RBC Capital Markets Transportation and RBC Capital Markets - - PowerPoint PPT Presentation

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RBC Capital Markets Transportation and RBC Capital Markets - - PowerPoint PPT Presentation

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Propelling the Franchise RBC Capital Markets Transportation and RBC Capital Markets Transportation Industrials Conference Conference December 1, 2010 December 1, 2010 Picture1.jpg Donald W. Seale Donald W. Seale Executive Vice President

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SLIDE 1

RBC Capital Markets Transportation Conference

December 1, 2010

Donald W. Seale Executive Vice President & Chief Marketing Officer Norfolk Southern Corporation

Propelling the Franchise

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RBC Capital Markets’ Transportation and Industrials Conference

December 1, 2010

Donald W. Seale Executive Vice President & Chief Marketing Officer

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SLIDE 2

Agenda

  • Summary of current business results
  • Operating metrics/productivity update
  • NS market drivers and outlook
  • Propelling the NS Franchise

RBC Capital Markets’ Conference

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SLIDE 3

Improving Financial & Operating Metrics

Nine-Month Financial Highlights

Income From Railway Operations $2,034 Mill. +44% Net Income $1,094 Mill. +50% Diluted Earnings Per Share $2.91 +50% Operating Ratio 71.4% +6% Propelling the Franchise

Favorable % Change

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SLIDE 4

Solid Revenue Gains Produce 5 Consecutive Quarters of Sequential Improvement

$7.1 Billion in Railway Operating Revenue

– Increase of $1.3 Billion, or 22%

Increased Volume Improved Pricing & Fuel Revenue

3Q 2009 4Q 2009 1Q 2010 2Q 2010 3Q 2010 $2,063 $2,106 $2,238 $2,430 $2,456

3Q 2009 – 3Q 2010 Revenue in $ Millions

Propelling the Franchise

Paper Agriculture Intermodal Coal Chemicals Automotive MetCon

7% 14% 18% 21% 27% 36% 38% January – September 2010 vs. 2009

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SLIDE 5

Solid Volume Gains Produce 5 Consecutive Quarters of Sequential Improvement

3Q 2009 4Q 2009 1Q 2010 2Q 2010 3Q 2010 1,522,215 1,567,133 1,582,861 1,719,809 1,752,678

3Q 2009 – 3Q 2010 Units

Propelling the Franchise

January – September 2010 vs. 2009

5.1 Million Units Through September

– Increase of 665,200 units, or 15% – Continued strong volume in 4th quarter, up 10% to-date

Solid Growth in Core Markets Strong Project Growth Conversions From the Highway

Paper Coal Automotive Agriculture Intermodal Chemicals MetCon

9% 9% 10% 14% 17% 21% 27%

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SLIDE 6

Railway Volume 4th Quarter-to-Date vs. 2009

Propelling the Franchise

Source: AAR carloadings through November 20, which are reported weekly and may not equal NS’ reported volume

4QTD 2010 Units

  • Vs. 2009

Abs.

  • Vs. 2009

% Chg.

Agriculture 89,938 5,301 6% Chemicals 54,542 6,433 13% MetCon 85,766 12,888 18% Paper 42,101 (918) (2%) Automotive 42,669 (8,348) (16%) Intermodal 420,630 46,501 12% Coal 224,393 23,305 12% Total 960,039 85,162 10%

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SLIDE 7

Outlook – Business Portfolio

  • Manufacturing recovery & project growth

Chemicals

  • Build out of ethanol network and export grain

growth Agriculture

  • Truckload conversions

Domestic Intermodal

  • Improving imports/exports

International Intermodal & Export Coal

  • Recovery in global steel production

Domestic Met Coal & Steel

  • Falling stockpiles and increased electricity

generation Utility Coal

  • New business, improved auto production and

sales Automotive

  • Uncertainty in housing, but improving paper

markets Forest Products

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SLIDE 8

Improving Railroad Productivity

January - October 2010 vs. 2009

GTMs per Train Hour GTMs per Gallon GTMs per Employee Railroad Employees Crew Starts Carload Volume 1% 2% 16% (1%) 5% 15% Propelling the Franchise

