) Wage rates (7) Incentive compensation 11 Stock-based compensation 19 Other (6) Total increase $ (46)

Railway Operating Expense Analysis

Fourth Quarter 2010 vs. 2009 ($ Millions)

Net Increase $193 Million / 12%

• $6

+ $46 + $87 Depreciation + $29 + $37 Materials and other Purchased services and rents Fuel Compensation and benefits

Railway Operating Expense Analysis

Fourth Quarter 2010 vs. 2009 ($ Millions)

Net Increase $193 Million / 12%

• $6

+ $46 + $87 Depreciation + $29 + $37 Materials and other Purchased services and rents Fuel Compensation and benefits

Income Before Income Taxes

Fourth Quarter ($ Millions)

Change vs. Prior Period: + 20% $467 $562

2009 2010

Income Taxes

Fourth Quarter ($ Millions)

Change vs. Prior Period: 0% $160 $160

2009 2010

Net Income and Diluted Earnings per Share

Fourth Quarter ($ Millions except per share)

Net Income Diluted Earnings per Share

$307 $402 $1.09 $0.82 Change vs. Prior Period: + 31% Change vs. Prior Period: + 33%

2009 2010 2009 2010

Net Income and Diluted Earnings per Share

Year ($ Millions except per share)

Net Income Diluted Earnings per Share

$1,034 $1,496 $4.00 $2.76 Change vs. Prior Period: + 45% Change vs. Prior Period: + 45%

2009 2010 2009 2010

Cash Flows

2010 vs. 2009 ($ Millions)

2010 2009 Increase (Decrease) Cash from operating activities $ 2,714 $ 1,860 $ 854 Capital expenditures (1,470) (1,299) 171 *Free cash flow $ 1,244 $ 561 $ 683 Share repurchases $ 863 $

• $

863 Dividends $ 514 $ 500 $ 14 Cash and cash equivalents at December 31 $ 827 $ 996 $ (169)

*Please see reconciliation to GAAP posted on our web site.

2011 11 Capit ital al Progr gram am

Deborah H. Butler Executive Vice President and Chief Information Officer

Baseline Capital Program *

($ Millions)

2007 2008 2009 2010 2011 budget $1,341 $1,558 $1,299 $1,470 $1,743 * Please see reconciliation to GAAP posted on our website

2

Total Capital Program

($ Millions)

2007 2008 2009 2010 2011 budget $1,341 $1,558 $1,299 $1,470 $1,743 $334 $146 Baseline Lease Replacements PTC $2,223

3

2011 Baseline Capital Program

Replacement/Core vs. Growth

83% 17%

Replacement/Core Growth/Productivity

Total Spending = $1.7 billion

4

$763 $244 $212 $155 $96 $79 $194

Roadway Facilities & Terminals Locomotives Freight Cars Technology Infrastructure Other Projects

2011 Baseline Capital Program

($ Millions) Total Spending = $1.7 billion

5

Roadway

$763 Million

• Normalized programs to maintain track network
• Primarily rail, tie, and ballast programs
• Bridge and culvert replacements

6

$763 $244 $212 $155 $96 $79 $194

Roadway Facilities & Terminals Locomotives Freight Cars Technology Infrastructure Other Projects

2011 Baseline Capital Program

($ Millions) Total Spending = $1.7 billion

7

Facilities and Terminals

$244 Million

• Intermodal terminals and equipment
• Industrial Products facilities
• Mechanical shops and facilities

8

$763 $244 $212 $155 $96 $79 $194

Roadway Facilities & Terminals Locomotives Freight Cars Technology Infrastructure Other Projects

2011 Baseline Capital Program

($ Millions) Total Spending = $1.7 billion

9

Locomotives

$212 Million

• New locomotives
• Alternative power locomotives
• Locomotive rebuilds and upgrades
• Emission kits

10

$763 $244 $212 $155 $96 $79 $194

Roadway Facilities & Terminals Locomotives Freight Cars Technology Infrastructure Other Projects

2011 Baseline Capital Program

($ Millions) Total Spending = $1.7 billion

11

$763 $244 $212 $155 $96 $79 $194

Roadway Facilities & Terminals Locomotives Freight Cars Technology Infrastructure Other Projects

2011 Baseline Capital Program

($ Millions) Total Spending = $1.7 billion

12

Technology

$96 Million

• Improve safety, service, operating efficiency and

equipment utilization

– LEADER – UTCS/RailEdge

• New technology

– SAP – IT infrastructure and software development

13

$763 $244 $212 $155 $96 $79 $194

Roadway Facilities & Terminals Locomotives Freight Cars Technology Infrastructure Other Projects

2011 Baseline Capital Program

($ Millions) Total Spending = $1.7 billion

14

Infrastructure

$79 Million

• Network improvements for coal and

merchandise traffic

• MidAmerica Corridor
• Public/Private Partnerships

– CREATE – Crescent Corridor

15

Total Capital Program

($ Millions)

2007 2008 2009 2010 2011 budget $1,341 $1,558 $1,299 $1,470 $1,743 $334 $146 Baseline Lease Replacements PTC $2,223

16

Freight Cars - Purchase vs. Lease

17

• Financing decision produces a positive PV
• 2011 bonus depreciation
• Accretive to earnings

Total Capital Program

($ Millions)

2007 2008 2009 2010 2011 budget $1,341 $1,558 $1,299 $1,470 $1,743 $334 $146 Baseline Lease Replacements PTC $2,223

18

2011 Capital Program Objectives

• Maintain the franchise
• Strengthen the coal fleet
• Invest in business growth
• Optimize capital efficiency (purchase versus

lease)

19