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SLIDE 9

Propelling the Franchise 0.8 0.9 1 1.1 1.2 1.3 1.4 64 69 74 79 84 89

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Y-T-D

Operating Ratio Injury Ratio per 200,000 Employee Hours

Operating Ratio Injury Ratio

Improved Safety Process Improvements Lower Operating Ratio

Six Sigma LEAN LEADER UTCS TYES OPD RailEdge ECP TOR

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SLIDE 10

Increased Revenue Per Unit Contributes to Better Operating Ratio

$0 $300 $600 $900 $1,200 $1,500 $1,800 $2,100 $2,400

1Q 2001 3Q 2001 1Q 2002 3Q 2002 1Q 2003 3Q 2003 1Q 2004 3Q 2004 1Q 2005 3Q 2005 1Q 2006 3Q 2006 1Q 2007 3Q 2007 1Q 2008 3Q 2008 1Q 2009 3Q 2009 1Q 2010 3Q 2010

Merchandise Intermodal Coal Total

Propelling the Franchise

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SLIDE 11

Within our service territory:

 74% of the 2009 U.S. population  58% of total energy consumption in U.S.  63% of U.S. manufacturing  One study suggests that at least 30 million truck shipments over 550 miles touch our service territory

NS Local Market Dynamics

Propelling the Franchise

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SLIDE 12

Increasing Highway Congestion -

Truck Volume in 2007

Propelling the Franchise

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SLIDE 13

Increasing Highway Congestion -

Projected Truck Volume in 2040

Propelling the Franchise

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SLIDE 14

Comprehensive Safety Analysis 2010 & the Changing Truckload Market

  • CSA 2010 safety rating program

– Calculates carriers & drivers safety ratings using defined set of criteria

  • Hours of service regulations

– Reduction of workday to 10 hours of driving time

  • FMCSA Training requirements

New regulations governing recruitment and improving training

  • ID requirements

– Imposes strict national standards for issuance of state ID documents

Net Effect – More than 300,000 drivers will be disqualified between now and 2012 – doubling current driver shortage – Driver shortage may cost shippers an additional $25 billion – Estimated that new regulations will decrease trucking productivity by over 5%

Propelling the Franchise

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SLIDE 15

Balanced Portfolio of Business

Energy 31% Manufacturing 41% Intermodal 18% Agriculture 10%

Percentage of Total Book of Business in Revenue

Propelling the Franchise

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SLIDE 16

Balanced Portfolio of Business

Intermodal

Energy 31% Manufacturing 41% Intermodal 18% Agriculture 10%

Percentage of Total Book of Business in Revenue

Propelling the Franchise

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SLIDE 17

NS Intermodal Network Flows

Chicago Harrisburg Atlanta

Golden Triangle volume up 19%

% of Total Volume Jan.-Sept. 2010 vs. 2009

Domestic 60% 27% International 40% 10%

Maps use variable scales

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SLIDE 18

Chicago Cincinnati Columbus Pritchard Roanoke Norfolk Detroit Harrisburg Philadelphia NY/NJ Titusville Jacksonville Atlanta Charlotte Lynchburg Shreveport Meridian Birmingham New Orleans Memphis Bethlehem Mechanicville Ayer

NS Intermodal Corridor Strategy

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SLIDE 19

Chicago Cincinnati Columbus Pritchard Roanoke Norfolk Detroit Harrisburg Philadelphia NY/NJ Titusville Jacksonville Atlanta Charlotte Lynchburg Shreveport Meridian Birmingham New Orleans Memphis Bethlehem Mechanicville Ayer

Corridor Volume Increases Jan.-Sept. 2010 vs. 2009 Premier Route 20%

NS Intermodal Corridor Strategy

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SLIDE 20

Chicago Cincinnati Columbus Pritchard Roanoke Norfolk Detroit Harrisburg Philadelphia NY/NJ Titusville Jacksonville Atlanta Charlotte Lynchburg Shreveport Meridian Birmingham New Orleans Memphis Bethlehem Mechanicville Ayer

Corridor Volume Increases Jan.-Sept. 2010 vs. 2009 Premier Route 20% PanAm Southern 36%

NS Intermodal Corridor Strategy

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SLIDE 21

Chicago Cincinnati Columbus Pritchard Roanoke Norfolk Detroit Harrisburg Philadelphia NY/NJ Titusville Jacksonville Atlanta Charlotte Lynchburg Shreveport Meridian Birmingham New Orleans Memphis Bethlehem Mechanicville Ayer

Corridor Volume Increases Jan.-Sept. 2010 vs. 2009 Premier Route 20% PanAm Southern 36% Crescent Corridor 31%

NS Intermodal Corridor Strategy

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SLIDE 22

Chicago Cincinnati Columbus Pritchard Roanoke Norfolk Detroit Harrisburg Philadelphia NY/NJ Titusville Jacksonville Atlanta Charlotte Lynchburg Shreveport Meridian Birmingham New Orleans Memphis Bethlehem Mechanicville Ayer

Corridor Volume Increases Jan.-Sept. 2010 vs. 2009 Premier Route 20% PanAm Southern 36% Crescent Corridor 31% Meridian Speedway 40% Titusville 167%

NS Intermodal Corridor Strategy

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SLIDE 23

Balanced Portfolio of Business

Manufacturing Network

Energy 31% Manufacturing 41% Intermodal 18% Agriculture 10%

Percentage of Total Book of Business in Revenue

Propelling the Franchise

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SLIDE 24

NS Manufacturing Network Flows

Jan.-Sept. 2010 vs. 2009 Metals/Construction

27%

Chemicals

21%

Paper

9%

Automotive

10%

Maps use variable scales

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SLIDE 25

Propelling the Franchise 20,000 40,000 60,000 80,000 100,000 120,000 140,000 $0 $50 $100 $150 $200 $250 $300

2001 2002 2003 2004 2005 2006 2007 2008 2009

Revenue Carloads

Continued Success in Industrial Development

Revenue in Millions Carloads

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SLIDE 26

Industrial Development

January – October 2010

Number of Projects New Jobs Estimated Annual Carloads

New Industries

59 1,022 55,076

Expansions

26 827 67,912

Total Projects

85 1,849 122,988

Propelling the Franchise

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SLIDE 27

Balanced Portfolio of Business

Agriculture Network

Energy 31% Manufacturing 41% Intermodal 18% Agriculture 10%

Percentage of Total Book of Business in Revenue

Propelling the Franchise

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SLIDE 28

28 NS Agriculture Network Flows

Jan.-Sept. 2010 vs. 2009

Export Grain 127% Domestic Grain 13% Fertilizer 72%

Maps use variable scales

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SLIDE 29

Balanced Portfolio of Business

Energy Network

Energy 31% Manufacturing 41% Intermodal 18% Agriculture 10%

Percentage of Total Book of Business in Revenue

Propelling the Franchise

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SLIDE 30

30 NS Energy Network Flows

Illinois Basin 8%

  • C. APP

40% Alabama 3%

  • N. APP/PA/OH

29% PRB 19%

Jan.-Sept. 2010 vs. 2009

Utility

(5%)

Export

56%

Domestic Metallurgical

84%

Industrial

3%

Ethanol

12%

Maps use variable scales

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SLIDE 31

The Rail Market Ahead

 Complexity - multiple markets, channels, and shifting industrial production/global trade patterns  Motor carrier costs will continue to rise and capacity will decline or remain static  Approximately 80% of intercity freight tonnage originates or terminates within the NS service area  Highway conversions and continued yield management will be key drivers  Environmental advantages of rail shipping will become more prominent  Continued productivity gains on our network

Propelling the Franchise

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SLIDE 32

Our goal: Be the safest, most customer-focused and successful transportation company in the world

Revenue Growth from New Business

  • Industrial

Development

  • Market research
  • Growth markets
  • Highway

conversions

Market Reach Extension

  • Corridor

development

  • Public Private

Partnerships

  • Coal sourcing

network

  • Distribution

Network

Customer Satisfaction

  • Customer

survey

  • Communication

and outreach

  • Continuous

improvement in service

Resource & Productivity Management

  • Technology
  • Locomotives
  • Employees
  • Track
  • Structures

Propelling the Franchise

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SLIDE 33
  • Will get picture from Frank Brown

Thank You